Case Study On Double Ink Printers Ltd (DIPL) - HI6026
Added on 2020-03-13
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Audit, Assurance, and ComplianceINDIVIDUAL ASSIGNMENT 11 | P a g e
Table of ContentsSolution 1.........................................................................................................................................3Solution 2.........................................................................................................................................6Solution 3.........................................................................................................................................8References......................................................................................................................................102 | P a g e
Solution 1The Auditor of the DIPL before commencing the audit needs to determine the procedure whichis too followed at the time of audit to ensure that there is no material misstatement in thefinancial statement of the company. The Auditor at the time of planning stage needs to determinein advance the area of the business which is too examined during the audit to frame opinion overthe true and fair presentation of the financial statement of the entity (DeFond & Lennox, 2011).Also, the auditor of the DIPL should obtain sufficient evidence to ensure that there is no error inthe financial statement of the company. The Auditor of the DIPL can include the preliminary audit procedure to create the betterunderstanding of the nature of the business and plan the timing nature and extent of the auditprocedure used at the time of the audit. The Analytical procedure involve involves evaluation ofthe both financial as well as non-financial information which is the required phase of the audit.The key objective of the procedure is to identify and the transaction of the client business and thefinancial statement account which are likely to contain the error. The Auditor of the DIPL needs to need to perform the analytical procedure at the planning stageof the audit to direct the attention towards the area of the potential problem to avoid the risk ofmissing something important. As stated in the accounting standard the auditor needs to apply theanalytical procedure at the planning stage of the audit and design the subsequent audit procedureaccordingly. The following are the few of the area over which the auditor of the DIPL needs toconcentrate during the Audit.Cash – after looking at the financial statement of the DIPL it was observed that there is a hugedecline in the cash balance of the company from the past year (Hammersley, 2011). So theauditor at the time of audit needs to examine the same as it will create impact over the liquidityposition of the company. Also, the auditor needs to examine the check over the cash receipt andthe payment to ensure that there is no default at the time of recording the cash transaction. Inventories - The Company has reported increased inventory so the auditor needs to examine thereason behind why the company has shown increase inventory. Also, the company needs toensure that the company is recording the inventory as per the applicable accounting standard. In3 | P a g e
order to examine the check over the stock, the auditor can conduct the manual check at thecompany warehouse and inward and outward slip at the factory gate. Property, plant, and equipment – The Auditor also need to examine that the company hasrecorded the new assets as per the accounting standard. Also, they need to examine that thedepreciation on the increased assets are charged as per the relevant standard and are in the sameproportion.Intangible assets – the books of DIPL has shown the intangible assets of 975000 which needs toexamine by the auditor that they are recorded as per the AASB 138. Also, the auditor needs toensure that the company has recorded the same at the appropriate value. Bad debts – There was a significant increase in the company bad debts during the year so theauditor needs to work concentrate on the same and identify the reason behind the increase. Also,the auditor needs to ensure that the company is creating enough provision to cover the bad debtsas the failure to same will create impact over the company future working (Hammersley, 2011).Also, the auditor should collect the document of the evidence. Employee payment – The auditor at the time of audit should also conduct the check over thepayment which is made to the employee by checking the employee register. The auditor needs toensure that the company is not creating the fictitious employee for the purpose of minimizing itsprofit. Revenue and receipt – The Auditor needs to conduct the test check to examine that the revenuedisclosed by the company is related to the company. Also, the receipt of the revenue from the E-manual can be verified by checking the same from the manual receipt (Knechel & Salterio,2016). Also, the auditor needs to ensure that company is charging the revenue to the period towhich it relates. The application of the analytical procedure will help the auditor to identify the area over whichthey need to focus and plan the audit process accordingly. The procedure involves checking thefigure of the financial statement which has major changes from the past year (Hammersley,2011). The auditor should also examine the internal control system of the DIPL as it is also thepart of the analytical process to identify the shortfall in the business. Also, it helps in identifying4 | P a g e
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