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HI6026: Audit, Assurance and Compliance | Assignment

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Holmes Institute Sydney

   

Audit, Assurance and Compliance (HI6026)

   

Added on  2020-03-02

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HI6026 - The following document is based on your reading and understanding the document. The paper has some questions answer based on your learnings. The paper has following questions 1. Explain how results influence planning decisions for the audit if analytical procedures to the financial report information of DIPL for the last three year is applied. 2. Conduct risk assessment and find inherent  risk factors that arise from the nature of DIPL’s business operations.

HI6026: Audit, Assurance and Compliance | Assignment

   

Holmes Institute Sydney

   

Audit, Assurance and Compliance (HI6026)

   Added on 2020-03-02

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Audit assignmentAugust 23, 2017Audit assignment1
HI6026: Audit, Assurance and Compliance | Assignment_1
Audit assignmentTable of ContentsContentsTable of Contents.............................................................................................................................2Question 1........................................................................................................................................2Question 2........................................................................................................................................7Question 3........................................................................................................................................9References......................................................................................................................................112
HI6026: Audit, Assurance and Compliance | Assignment_2
Audit assignmentQuestion 1Analytical procedures are procedures those help the auditor in making auditor plan and plan howto conduct an audit, which areas of the company’s financial report needs a greater number ofprocedures etc [ CITATION Glo00 \l 1033 ]. Analytical procedures can be performed in two steps infirst step auditor makes understanding regarding entity, business environment surrounded byentity, internal controls applied by entity in its daily operating procedures, this step is known aspreliminary analytical procedure study[ CITATION Aud09 \l 1033 ]and in second step auditorcalculates ratios from financial information as well as apply some statistical tools and this step isknown as substantive analytical procedure [ CITATION HIR96 \l 1033 ].Preliminary analytical procedures on the company Double ink printers limited results thatcompany is a public company, working in the service sector business enviournemnt. Copamy’smajor service is to provide print on demand i.e. company prints various paper print materials forthe clients for theire exact order requirment. The secondry way of earning revenue for thecompany is to provide e-books with titles of publishers, for providing this service companychange commission as well as fees. Company’s internal conrol from the view point ofpreliminary procedures seems good except for the non-application of seggeregation of duties. Application of substantive analytical procedures on the company will impact audit plans andaudit procedures on the following way,201320142015Gross Profit600450060795006604500÷Revenue from Operations342120003769950043459500Gross profit17.55%16.13%15.20%Net profit235919022913622972183÷Revenue from Operations342120003769950043459500Net profit ratio6.90%6.08%6.84%Net profit ratios show profitability percentage of the company for total profit and gross profitratio shows profitability percentage for profit from direct activities of the company. In thepresent case, net profit ratio is increased in 2015 even after a decrease in the gross profit ratio forthe same year. This is unusual assertion hence this will impact audit procedures by an increase ina number of procedures for all assertions present in income statement especially those assertionswhich can be changed by an organization with own discretion like accousting estimates,3
HI6026: Audit, Assurance and Compliance | Assignment_3
Audit assignmentvaluation methods etc.Net profit235919022913622972183÷Total Assets129300001590390026147991Return on asset18.25%14.41%11.37%Net profit235919022913622972183÷Total Equity91500001078365012250491Return on equity25.78%21.25%24.26%Return on asset shows the profitability of company for total asset invested in the company andreturn on equity shows the profitability of company for total equity invested in the company. Inthe present case, return on equity is increased in 2015 and return on asset ratio decreased for thesame year. Return on asset ratio decline due to higher investment in the assets of the company.This will impact audit procedures by an increase in a number of procedures for all transactionsrelated to assets especially for the transactions related to assets purchase and method of assetvaluation.Total Liabilities3780000512025013897500÷Total Equity91500001078365012250491Debt/ equity41.31%47.48%113.44%EBIT345465033570373867337÷Interest expense8437983663808038Time interest40.9440.134.79In the year 2015, company’s debt increased with a very higher amount hence debt financing isalso increased and entity becomes more leveraged. A Higher level of leverage increase riskbecause non-payment of debt related obligation may result in company’s liquidation. Due to thisdebt-equity ratio increased and times interest ratio decreased during the year. This will impactaudit procedures by an increase in a number of procedures for making understanding regardingthe need for new debt capital.Accounts Receivables248250043200005073309*Days365365365÷Revenue from Operations342120003769950043459500Days sales outstanding26.4941.8342.61Revenue from Operations342120003769950043459500÷Accounts Receivables248250043200005073309Accounts receivable turnover ratio13.788.738.57Accounts receivable turnover ratio shows frequency of collecting debts by the company itsreceivables. Days sales outstanding in how many days company can convert its debts into cash.In the present case Accounts receivable turnover declined and days sales outstanding decline dueto increase in accounts receivable. It indicates that company starts to give longer credit period4
HI6026: Audit, Assurance and Compliance | Assignment_4

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