Audit and Assurance for DIPL Limited

AUDIT & ASSURANCE

Audit DIPL
Answer 1
In the process of decision making, systematic methods may be helpful for an organization or
firm for the purpose of auditing and management. This just doesn’t improve the financial
aspects of the firm but also helps the nonfinancial aspects of the firm to overcome the faults
and grow. The case provided by DIPL Limited also the methods of analytical approaches
have been utilized to apex the real potential of the firm and also it helped the top level
management to make decisions. If there is by any chance any misinterpretation of the
financial statements, these processes can be taken into power to mend the false or incorrect
results (Elder et. al, 2010). Therefore it is also found that many of the organizations also use
these types of methods in order to achieve the desired objectives as it make it easier for the
firm to approach its goals.
The first ever operation conducted on the firm DIPL limited is the trend analysis. In this
process, a firm tries to find the contrast between the financial statements of the current year to
that of the past. This helps the firm to find the variations in the data and thus helping to
improve the process of decision making. Therefore it can be said that trends and patterns help
in the decision-making process of the firm and also they may help to raise the future concerns
and complication for which the firm should be ready with a rescue plan. According to the
financial statements of the firm DIPL limited, it can be clearly understood that the sale
figures are rising higher which lead to revenue generation, thus creating a positive impact for
the firm’s financial position. It should also be noticed that even the sales figures being high,
the difference between underlying stocks of company and sales is huge which is not normal
and thus becoming a matter of concern for the firm (Coram et. al, 2011). The figure of the
stocks does not give the firm a positive environment thus it should be evaluated by the
auditor as the trend followed by the financial statements of sales and stock are not in a
scrupulous manner.
The second process consists of the formulation of the ratios which has been conducted in
order to find the true financial condition of the firm. Many ratios can be calculated for
achieving the desired results and also be compared to the last year’s figures which may be
helpful in ascertaining the true condition of the firm. The solvency, liquidity and profitability
ratios of the firm DIPL limited may be proved to be helpful for the trend and growth analysis.
Liquidity ratios are calculated to find the liquid position of the firm, i.e. to find that the firm
will be able to clear its credit balances or not. Solvency ratios help to calculate if the firm is
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Audit DIPL
having a suitable amount of balance in the form of capital or not. At last, the profitability
ratios help to ascertain that the firm is incurring margined revenues or not, that is it is gaining
profit or loss (Gay & Simnet, 2015).
Ratio Formula 2015 2016 2017
Current Ratio Current Assets/
Current
Liabilities
1.42 1.47 1.50
Gross Profit
Ratio
Gross Profit/
Sales
17.55 16.13 15.20
Net Profit Ratio Net Profit after
tax/ Sales
6.89 6.07 6.84
Debt
Equity Ratio
Debt / Equity _ _ 0.61
After the assessment of the calculation, it can be commented that the moral responsibility of
an auditor is to take into consideration various concern before undertaking any analytical
mechanism to provide a judgement. From the financial of the company, it can be witnessed
that the debts have projected a huge increment over the years and is not a good indicator for
the company. Moreover, the balance of cash has also projected a falling trend that projects
lack of resources that are required to fund the process of working capital. Moreover, the
company payables have signalled an increasing trend and indicate that inefficiency of the
company in terms of discharging the obligations. The auditor is needed to assess all concern
before implementing any policies. Such concerns are projected clearly in the DIPL financial
that indicates the inefficiency in addressing the problems. Future problem may arise in this
scenario. Further, if the auditor is influenced by the material misstatement then the auditor
might not be able to provide a true and fair view (Geoffrey et. al, 2016).
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