Audit Assurance and Compliance Report: DIPL Financial Review

This report provides a comprehensive analysis of audit assurance and compliance, focusing on the financial performance and risk factors of DIPL. It begins by examining key financial ratios, including profit margin, solvency ratio, and current ratio, to assess the company's financial health over a three-year period. The report then delves into the identification of inherent risks, such as those stemming from potential errors in financial statements, inadequate employee expertise, and environmental factors. Furthermore, it explores fraud risks, including those related to employee pressures, management incentives, and the potential for misstatements in financial reporting. The analysis includes detailed explanations and examples to illustrate each type of risk, providing a thorough understanding of the challenges and considerations in ensuring audit assurance and compliance for DIPL. The report also references various sources to support its findings.

Running head: AUDIT ASSURANCE AND COMPLIANCE
Audit Assurance and Compliance
University Name
Student Name
Authors’ Note

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Table of Contents
Requirement 1:...........................................................................................................................2
Requirement 2:...........................................................................................................................3
Requirement 3:...........................................................................................................................5
Requirement 1:
In essence, there are specific results of judgements for both preparation as well as presented
of firm’s audit (Duncan and Whittington 2014). However, process of audit can be affected
by the precise line of approach of the analytical approach adopted for deciphering specific
information from the financial reports declared by the firm DIPL. For instance, analysis of
key financial ratio computed from the financial statement of DIPL can help in understanding
the financial condition of the firm:
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

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Detailed evaluation of financial state of affairs of the firm DIPL can be carried out by using
key financial ratio such as profitability ratio, solvency ratio along with liquidity ratio (Baylis
et al. 2017). Results of the financial ratio is hereby enumerated based on the financial
assertions declared by the firm DIPL. Profit margin ratio reflecting the profitability condition
of the firm is enumerated to be 0.068 during the FY 2013, 0.60 recorded in 2014 and 0.06 in
2015. This shows that the profitability condition of the firm improved during the period 2014,
but further declined during the period 2015. Again, the solvency ratio is enumerated to be
0.62 in 2013, 0.44 in 2014 and 0..21 in 2015. Essentially, this replicates the fact that
the .solvency condition of the firm dropped during both 2014 and further in 2015. Again, the
current ration of DIPL is calculated to be 1.42 in 2013, 1.46 in 2015 and 1.50 in 2015. This
shows that the liquidity condition reflected by the current ratio has improved over the said
period of time.
Thus, examination of significant financial ratio aids auditors in comprehending diverse
expends of the firm are properly well-designed and operational. In addition to this, ratio
analysis of the financial statements of DIPL also helps in understanding whether entire costs
that the company incurs are unusually high. Furthermore, financial ratio also assists in
understanding both the belongings along with resources of the corporation together with the
way DIPL can undertake different necessary acts to restrain any sort of adverse incidence
(Homb et al. 2014).

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Requirement 2:
Category of
Risk
Illustration
Inherent Risk Evaluation of business case on DIPL reflects different errors or else faults
exist in financial statements owing to mistakes committed by the proficient
accountants. Examination of financial statements also reveals that the
company DIPL has failed to attain pre-determined figure on figure from the
sales proceeds of the firm. Mainly, this occurs because of failure of the
management of the firm to understand diverse necessary requirements along
with different micro as well as macro facets of the business environ , let’s say
different aspects of political as well as social affairs along with economic
facets. It can be hereby witnessed that the lower amount of sales of the firm
also directs towards events of inherent risks (Loconto 2017).
Besides this, employees of the firm DIPL also add to the inherent risk of the
firm. Again, inadequate experience and level of expertise of the workers also
add to the overall inherent risks of the firm DIPL. Nevertheless, the non-
proficient employees can escalate the overall inherent risk of the firm as they
are more probable to commit errors. However, this can lead to erroneousness
representation of financial statements and this might be referred to as the
material misstatements (Chambers and Odar 2015). In addition to this,
different environmental features can increase the level of inherent risk of the
firm. This primarily occurs because of swift transformation in the business
environ and proper link to specific schemes, very tough level of competition in
the market and shortfall of capital (Graham 2015).
Inherent Risk Inherent risks also occur in the course of selection of CEO and the process of
CEO succession. Therefore, there is a pressing need for following a proper

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strategy for selection of subsequent CEO s of the firm. Essentially, beginning
a certain task without sticking to specific pre-stated strategies, beginning the
entire process late, inapt linkage to the CEO and selection of the nominee of
the CEO might possibly give way to events to inherent risks. Additionally,
proper listing and registering of different cash proceeds by finance experts can
too lead to development of inherent risks of the company. Again, detailed
cataloguing of proceeds from the business from certain e-books, proper
issuance of manuals or else text books also add to the inherent risk in the
future period as a result of complicatedness of the overall mechanism (Pitt
2014).
Diverse reasons behind the risks due to material misstatement in the financial statements are
as mentioned below:
unnecessary work load on employees as well as administration of DIPL
Committing errors while preparation as well as presentation of financial statements
can lead to flawed or material misstatements (Jones and Beattie 2015)
steadiness of total administration
strain on management
features in conjunction with character of functionalities of DIPL
Requirement 3:
Recognitio
n of Fraud
Detailed Explanation

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Risk
Fraud risk Critical analysis of the particular business case on DIPL can lead to incidence of different
types of risk. Risks might crop up owing to engagement of different discontented workers
in different deceitful actions. Examination of functionalities of the firm reveals the fact that
there exists enormous pressure on employees of the firm, administration of DIPL to acquire
a new guideline for system of accounting. Nevertheless, this also put forth enormous strain
on employees to presume the assignment of suitable and advanced IT induced system of
accounting (Duncan and Whittington 2014). This might conceivably occur due to different
deceitful actions. As a result, workforces might get engaged in different duplicitous
actions. Thereafter, workers might also get influenced and manage the entire process of
clearing in an accurate manner and therefore take on misstatement in financial statements
of DIPL.
However, critical analysis of the business operation of the firm DIPL clearly replicates the
fact that unsuitable way of managing the entire task of implementing or applying the
innovative solution for improvement of accounting system can lead to inherent risk. this
essentially leads to assumption of precise business dealings and inappropriate way of
dealing with the financial transactions of the firm lead to erroneous representation and
material misstatement in financial assertions (Baylis et al. 2017).
Fraud risk There are diverse risks that might crop up owing to different fraudulent actions that take
place in course of both preparation as well as presentation of pecuniary declaration of
DIPL. Again, huge anticipations of sponsors outside that of the organization also lead to
risk of material misstatements. For example, the financial statements present financial
evidences and the company intends to present evidence that shows realisation of pre-
determined performance objectives in the financial statements. This in turn can help the
management of the company to draw more number of sponsors (Loconto 2017). Thus, this
compels the management of the firm to overstate their revenue and understate their
expends. This can help the management of the corporation to acquire higher amount of

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debt. Thus this raises the fraud risk of the company DIPL. Besides this, the calculated
gross earnings as well as net revenue is said to have elevated. Nevertheless, the business
case also reflects that DIPL has acquired loan amounting to 7.5 million from BDO Finance.
In addition to this, business case on DIPL also helps in understanding the fact a specific
loan agreement has certain terms of contract that require certain level of current ratio of
roughly 1.5 and debt equity ratio lesser than just about 1. Thus, it can be hereby mentioned
that these facets have the need of maintaining specific financial ratio that can support the
company to acquire credit (Graham 2015). Fundamentally, this can assist in different
fraudulent activities and lead to reflection of financial condition.