Audit and Assurance in Australia: DIPL Case Study Report

This report provides an in-depth analysis of an audit and assurance case study, focusing on Double Pink Printers Ltd (DIPL). It begins by examining the importance of analytical procedures in audit planning, highlighting the use of ratio analysis (current, profit margin, and solvency ratios) and benc...Read More

Running head: AUDIT AND ASSURANCE IN AUSTRALIA
Audit and Assurance in Australia
Name of the Student:
Name of the University:
Author’s Note:

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AUDIT AND ASSURANCE IN AUSTRALIA
Table of Contents
Answer to Question No 1................................................................................................................2
Answer to Question No 2................................................................................................................5
Answer to Question No 3................................................................................................................7
Answer to Question No 3 (a).......................................................................................................7
Answer to Question 3 (b).............................................................................................................9
Reference List................................................................................................................................10

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Answer to Question No 1
The analytical process has supreme importance for the assessment and review of the
financial data that has been gathered from the financial statements of the company under
consideration. During the time of constructing the plan of audit for Double Pink Printers Ltd
(DIPL), the analytical mechanism of financial data is regarded as the most appropriate and
cherished component. It requires to be cited that the audit plan of the organizations gives
essential path and direction to the auditors while undertaking the process of audit during a
specified time period. With the help of a distinct note, the audit plan aids the auditors to keep
track of the audit costs in order to restrict any miscommunication and misunderstanding with the
clients who require audit (Hardy 2014).
The analytical process of the financial data of DIPL answers to the method of scattering
the financial data from various types of financial disclosures of the firm. It is even seen that there
are various categories of techniques that aids in carrying out the analytical mechanism of the
financial data. By taking help of the analytical process for the examination of the financial data,
the accountants and the managers of finance of the firm exploits this data so that effective and
several types of decisions with respect to accounting and finance can be undertaken.
Furthermore, by taking help of the general sized analytical approach of the financial data, the
finance managers of the organizations gain the authority to dichotomize the financial disclosures
of the firm from various financial insights (Kend et al., 2014). It has been observed that one of
the significant advantages of this is that it aids to give out assistance for the construction of the
financial statements and undertake a comparison of the financial statements of the firms for the
last three accounting years.

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By taking help of the analytical process, the finance managers of the organizations can exploit
the financial information from the financial statements and they can authenticate the method of
financial broadcasting of the highlighted data. For instance, the process of financial reporting of
the net liabilities and the owner of the equity can be deliberated in this respect along with the
excursion of the data (Moroney et al., 2014). It requires to be cited that benchmarking has been
taken as the chief analytical process of financial data and it can be exploited for the construction
of the audit plan of the company.
By taking help of the process of benchmarking, the finance managers can recognise the
modifications in the financial statements of the organizations. Furthermore, the actual factor of
these alterations along with their core factors can be recognised. Along with the method
benchmarking, ratio analysis is regarded as a crucial analytical process of the financial data
(Min, & Lv 2017). The method of ratio analysis aids in the construction of the audit plan by
undertaking a comparison of the financial reports of more than one organization.
Explanation:
With respect to the case study, the implemented analytical process has a significant
impact on the construction of the audit plan. Additionally, it even has the significance in
distributing the financial data within several accounting and financial departments of the firm.
The following ratios can be constructed as these are a part of the analytical technique.

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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: Ratio Analysis
(Source: as created by Author)
With the help of the table that has been constructed above, it is observed that there has
been a rise in the current ratio of DIPL from the year 2013 to 2014 and the value has increased
from 1.42 to 1.46. In the year 2015, the current ratio accounted to 1.50 with a rise of 0.4. It has
been noticed that there has been a major variation of the financial report of DIPL for the last
three years which has shown the sum of the net profit of the firm from the net sales. Furthermore,
by taking help of the profitability analysis of DIPL, the finance managers receive an insight
about the expenses of the organization. It is seen that by taking help of the evaluations of the
financial reports, the finance managers can gain the information about the efficiency of the
organization’s budget with respect to the diversification requirement of the company (Green et
al., 2017).
The DIPL auditors can gain knowledge and idea about the present financial condition of
the firm by examining the financial issues and the ratios. By observing the table depicted above,
it can be cited that there has been a reduction in the solvency ratio of DIPL from the year 2013 to
2015. This specific pattern in the solvency ratio aids the managers in the understanding of the
financial performance of the firm. By taking help of the ratio analysis, the finance managers can
determine the cash flow amount in order to meet the short and long term responsibilities of the

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firm. Furthermore, it can be cited that the assessment and the comparison of the performance and
the ratios of the company can aid the financial managers to determine the financial condition and
performance of DIPL over the past three year time period. Additionally, the finance managers
can determine whether the present financial situation of the firm is unfavourable or not (Shah et
al., 2017). In circumstances of a unfavourable the DIPL managers requires remedial actions in
order to bring back the efficient financial condition of DIPL. Therefore, by examining the tables
that have been constructed above, it can be cited that the analytical techniques of the financial
data has significant figures for the organization.
Answer to Question No 2
The risks that are in association to a business can be described as the potentiality of the
organizational inability in order to reach the objectives of the organization. There have been
various factors of risk that are related to DIPL and this makes the firm ineffective to attain their
objectives. It has been observed that DIPL has been unable to record various financial
transactions of their activities (Rahim & Idowu 2015). By looking at the case study, the faults of
the management have a direct relation with the unreliable and futile planning of the several sales,
financial and marketing operations of DIPL. With respect to the case study there have been
specifically two factors of risk that have a significant effect on restricting DIPL to attain their
goals. They are explained as follows:
Financial Risk
The risk associated with finance can be explained as the ineffectiveness of an
organization in order to payout their liabilities that are in nature long term. With the rise in the
extrinsic liabilities, the extent of risk even gets raised. The debt percentage of DIPL in

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accordance to their equity by comparing with the figures obtained for the last three years have
increased significantly in the year 2015. It is even observed that there has been a rise in the
payment pressure that are in relation to liabilities of loan payout and the fixed rate interests of the
company within a stipulated time period (Carson et al., 2014). The observations have indicated
that there exists a challenge to the solvency condition of DIPL in the long run if DIPL is unable
to make payments for the principle and the interest amount.
Misstatement of the financial statements:
There exists a chance that DIPL may look to make transformations in their financial
statements in order to maintain their debt to equity and their current ratio in line with the contract
agreement with the borrowing firm. DIPL in order to preserve their current ratio may look to
increase their current assets with the help of the rising receivables or inventory values as well.
DIPL tries to preserve their debt-to-equity ratio looks to increase their equity values with the
help of the rising retained earnings value.
Risks related to information technology
The use of information technology within DIPL creates a serious amount of challenge for
them. The scarcity in the control of information technology may have extreme effect on DIPL.
There was a significant amount of burden that was stressed over to the IT personnel by the
management of DIPL in order to conclude the technique in the year 2015. The accounting
information process has threat related to security and this has mainly been due to the natural and
man-made calamities (Sutherland 2017).

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Misstatement in the financial statements
DIPL has been unable to maintain the equivalency among the current software process
and the innovative accounting system. There has been an issue of the ineffective transaction
allocation. The periodicity concept of accounting has not been followed by DIPL. Therefore, it
can be seen that it could lead to an ineffective disclosure of the profit condition as well as the
financial condition of DIPL (Varughese et al., 2014)
Answer to Question No 3
Answer to Question No 3 (a)
The backdrop data of DIPL that has been gathered with the help of the case study has
disclosed the potentiality of the introduction of the in effective financial statement construction
processes of DIPL. The important factors of risk that are associated with the use of these
practices can be described as follows:
Types of
Risk
Details and Identification
Fraudulent
Risk
By examining the information gathered from the DIPL case study, it can be
noticed that the key risk of counterfeit is related with the staffs and the
employees of the organization, as they have the possibility to be associated with
the operations. The key factor that is associated with the risk is the discontent
within the employees of the corporation (Joshi et al., 2014). According to the
case study that is associated with DIPL, there has been an observation that there
has been extensive stress from the side of the management so that the new
accounting process can be implemented. As the implementation of the concerned

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accounting system establishes a enormous strain on the employees, there exists
an increased amount of risk as the employees may be associated with
malpractices (Gu et al., 2017). Therefore, in order to act as a remedy for the
reconciliation process, the employees of DIPL may make use of malpractices
and this process may result to financial report misstatement. According to the
concerned case study, because of inefficient introduction of the innovative
accounting software, the company accountants have been unable to record in a
proper manner, the financial transactions and the initial accounting for the
present accounting year (Diez et al., 2015). Furthermore, the fraudulent risk can
be discovered in the mechanism in order to choose the CEO succession of the
organization. Due to this effect, there can be an increased opportunity of intrinsic
risks within DIPL.
Risk related
to Financial
Reporting
During the business activities of DIPL, the other key risk can be noticed in the
mechanism of financial reporting of DIPL (Beiles et al., 2015). During the
situation, if the stakeholders of DIPL have key financial anticipations from the
financial presentation of DIPL, there is an increased probability of malpractices
in the financial statements from the side of the organization. It has been observed
that the management of DIPL makes alterations in the financial reports thereby
showing a false presentation to the stakeholders that the organization has been
undergoing financial growth and effective operations. Therefore, it can be cited
that the risk of fraud in the reporting of the financial statements is one of the key
risks in DIPL.

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Answer to Question 3 (b)
With respect to the given case study, there has been a major deficiency in the valuation of
the raw materials of DIPL that is on the basis of the mechanism of the aggregate cost. The key
factor has been the rise in the cost of paper that has been way higher than the aggregate cost.
Therefore, it can be concluded that this is not an efficient method. The principal risk associated
with the process of the introduction of the innovative accounting software can be recognised by
taking assistance of examining several steps of the jobs within the organization (Singh et al.,
2014). Furthermore, the evaluation and assessment of the financial statements of DIPL aids the
administration to discover the fraudulent risk that is associated with the reporting of the
financials. According to the discussions made earlier, the assessment can be undertaken with the
assistance of several analytical techniques that is known as ratio analysis, benchmarking and
other financial mechanisms (Stewart et al., 2015). It is essential for the administration of DIPL in
order to complete the analysis and assessment mechanism in a timely manner.

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Reference List
Beiles, C. B., Retegan, C., & Maddern, G. J. (2015). Victorian Audit of Surgical Mortality is
associated with improved clinical outcomes. ANZ journal of surgery, 85(11), 803-807.
Carson, E., Redmayne, N. B., & Liao, L. (2014). Audit market structure and competition in
Australia. Australian Accounting Review, 24(4), 298-312.
Diez, P., Aird, E. G. A., Gouldstone, C. A., Sander, T., Eaton, D. J., & Sharpe, P. H. G. (2015).
OC-0271: A multicentre audit of HDR and PDR brachytherapy absolute dosimetry in
association with the INTERLACE trial. Radiotherapy and Oncology, 115, S139.
Green, W., Green, W., Taylor, S., Taylor, S., Wu, J., & Wu, J. (2017). Determinants of
greenhouse gas assurance provider choice. Meditari Accountancy Research, 25(1), 114-
135.
Gu, T., Simunic, D. A., & Stein, M. T. (2017). Fixed Costs, Audit Production, and Audit
Markets: Theory and Evidence.
Hardy, C. A. (2014). The messy matters of continuous assurance: Findings from exploratory
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Joshi, R., Hocking, C., O’Neill, S., Singhal, N., Kee, M., & Keefe, D. M. (2014). A Prospective
Audit of Inpatient Medical Oncology Consultation Patterns in a Tertiary Teaching
Hospital in South Australia. Global Journal of Epidemiology and Public Health, 1, 42-
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Kend, M., Houghton, K. A., & Jubb, C. (2014). Competition issues in the market for audit and
assurance services: are the concerns justified?. Australian Accounting Review, 24(4),
313-320.
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Pauly, R. P. (2017). Quality assurance audit of technique failure and 90-day mortality
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Stewart, J., Kent, P., & Routledge, J. (2015). The association between audit partner rotation and
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