Financial Ratios Analysis and Interpretation
Added on 2020-03-04
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Running head: AUDIT ASSURANCE AND COMPLIANCEAudit Assurance and ComplianceName of Student:Name of University:Author’s Note:
1AUDIT ASSURANCE AND COMPLIANCETable of ContentsAnswer to Question 1:.....................................................................................................................2Answer to Question 2:.....................................................................................................................3Answer to Question 3:.....................................................................................................................6Reference.........................................................................................................................................8List of Appendix..............................................................................................................................9
2AUDIT ASSURANCE AND COMPLIANCEAnswer to Question 1:Application of analytical procedures to the financial report information of DIPL The main type of the financial report of DIPL has been able to develop the audit plan.The planning of the audit has been followed with the time of undertaking of the same. Ingeneral, the assessor in terms of maintaining the costs associated to audit at a reasonable stage.This has been further seen to assist in terms of maintaining the audit cost and assist in avoidingof misunderstanding of clientele. The financial declaration of DIPL is associated to thedissemination from the financial declaration from the firm (Kend et al., 2014).Analytical approach of the common size has been based on common reference point andfinancial declaration. This has been further seen to help in the comparison of the financialstatement with different periods based on different corporations. The assessors of this can furtherconsider the different line items which have been mentioned in the financial report. For example,the registering process of the items such as net assets and net liabilities along with owner’s in thefinancial reporting of the company and infer the deviation from the normal reporting. It has been further seen that ratio analysis can be considered as an appropriate analyticalapproach which can be used for the assessment of audit plan and financial declarations (Williamet al., 2016).Explanation of the way the results influence planning decisions for the auditParticulars201320142015Current ratio1.421.461.50Profit margin0.0680.600.06Solvency ratio0.620.440.21
3AUDIT ASSURANCE AND COMPLIANCETable 1: Ratio Analysis(Source: as created by Author)The main result of the planning decision has been further considered necessary for theevaluation of the results which has been seen to be influenced by the financial statements. Theoutcomes of the ratio such as current ratio of DIPL are seen to be calculated as 1.42 in 2013, 1.46in 2014 and 1.5 in 2015. The profitability ratio has been further computed based on profit marginwhich has been discerned as 0.068 in 2013, 0.60 in 2014 and 0.06 in 2015. This particular factoris conducive in revealing the condition of net income which has been earned by the firm incompared to the net sales of DIPL. This is further seen to be conducive in understanding theexpenses are low or high whether the management to requirement to cut down the budget andexpend the same on firm. The comparison of the ratio in three year has been able to understandthe relative position of firm in three periods and further analyse the factor which has led toundesirable and unfavourable condition of the corporation (Arens et al., 2016).Answer to Question 2:Identification of inherent risk factors that arise from nature of business operations of DIPLThe important factor has been seen to be based on auditing which comprise of theincidence associated to material misstatement in the financial declaration of certain concern.However, it can consider making forms of the systematic as well as unsystematic risks which hasbeen further seen to reflect the way financial misstatements are taken into consideration forcorporations. Despite of this, the risks associated may be seen to be based on both financial aswell as non-financial factors which can be possible for the financial and non-financial factors.These factors can further avert a specific corporation for reflecting a true as well as fair view of
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