logo

Audit, Assurance and Compliance, HI6026

   

Added on  2020-03-04

6 Pages1121 Words39 Views
AUDIT THEORY

AuditAnswer – 1The analytical procedure enables to provide a sound knowledge of the business and helps in framing valid decision. For DIPL Ltd, the analytical procedure will comprise of ratio analysisand project the trend of the business. The analysis will help in knowing the trend that will shed light on the company’s performance. It will prove to be of major advantage in forecasting and take judgment on the business scenario. Ratio analysis is an important analytical procedure that enables to evaluate the financial performance by considering various parameters and variables (Douglas et.al, 2015). It is a strong indication of the firm’s performance in major areas and in the case of DIPL Ltd, the computation of ratio will attribute to areas of liquidity, profitability and solvency.Further, comparison and evaluation of the financial report of the three years will provide an absolute knowledge of the trend that the business is going through. It gives a knowledge of the trend that the business has (Elder et. al, 2015). The computation of ratios has been done to analyze the business scenario:Ratio201320142015Current Ratio1.4241.4661.500Quick ratio0.8279760.9448340.847273Net Profit Ratio6.8956.0776.838Gross Profit Ratio17.55016.12615.196Debt/Equity ratio0.4131150.4748161.134444As per the current ratio and the quick ratio, the business abounds in liquidity and it gives an indication that the business will not face any liquidity crunch (Brealey et. al, 2011). The company has maintained the liquidity position in all the three years thereby leading to the greater position. On the other hand, the profitability ratio indicates that the company has generated good profits in all the three years. The gross profit ratio has slightly declined in 2015. Overall, the profitability indicates that the company is having a strong hold on the cost of goods sold (Geoffrey, 2016). The debt-equity ratio falls under the category of solvency and it is noted that it is high in 2015 and should be controlled as higher interest payment needs to be done (Brigs, 2013).

AuditThe stock valuation mechanism is wrong and hence will impact the audit decision. Further, the huge increment in the accounts receivable is another issue in the records. The audit planning needs to be done in a manner that will address the problem otherwise the decision-making will fall flat (Wright, 2015).

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Answer to Question 1 Analytical Procedure in order to assess the financial reports of Double Ink Printers Ltd (DIPL), th
|8
|1053
|450

Auditing Theory and Practice : Assignment
|9
|1974
|201

Auditing Assignment | Analytical Procedure
|9
|2344
|68

AUDIT, ASSURANCE AND COMPLIANCE 15 AUDIT, ASSURANCE AND COMPLIANCE Audit, Assurance and Compliance
|20
|2902
|437

HI6026, Audit, Assurance and Compliance | DIPL Ltd
|8
|2168
|34

HI6026 | Audit and Assurance
|11
|2655
|53