Auditing Standards and Materiality in Financial Statements of Double Ink Printers Limited

AUDIT, ASSURANCE & COMPLIANCE

DIPL
Answer 1
The auditing process and the big firms in Australia are directed by the provisions of the
Corporation Acts, 2001 which is the only Act which is being discussed in the document
below. The section 336 of The Corporation Act, 2001 is taken into adherence by the auditors
while auditing the company. This act has mentioned all the necessary rules and regulations in
the form of Auditing Standards which are needed to be kept in mind while preparing the audit
file. The Auditing and Assurance Standards Board (AUASB) is the formulation body which
makes the Auditing Standards which are to be taken into consideration by the auditors while
preparing the report (Manoharan, 2011).
ASA 300 and ISA 300 have the same subject or topic being narrated about the planning of
the compiled financial audit report which is issued with the accordance to International
standards of auditing AUASB. ASA 30 states that an auditor of the financial report should
formulate his plan and remember his responsibility while auditing the statement. If an auditor
has a well planned and responsible method to perform an audit, then he will be able to
complete his work in the most effective and efficient manner. It is the decision of the auditor
whether to use the advice and services of an expert or not as an advice may help the auditor
to improve the quality of the work.
The advice or help of an expert auditor (ASA 600) is also stated in the AUSAB to teach the
other auditors that whether they need the help and assistance of an expert auditor while
preparing the audit report of a particular firm. It also helps the incompetent auditors to look
and learn by seeing the adequacy of the work which is initiated by the expert auditors while
preparing audit report of the firm (Lapsley, 2012). An expert is an individual who is said to
have sufficient essential skills and understanding after completing his necessary professional
qualifications, and who also gives important advice on the matters related or not related to
accounting and auditing (Matthew, 2015). If the inexperienced auditor finds that he is not
able to fulfil the requirements of the work then he should positively take help and advice
from a senior and much-experienced auditor for completing his work in a professional
manner. The auditor decides the method or way in which the expert or experienced auditor
will be carrying out or helping for the audit process (Livne, 2015).
ASA 315 may be helpful for the auditors to evaluate the entity and the environment of the
firm which need to be audited. It also helps the auditor to find whether he needs an expert
auditor for guidance or not. ASA 315 helps the auditor to analyze the firm’s environment and

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thus helping him to identify the inappropriate statements of the firm while auditing. The case
of Double ink printers limited is having the same necessity of analyzing and evaluating all the
account balances, types of transactions and the conditions of the firm so that the auditor can
be advised if he needs the help of an expert auditor in accordance to the ASA 315 (Merchant,
2012). According to ASA 600, an auditor faces no change in his situation of completing the
audit process which keeps it unchanged and unaltered no matter if an expert auditors help is
taken or not (Kaplan Kaplan, 2011). Even if the auditor of the firm DIPL takes help from an
expert or not, he needs to still needed to find out the data and give an opinion on the financial
performance and position of the firm.
While checking the background of the company Double Ink Private Limited, it was clearly
noted from the financial and non-financial data that the firm was moving rapidly towards
making an efficient progress by automating the tasks and also making use of the information
technology frequently so as to improve the efficiency of the firm and increase its profit. It is
duly noted that it is not possible for every auditor to be familiar with the knowledge and the
terms of Information Technology system used by the firm in its mechanism that is how the
policy is adapted and used, an auditor for understanding the effectiveness and efficiency of
the IT process used by the firm should analyze the past experiences of the firm where the
methods and the tricks of using the IT technology have been duly noted with the documents
containing financial statements which may help the auditor to work in the limits of the way
that the expert have advised him to proceed with the accordance of ASA 600 (Hoffelder,
2012). It was also found that the main source of revenue generation is from the E-book
revenue. The information provided about the terms and agreements of the firm DIPL in the E-
book should be always verified and assessed in order to ensure that there may not arise any
disputes between the companies and different publishers in future. It was also noticed that the
firm DIPL was charging an advance annual 12 months storage fees to its clients which makes
it necessary for the auditor to check the financial statements of the storage fee billing and any
related documents. If a proper judgment of data is needed then it is not possible for a non-IT
professional to assess this type of advanced IT system. Therefore the auditor is required to
use the help of a person who attains expertise in the IT field and thus also ensures that all the
data is assessed and the IT system is analyzed carefully so that the auditor can finalize his
reports in an efficient and effective way (Geoffrey et. al, 2016). It should be clearly known
that the auditor has the full right to choose that he or she may choose if they need an expert
on the judgement of the audit report as even after the analysis of all the documents, the

DIPL
auditor is left with the lone responsibility to choose whether it needs an expert opinion or not.
However looking after the gritty situation of the firms IT advancements, it is advised that the
auditor must opt for an expert opinion (Niemi & Sundgren, 2012).
Answer 2
Materiality in terms of financial aspects may be defined as the negligence of any information
which may cause a direct material effect on the financial statements of the business. There are
various standards of auditing related to the topic of materiality. A thorough analysis should
be made in order to understand these standards in the different parts of the question (Gay &
Simnet, 2015).
Part A
In auditing, it is important for an auditor to seek for the materiality of the financial statements
of the firm as it is not feasible to give every single item of expense, income and asset and
liability equal importance. The materiality of the financial statements id distinguished on, the
basis of the balances of the accounts and the divisions of the transactions are to be evaluated
on the basis of the entity and the financial statements of the business. ASA 315’s principle of
Identifying and assessing the risks of materials should be taken into consideration for
understanding the environment and financial aspects of the firm (Fazal, 2013). Is should be
followed so that there may be no state of confusion when there is a need to gain a proper idea
of the account balances or the environment of the firm on the basis of the operations in near
future while processing the report. ASA 320 issued by AUSAB gives the brief information
about the responsibility of an auditor in accordance with the materiality in the audit of a firm
(Roach, 2010).
The five factors affecting the materiality in the levels of the audit report of a DIPL firm’s
financial statements are:
1. Categories of transactions, declaration of items and account balances of the financial
statements of the company. For the estimation of materiality, the firm DIPL needs to divide
its financial statements into different categories of transaction like E-books, irregular
expenses, and storage fee according to their level of importance.