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Auditing & Assurance - Different Risks

Added on - 07 Mar 2020

In this document, we will discuss the analytical techniques of employment law to pecuniary declarations of the firm DIPL. Also, we include the process of audit and fraud risks.

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Running head:AUDITING AND ASSURANCEAuditing and AssuranceUniversity NameStudent NameAuthors’ Note
AUDITING AND ASSURANCE2Answer to Question 1:Employment of analytical techniques to pecuniary declarations of the firm DIPLAnalytical procedure to the financial declaration of the corporation DIPL can assist indeveloping the overall audit plan. However, this audit plan can be taken into account as aspecific directive that need to be tracked during the period of carrying out the audit (Duncanand Whittington 2014). Particularly, audit plan assists assessors in sustaining audit costs atreasonable stage and helps in avoiding misinterpretation and miscommunication with theclient of the company.Analytical tactic of common sizing assists in evaluating financial statements to a certaincommon point of reference (Bayliset al.2017). However, this in order helps in undertaking acomparative assessment of financial pronouncements in terms of diverse time periodotherwise in terms of different companies. Appraisers can consider different kinds orcategories of items stated in the financial declaration, check the manner of presentingpecuniary reports. For instance, the manner of recording items namely net assets elsewiseliabilities together with equity of different owners in the financial reporting. However,variance of financial declaration from specific point of reference assists in the process ofrecognizing the deviation and at the same time assist in evaluating the overall cause of thedetected variance in a bid to understand the main reason (Hombet al.2014). Furthermore,the technique of analysing using key financial ratio can be regarded as a suitable analyticalmethod that can be aptly utilized for the purpose of comparing different financialpronouncements and at the same time analysing specific plan of financial audit.Illustration of manner in which financial outcomes can influence on audit plan decisionsIn essence, specific outcomes of planning decisions for audit planning can be especiallyaffected by the analytical tactic adopted for deciphering information from the pecuniary
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 ratio0.620.440.21Current 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(Gloveret 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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In brief, we covered the procedure of valuation of the diverse inventory of raw materials at a specific average cost was not appropriate as the current paper cost was substantially over and above the average cost. Also, we concluded the risk associated with reporting economic declarations by undertaking an analysis of financial declarations by diverse assessors and tracking systems.