logo

HI6026, Audit, Assurance and Compliance | DIPL Ltd

   

Added on  2020-03-04

8 Pages2168 Words34 Views
AUDIT & ASSURANCE

DIPL Ltd AuditAnswer 1Analytical procedures are carried out in the company DIPL Ltd, and in this situation, a set of different ideas and procedures are needed to be established. The substantive procedure is one such procedure for such type of business which enables to evaluate the market trend and predict the future remedial action (Church et. al, 2008). The substantive procedure helps auditors finding the evidence so that the proclamation is backed up entirely and allowing weeding out of misstatement substance that is inserted to the validity and accuracy of the financial system and record of the company.Auditors in its capacity and competency are expected to bring the expertise in the form of procedures that will have a direct presence upon the future course of business. The substantive procedure will help the auditor to find out any differences in the transaction. So, analytical procedure should be known to the auditor. Analytical procedure can be applied in the present scenario. The analytical procedure must be applied in the normal functioning of the company’s business and the trend analysis is an effective instrument that assesses the differences in the books of accounts in a specific time frame. The trend analysis helps in the decision-making process. In addition, ratio analysis tool is an important instrument in helpingin easy relation in financial execution (Elder et. al, 2010). Thus, enabling decision-makingprocess can be guided via testing, control and through estimation.For the purpose of analysis and decision making, the ratio computation has been done for the period of 3 years that is 2013 to 2015. For the purpose of evaluation, the profitability, liquidity and the solvency ratio has been touched upon that denotes the trend in the company and even the manner in which the business operates. These three areas provide an indication of the performance of the company.Ratio analysis mentioned above is self-explanatory as far as company’s financial performance is concerned. It has been observed from the analysis that momentum is well maintained. The current ratio is 2:1 which is more than 1:1, indicates that the company has sufficient assets and liquidity to meet the obligations. So, the current ratio is well maintained signifying sufficient assets of the company. The company raised debt in 2015 and the debt-equity ratio stands at 0.61 which is more than the normal debt of 0.50 which might result in higher interest payment. For the purpose of debt-equity ratio only long-term loans have been taken into consideration (Northington, 2011). The profitability ratio is the gross profit and the2

DIPL Ltd Auditnet profit ratio. It denotes how profitable the company is. Over the period from 2013 to 2015 though the company is operating on a profitable basis but there was decline in profitability during the period. Net profit has increased whereas gross profit has marginally decline still the company maintained steady performance. It can be more effective if the company maintain a strong cost control over sales, as because the revenues are big, management isadvised to consider having a cost control mechanism in place to boost the profitability.There are some noticeable facts to be brought to light that the cash balance of the company has taken a dip during the past three years reflects a cause of concern. Moreover, the payments are hold up in accounts receivable gives an indication that the recovery process is slow and not effective which need to be addressed for the smooth functioning of the company financial aspects. The huge build-up in stock inventories does not reflect a strong situation. Dubious information in stock position can be due to wrong procedures adopted for the process of valuation. This must be addressed and corrective measures may be taken at the earliest. Increased in the bad debt is a cause of concern for the company’s management. In the year 2014, there is a significant jump in accounts payable without any changes in procurement expenditures.3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
HI6026 - Audit, Assurance Compliance
|9
|2492
|68

Auditing Theory and Practice : Assignment
|9
|1974
|201

HI6026 Compliance and Audit - DIPL Case Study
|11
|2816
|20

Auditing and Assurance Services- Project Report
|10
|2670
|156

HI6026 - Assignment Audit, Assurance and Compliance
|7
|1322
|160

HI6026 - Audit, Assurance and Compliance - Case Study
|10
|2515
|43