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HI6026 - Audit Assurance and Compliance

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Holmes Institute Sydney

   

Audit, Assurance and Compliance (HI6026)

   

Added on  2020-03-02

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In this document, we will discuss question answers based on Audit Assurance and Compliance. We cover the application of the analytical procedure to the financial report information, the impact of the analytical procedures on the audit planning, key risk factors related to the misstatement in the financial reporting, and the effect of the risk on the conduct of the audit.

HI6026 - Audit Assurance and Compliance

   

Holmes Institute Sydney

   

Audit, Assurance and Compliance (HI6026)

   Added on 2020-03-02

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Running head: AUDIT ASSURANCE AND COMPLIANCE Audit Assurance and ComplianceName of the Student: Name of the University: Author’s Note:
HI6026 - Audit Assurance and Compliance_1
1AUDIT ASSURANCE AND COMPLIANCE Table of ContentsAnswer to Question No 1................................................................................................................2(a)Application of analytical procedure to the financial report information of DIPL............2(b) Impact of analytical review on the audit planning for the year ended 30th June 2015...........5Answer to Question 2......................................................................................................................7Answer to Question No 3................................................................................................................9(a)Key risk factors related to the misstatement in the financial reporting............................9(b)Effect of risk on the conduct of audit..............................................................................10Reference List................................................................................................................................11Bibliography..................................................................................................................................13
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2AUDIT ASSURANCE AND COMPLIANCE Answer to Question No 1 (a)Application of analytical procedure to the financial report information of DIPL The mechanism of the analysis of the ratio has been implemented for the analytical reviewand the assessment of the financial reports and statements of DIPL for the last three years havebeen provided in the table below: (i)Profitability Analysis Profitability RatiosRatio201320142015Gross Profit Ratio 17.55%16.13%15.20%Net Profit Ratio 6.90%6.08%6.84%Operating Profit Ratio 19.82%19.18%19.12%Return on Assets 18.25%14.41%11.37%Return on Equity 25.78%21.25%24.26%Table 1: Profitability Ratios(Source: As Created By Author)The comparative evaluation of the profitability ratios of DIPL for the last three years havedisclosed that: The gross profit ratio of the firm has has decreased from 17.55% to 16.13% in the year2014 and has again fallen further to 15.20% in the year 2015. The operating profit ratio of DIPL has fallen from 19.82% to 19.18% in the year 2014and in the year 2015 has declined significantly to 19.12%. The probable factor for lowerdecreases in the year 2015 is due to the fact that the allowance for the inventoryundesirability has been written back in the year 2015 and there is a rise in the storagefees of the e-book even.
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3AUDIT ASSURANCE AND COMPLIANCE It has been observed that the net profit ratio of the firm has fallen in the year 2014 eventhough the ratio has enhanced in the year 2015. The main factor for the rise in the netprofit ratio is due to the savings that has been noticed in tax during the year 2015because of increased interest expenditure in the year 2015. The return on equity has decreased from 25.75% to 21.25% in the year 2014 and laterthe value has increased to 24.26% in the year 2015. (ii)Liquidity Analysis Liquidity ratiosRatio201320142015Current Ratio1.421.471.50Quick Ratio 0.830.940.85Table 2: Liquidity Ratios(Source: As Created by Author)The analysis of the liquidity ratio of DIPL has depicted that:The liquidity condition of the organization has enriched slightly in the year 2015 andthis value has been viewed with the help of the current ratio. The current ratio in theyear 2013 is 1.42 and in the year 2014 has raised to 1.47. The ratio has even increasedsignificantly in the year 2015 to 1.50. By looking at the quick ratio, it can be explained that the liquid assets of the firm hasnot developed too much in the year 2015. The current ratio in the year 2013 was 0.83and due to various factors, the ratio has increased to 0.94 in the year 2014. Then againthe value decreased to 0.85 in the year 2015. (iii)Efficiency Analysis
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