Auditing and Assurance Services in Modern Context

This assignment delves into the contemporary landscape of auditing and assurance services. It examines how these fields are adapting to new technologies, evolving regulations, and increasing stakeholder demands. The analysis draws upon academic literature and real-world examples to illustrate key concepts, trends, and challenges facing auditors and assurance providers today.

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
University Name
Student Name
Authors’ Note

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Answer to Question 1:
Employment of analytical techniques to pecuniary declarations of the firm DIPL
Analytical procedure to the financial declaration of the corporation DIPL can assist in
developing the overall audit plan. However, this audit plan can be taken into account as a
specific directive that need to be tracked during the period of carrying out the audit (Duncan
and Whittington 2014). Particularly, audit plan assists assessors in sustaining audit costs at
reasonable stage and helps in avoiding misinterpretation and miscommunication with the
client of the company.
Analytical tactic of common sizing assists in evaluating financial statements to a certain
common point of reference (Baylis et al. 2017). However, this in order helps in undertaking a
comparative assessment of financial pronouncements in terms of diverse time period
otherwise in terms of different companies. Appraisers can consider different kinds or
categories of items stated in the financial declaration, check the manner of presenting
pecuniary reports. For instance, the manner of recording items namely net assets elsewise
liabilities together with equity of different owners in the financial reporting. However,
variance of financial declaration from specific point of reference assists in the process of
recognizing the deviation and at the same time assist in evaluating the overall cause of the
detected variance in a bid to understand the main reason (Homb et al. 2014). Furthermore,
the technique of analysing using key financial ratio can be regarded as a suitable analytical
method that can be aptly utilized for the purpose of comparing different financial
pronouncements and at the same time analysing specific plan of financial audit.
Illustration of manner in which financial outcomes can influence on audit plan decisions
In essence, specific outcomes of planning decisions for audit planning can be especially
affected by the analytical tactic adopted for deciphering information from the pecuniary

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statements. For instance, results of the ratio analysis enumerated based on the financial
declaration of the company DIPL is as presented below:
Particulars 2013 2014 2015
Profit margin 0.068 0.60 0.06
Solvency ratio 0.62 0.44 0.21
Current ratio 1.42 1.46 1.50
Appropriate evaluation of the financial condition can be essentially undertaken using key
financial ratio used in this case namely profitability ratio, liquidity ratio and the solvency
ratio. The profitability condition depicted by the profit margin ratio stands at 0.068 during the
year 2013, however, the same financial ratio improved to 0.60 during the financial year 2014.
Thereafter, the same declined to 0.06 in the following year 2015. Again, solvency ratio
enumerated for DIPL reflects the fact that the ratio has declined from 0.62 in 2013 to 0.44 in
2014 and further to 0.21 in 2015. Again, the current ratio calculated for the firm is observed
to be 1.42 in the year 2013, 1.46 during the year 1.46 and 1.50 during the period 1.50. Thus,
this financial ratio analysis helps assessors in comprehending the fact whether expends of the
entire corporation are sensible and whether the overall costs incurred are extremely high
(Glover et al. 2016). This in turn also assists in understanding the resources of the
corporation and the way the corporation can undertake necessary measures to limit any kind
of unfavourable incidence.
Answer to Question 2:
There are different risk categories involved in the process of audit and is necessarily founded
on specific incidence connected to material misstatement indifferent pecuniary or else
economic pronouncements of particular business concern. However, it can be hereby

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recognised that there exists diverse classes of unsystematic risk that can point out towards
different types of risks identified from financial pronouncements of the business. Again, there
also exists different categories of other risks that can be functional for both financial along
with different non-financial facets that in due course can be avoided in a specific corporation
(Arens et al. 2016). This in turn can help in representing both true as well as fair view of
different kinds of economic declarations. Nevertheless, the appraiser might possibly find it
quite demanding to detect specific risks. There exists diverse classes of correlated risks that
might arise due to omission together with different range of errors along with mistakes that
are necessarily unthinkable for different bookkeepers.
Category of
Risk
Description
Inherent Risk As per the current case it can be hereby mentioned that there exists
business transactions that are sometimes omitted by mistake by diverse
accountants of the company. Analysis of financial statements of the
firm divulges the fact that the company DIPL has failed to attain the
desired level of profit and failed to acquire revenue from the company’s
sales. However, this might perhaps be due to failure of the
administration of the corporation to detect particular necessities, failure
to evaluate diverse macro as well as micro features that are within the
purview of soci0-economic as well as political matters. Thus, this
consequently revealed from the poor figure on sales and this in line led
to the occurrence of inherent risks (Knechel and Salterio 2016).
Besides this, members of the staff of the organization have also
increased the entire inherent risks. Analysis of the current case reveals
the fact that owing to inadequate experience along with proficiency

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level of workers, the overall inherent risks of the corporation have
increased. The non-skilled workers can augment the overall inherent
risks as they are certain to commit certain errors for example,
inaccuracies due to exclusion that again directs towards falsely
presented pecuniary declarations (Houghton and Campbell 2013).
Diverse environmental aspects leads towards certain inherent risk. This
primarily occurs due to rapid transformation and specific issues
connected to method of assessment of inventory, hard competition in
the common market accompanied by deficiency of sufficient capital.
Inherent Risk In addition to this, process of analysis of present case on DIPL divulges
about diverse complexities together with intricacies present in the
process of CEO selection as well as succession, appropriate technique
of selection alongside effortlessness of transition contains inherent risk
(Green and Zhou 2013). Therefore, initiation of procedure without
adhering to the strategy, commencing the procedure late, improper
association with the CEO and parting of diverse candidates might
perhaps direct the way towards inherent risks. Furthermore, registering
receipts of cash by finance authorities of the corporation might also
make the way for inherent risks if not appropriately controlled. Carrying
out detailed registration of earned revenue from the specific e-book,
considering republication of textbooks in the forthcoming period can
give way to inherent risks because of complication of the procedure
(Reding et al. 2013).
Way in which the risks might affect material misstatement in financial declaration

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Identified inherent risks can be regarded as the proneness of a specific assertion in relation to
material misstatement.
Extreme pressure on workforce as well as management (Christensen et al. 2016)
Risks of errors in addition to inaccurate misrepresentation
Reliability of the complete administration
Pressure on management
Nature of business
Answer to Question 3:
It can be hereby mentioned that fraud risk directs the way towards significant losses of assets
due to incidence of fraud. However, discontentment of workers stemming from extreme work
pressure can prompt the members of the staff to engage in the act of fraudulent actions.
Furthermore, anticipations of the specific management as regards financial results and
expectations to achieve particular level of performance directs the way towards occurrence of
fraud risk (Kilgore et al. 2014). In addition to this, there are occurs the necessity to
pronounce particular financial results that in turn can help in averting risks of presenting
falsified statements.
Risk Description
Fraud
risk
This risks might perhaps take place due to the engagement of the dissatisfied workers
in different fraudulent activities. In this particular case on functionalities of the firm
DIPL focuses on the excessive pressure of the board to acquire a new system for
accounting. However, it can be hereby mentioned that this too much pressure on the
members of the staff to undertake the task of installing the new technologically

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advanced and IT induced system of IT might perhaps direct the way towards
fraudulent actions (Chou 2015). Subsequently, this refers to the fact that the workers
might perhaps get involved in diverse fraudulent actions and manage the process of
settlement in an inappropriate manner and consequently commit material
misstatement. Nevertheless, this current case study also explicates illustratively that
the inappropriate process of dealing with the entire process of executing the work of
installing the new system of accounting might turn to inappropriate appropriation of
specific business transactions during the closing of the year (Pizzini et al. 2014).
Again, this sequentially might possibly direct towards occurrence of incidence of loss
owing to material misstatement along with fraud risk.
Fraud
risk
Besides this, another risk that might perhaps stem comprises of fraudulent actions
involved in the process of preparation as well as presentation of financial
pronouncements. Particularly, at the time when there is extreme anticipation from
outside sponsors to announce particular financial facts otherwise to attain particular
performance targets by the management leads to risk of material misstatement
(Svanström 2013). In addition to this, attainment of specific goals in a bid to qualify
to procure debt also involves huge risk of unfitting financial declarations. However,
declarations as regards the financial condition of the corporation DIPL divulges about
the revenue of the corporation and this represents the fact that the company has raised
the overall revenue of the firm during the specific period that is between the year 2013
and the year 2015. Besides this, the calculated gross profit along with the net profit
can also be observed to have risen. Nevertheless, the current case study divulges the
fact that this specific corporation DIPL has garnered loan worth 7.5 million from the
organization BDO Finance. Apart from this, this case under consideration also
replicates that this specific loan has a specified loan contract that calls for the need of

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maintaining a particular current ratio of roughly 1.5 together with debt equity ratio
lesser than 1. Thus, this in turn reflects that these factors necessitates the business
firms to keep a certain financial ratio that subsequently can help in acquiring credit.
Therefore, this can consequently lead to different fraudulent activities and direct the
way towards inappropriate representation of financial condition. Essentially, failure of
the business to maintain the specific yardstick can in due course make the corporation
non-qualified to obtain funds from BDO Finance.
As per the given case study, it can hereby mentioned that procedure of valuation of diverse
inventory of raw material at specific average cost was not appropriate as the current paper
cost was substantially over and above the average cost. Again, risk of detecting fraudulent
activities engaged in the process of execution of accounting system using information
technology in the process of accounting can be undertaken by observing diverse actions at
different stages (Edgley et al. 2015). Initially, the risk associated to reporting economic
declarations can be detected by undertaking analysis of financial declarations by diverse
assessors, tracking systems of control periodically.

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Reference
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services. Pearson.
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lenders’ demand for audit. Journal of Accounting and Economics.
Chou, D.C., 2015. Cloud computing risk and audit issues. Computer Standards & Interfaces,
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Christensen, B.E., Glover, S.M., Omer, T.C. and Shelley, M.K., 2016. Understanding audit
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