University Audit, Assurance and Compliance Report on DIPL

This report analyzes the audit, assurance, and compliance practices of Double Ink Printers Limited (DIPL), focusing on financial analysis and risk assessment. It examines the application of analytical procedures, including common sizing and benchmarking, to evaluate financial statements. The report ...Read More

Running head: AUDIT, ASSURANCE AND COMPLIANCE
Audit, Assurance and Compliance
Name of the Student
Name of the University
Author’s Note

1AUDIT, ASSURANCE AND COMPLIANCE
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................4
Answer to Question 3......................................................................................................................5
References........................................................................................................................................7

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Answer to Question 1
Application of Analytical Procedures
In the process of accounting and finance, analytical process of the financial information
has significant importance. On the other hand, audit plan also has its importance in the audit
process of the companies. With the help of proper audit plan, the accountants and financial
analysts of the companies can maintain the auditing cot and prevent misunderstanding regarding
financial information with the clients. In Double Ink Printers Limited (DIPL), financial analytical
approach refers to the spreading of accounting and financial information from different financial
declaration. There are various mechanisms or methods are available for analytical approach.
With the help of analytical approach, financial managers of the companies can analyze the
financial information for various purposes (Louwers et al. 2015).
Common sizing analytical approach helps to analyze the information from various
financial declarations from different organizational perceptions. With the help of this, the
financial managers can compare the financial statements from different financial years. The
financial managers can validate all the financial items of the financial reports and they also check
the recording process of theirs in the financial statements. For example, it can be said that the
reporting system of liabilities is different from the reporting system of owner’s equity.
Benchmarking is considered as the major process of analyzing the audit plan. With the help of
benchmarking process, variance between the actual and benchmarked financial performance can
be identified. This process helps in taking corrective measures to minimize those variances
(Nalewaik and Mills 2016).

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Explanation of Influence of Results on Planning
Apart from this, another major analytical mechanism is the Ratio Analysis. Ratio analysis is used
as a crucial tool to compare the financial statements of different years and to assess the audit
plan.
Particulars 2013 2014 2015
Current ratio 1.42 1.46 1.50
Profit margin 0.068 0.60 0.06
Solvency ratio 0.62 0.44 0.21
Table 1: Analysis of Ratios
(Source: As created by Author)
The results of analytical approach influence the audit planning process of the companies
for spreading information of the financial statements. For example, the results of the ration
analysis can be considered. As per the above table, it can be seen that the current ratio of DIPL
for the financial year 2013, 2014 and 2015 are 1.42, 1.46 and 1.50 respectively. On the other
hand, the profitability ratio of DIPL for the financial year 2013, 2014 and 20115 are 0.068, 0.60
and 0.06 respectively. Profitability ratios are helpful for analyzing the earned net income in
respect to total sales. Apart from this, with the help of profitability ratio, the financial managers
can assess whether the expenses of the companies are high or low. It also indicates that whether
the business organizations have sufficient financial power for expansion. From the above table, it

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can also be seen that the solvency ratio for the year 2013, 2014 and 2015 are 0.62, 0.44 and 0.21
respectively. With the help of solvency ratios of the companies, the financial managers can judge
the solvency position of the companies. Different types of ratio analysis for the years helps to
make the financial managers of the companies understand whether the overall cash flow of the
company is enough to meet the long as well as short-term obligations of the company (Hayes,
Wallage and Gortemaker 2014).
Answer to Question 2
From the business operations of DIPL, several risk factors are raised. However, there are
two major risk factors. These two risk factors are discussed below:
According to the provided case study, it can be seen that the accountants or the
management of the company has omitted numerous accounting transactions. The aspects show
the ineffectiveness and inconsistency of the accountants and management of the company. In
addition, the analysis of financial reports has shown the failure of the company in achieving the
required level of profit from the sales. From this, it can be understood that the management of
the company has failed to identify the specific requirements for the smooth running of the
organization. Thus, it can be said that the management of DIPL has failed to assess the impact of
different micro and macro economic factors on the organization. This factor increases the
inherent risks of the company (Duncan and Whittington 2014).
The employees of the company have also increased the inherent risks of the company.
The success of the business organizations lies on the hands of their employees. In this case, the
employees of DIPL lack efficiency and experience. For this reason, they fail to contribute
towards the success of the company. This factor massively increases the inherent risk factors of

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the company. It is expected that the inexperience and non-proficient employees of the company
will make mistakes while doing their jobs. For this reason, the inherent risk factors can be
increased (Cannon and Bedard 2016).
There are some reasons that lead to the material misstatements in the financial reports of
the companies. Excessive pressure on management is a major reason. Excessive pressure on the
employees contributes to the ineffective bookkeeping process. For this reason, various issues in
the organization can be seen like issues in cash flow, liquidity issues, ineffective operating
outcome and others. Another major issue is the incorrect interpretation. The incorrect
interpretation of the financial statements crates negative effects on the materiality of the financial
statements. In addition, as per the provided case study, it can be seen that the management team
of DIPL lacks integrity and honesty in their jobs. Therefore, the entire reputation of the company
can be lost. The management of the company faces excessive pressure in order to achieve the
benchmarked target. All the above discussed reasons jointly contributes towards the material
misstatements of the financial statements.
Answer to Question 3
Answer to [a]
Name of Fraud Risk Explanation
Engagement of
Workforce in Fraud
Actions
Engagement of the employees of DNPL in different types of fraudulent
activities is a major fraud risk for the company. This risk happens due to the
dissatisfaction of the employees towards their jobs. According to the
provided case study, it can be seen that there are huge pressure on the
employees for the adoption of new accounting system. This excessive

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pressure on the employees may lead to fraud risks. It states that the
employees may choose the way of fraudulent for the reconciliation
procedure. This also leads to material misstatements of the financial
statements (Arens et al. 2016).
Fraud Risk in Financial
Reporting
Financial reporting fraud risk is another type of fraud risk. When the
stakeholders of the company have specific performance requirements from
the company, then there is a high risk of fraud. It can be seen that the
management often manipulates the financial position of the company in
order to fulfill the expectations of the stakeholders. As per the financial
statements of the company, from 2013 to 2015, there was an increase in the
revenue of the company. However, the current and total assets of the
company have also increased.
Answer to [b]
As per the case study, the valuation process of different raw materials of the company in
the average cost is not suitable as the present cost is higher than the average cost of the company.
With the help of monitoring process in the different phrases of activities, identification risks of
fraudulent actions regarding the implementation of new IT system can be executed. On the other
hand, the with the help of analysis and evaluation of financial statements, the risk of financial
reporting can be identified (Arens, Elder and Mark 2012). Thus, it can be seen that the risk
factors identified in the above section largely affects the various audit operations of the
company.

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References
Arens, A.A., Elder, R.J. and Mark, B., 2012. Auditing and assurance services: an integrated
approach. Boston: Prentice Hall.
Arens, A.A., Elder, R.J., Beasley, M.S. and Hogan, C.E., 2016. Auditing and assurance services.
Pearson.
Cannon, N. and Bedard, J.C., 2016. Auditing challenging fair value measurements: Evidence
from the field. The Accounting Review.
Duncan, B. and Whittington, M., 2014, September. Compliance with standards, assurance and
audit: Does this equal security?. In Proceedings of the 7th International Conference on Security
of Information and Networks (p. 77). ACM.
Hayes, R., Wallage, P. and Gortemaker, H., 2014. Principles of auditing: an introduction to
international standards on auditing. Pearson Higher Ed.
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing
& assurance services. McGraw-Hill Education.
Nalewaik, A. and Mills, A., 2016. Project Performance Review: Capturing the Value of Audit,
Oversight, and Compliance for Project Success. CRC Press.

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