Auditing and Assurance: Factors Influencing Materiality in DIPL

AUDITING AND ASSURANCE

Auditing and Assurance 1
Table of Contents
Introduction......................................................................................................................................2
Need for the Services of an Expert Auditor.....................................................................................2
Five Factors Influencing Overall Materiality of DIPL....................................................................4
Relevancy of the Factors.................................................................................................................5
Material Factors...........................................................................................................................5
Quantitative factors......................................................................................................................5
Qualitative Factors.......................................................................................................................7
Factors influencing Preliminary Figure...........................................................................................7
References........................................................................................................................................9

Auditing and Assurance 2
Introduction
This report contains the analysis of the case study given for DIPL where the services of an expert
is used by the company to collect evidences for material misstatements which was founded in
financial reports. It is important for a company to prevent material misstatements in the financial
records and statements. For this purpose company conduct internal and external audit depending
on the demand needed for the type of auditing required. The questions been asked in the case
study in relation to the factors which influence the preliminary figure determined for materiality
in the audit of DIPL. The factors which are being identified are explained well to showcase the
relevancy in calculating the materiality in the audit planning process.
Need for the Services of an Expert Auditor
On the basis of the case study given for the company DIPL, it is necessary to conduct audit from
an expert for the sole purpose that it provides assurance to the management that presents a true
and fair picture of the financial performance and position. There is an auditing standard 620
which explains the guidance to use the work of an expert in audit as evidence ( Auasb.gov.au,
2009). An expert here means a person or a firm who possess some special skills and expertise in
their particular field (Accaglobal.com, 2011).
As per the case of DIPL, where few issues were arising in the accounting department and auditor
fails to maintain the financial ratios under the provided benchmarks. The new CEO William
Jackson pounded a recommendation to introduce a new internal control system in the department
to resolve the issues arising in the financial statement and also decides to invest in IT system
which will automate the whole process of finance and accounting and integrate the current
accounting process within the organization. But the IT manager had issues in implementing the
IT system installation and the way it was handled. It was found out that there was not enough
staff available to do the required reconciliation and testing. The testing which was conducted
before implementing IT system into the accounting process various errors are found out in the
transactions and its value allocation. Though there were staff appointed at each stage in the
department but it happens to be showing non reliable results. Due to such weak system of
finance and accounting department the need for the use of expert in audit is highly required
where the expert will collect audit evidences of the company as per the new internal control
system introduced it will be helpful for expert. The auditor must have to rely on the audit

Auditing and Assurance 3
evidences given by expert. To be ensured about the qualification and expertise that an expert
must consist and align the whole procedure with the new IT system introduced in the company
and a complete study should be conducted about the assurance of expert’s qualifications (Boritz,
Robinson, Wong, and Kochetova-Kozloski, 2014).
In the given case study, auditor will determine the need first to use the work of an expert while
considering:
 The company’s team knowledge and the past experiences of the matter of the company
here is being considered.
 The risk involve of material misstatement in the financial report of DIPL is considered
where complexity, nature and materiality will be taken.
 Obtaining the quality and quantity of audit evidence which has been expected are done.
There is a need to obtain the understanding of DIPL and perform the procedure further in
assessment of risk, the auditor requires in combined with company and individually the audit
evidences that consists of reports, valuations, opinions and statements of an expert. For example
the evidences must include the following:
- The valuations required of various type of assets of the company including ink, printers,
property, plant and equipment;
- The condition of assets physically or quantities available and the useful life of fixed
assets which is remaining;
- The type of valuation that has been followed to determine amounts and what techniques
or methods have been used while valuation for example DIPL is following actuarial
valuation;
- Work is measured to see if completed or in progress and take advice accordingly;
(Messier, and Schmidt, 2017.).
- The opinions in concern with interpretations of agreements, statutes and regulation been
followed by the company (Ifac.org, 2017).
While planning to use the work of expert in audit of the DIPL, it is the responsibility of
auditor to look out for the competence of the expert in profession. The auditor of the
company must consider that an expert carries a professional certification, licensed or acquire