Auditsales, it is not a good sign for the company. Similarly, if there is an enhancement in sales figures, it is a good indicator but the auditor must cautiously observe any significant increase in amounts because it may either be influenced or occurred due to some error. It is therefore vital that the auditor take relevant steps to verify the sales amount from the authenticated documents. Furthermore, such comparison can also be conducted with companies engaged in the similar line of businesses so that variations can again be evaluated to identify management problems that persist owing to decline in patterns (Cappelleto, 2010).Another process that can be utilized to identify material misstatements in the financials ofDIPL Ltd is ratio analysis. For instance, ratios like profitability ratio, liquidity ratio, solvency ratios, etc can be taken into account to evaluate the pattern of alterations in the financial statements. In the case of DIPL Ltd, ratio analysis has been conducted for identifying such patterns over the period of three years. Firstly, profitability ratios like netprofit ratio and gross profit ratio have been shown. Secondly, liquidity ratio like current ratio has been shown. Thirdly, solvency ratio like debt-equity ratio has also been shown.Profitability RatioGross profit ratio201320142015Gross profit (I)600450060795006604500Sales (II)342120003769950043459500GP ratio (I/II)17.55%16.13%15.19%Net profit ratio201320142015Net profit (I)235919022913622972183Sales (II)342120003769950043459500NP ratio (I/II)6.90%6.08%6.84%In relation to the profitability ratios, an auditor can evaluate the changes in ratio to determine whether the company is capable of converting its revenue into profits. From the above computation, it can be seen that the net profit ratio of DIPL have been stagnant over the years as 3

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