AUDITING AND ASSURANCE3statements. For instance, results of the ratio analysis enumerated based on the financialdeclaration of the company DIPL is as presented below:Particulars201320142015Profit margin0.0680.600.06Solvency ratio 0.620.440.21Current ratio1.421.461.50Appropriate evaluation of the financial condition can be essentially undertaken using keyfinancial ratio used in this case namely profitability ratio, liquidity ratio and the solvencyratio. The profitability condition depicted by the profit margin ratio stands at 0.068 during theyear 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 ratioenumerated for DIPL reflects the fact that the ratio has declined from 0.62 in 2013 to 0.44 in2014 and further to 0.21 in 2015. Again, the current ratio calculated for the firm is observedto 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 theentire 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 thecorporation and the way the corporation can undertake necessary measures to limit any kindof unfavourable incidence. Answer to Question 2:There are different risk categories involved in the process of audit and is necessarily foundedon specific incidence connected to material misstatement indifferent pecuniary or elseeconomic pronouncements of particular business concern. However, it can be herebyrecognised that there exists diverse classes of unsystematic risk that can point out towardsdifferent types of risks identified from financial pronouncements of the business. Again, there

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