Audit Compliance and Assurance Report - DIPL Printing Firm Analysis

This report examines audit compliance and assurance procedures within the context of a printing firm, DIPL. It begins by detailing the role of analytical procedures in providing evidence for audit activities, emphasizing their importance in identifying potential errors and fraud. The report then delves into inherent risks, such as material misstatements and the influence of those charged with governance, and how these risks affect the quality of the audit. Finally, the report addresses fraud risks specific to DIPL, particularly concerning online order processing and the need for robust internal controls and proper documentation. It highlights the auditor's role in assessing these risks and the impact on the auditor's ability to provide a true and fair view of the financial statements, emphasizing the importance of a strong internal control system. The report concludes by referencing several academic papers on audit procedures and risk assessment.

Audit compliance and assurance
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Table of Contents
Question 1....................................................................................................................................3
Question 2....................................................................................................................................5
Question 3....................................................................................................................................6
References........................................................................................................................................8
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Question 1
In order to carry out the audit procedure auditor need to carry out various processes to provide
opinion on the financial statement. For this the auditor need to conduct analytical procedure to
provide the evidence for carrying audit activity. These procedures give the result that the
organization’s books of accounts are prepared without any error and misstatement. Analytical
procedures are the detailed examination of the items and information provided in the financial
statement. These are helpful in determining whether the transactions have been prepared in
legible manner and without any fraud conducted by any of the employees on management of the
company. The result obtained on the procedure supplied by the auditor helps in determining and
preparing the plan for conducting audit and assurance procedure. Auditor gets the knowledge
about the areas which he need to concern more and the areas which are less in priority. The
evidence received on performing analytical procedures becomes the part of the documentation of
the auditor for the future reference.
A detailed plan can be made which includes all the areas of high concern and of high value
where are the chances of fraud greater. On the basis of results obtained by the analytical
procedure the auditor is in a position to ask from the person charged with governance about the
reasons and the steps taken by them to correct the error in the financial statements. On the basis
of the review of the financial statement of auditor decide upon the reply received from the
management (Brown-Liburd, et. al., 2015).
In the present case firm is conducting printing activity for which he takes orders on online basis.
It is very important to check that the online orders received in confirmation to the delivery made
for the orders. What is the auditor need to check whether the documentation is proper and all the
documentation are related to the orders received through online mode. If any Outsourcing is
carried by the firm it should be checked by the Outsourcing form and evidence should be taken
to confirm with the firm books of accounts.
Related to cash balance the auditor should tally the actual cash balance with the cashier with the
balance shown in the cash statement. Also the cash can be verified by actual verification by the
auditor. It can also be checked that the proper segregation of duties is undertaken by the firm to
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avoid fraud and error by the employees. All the payments which are large amount should be
verified with the documents attached with the transaction undertaken. This will help the auditor
in determining the strength of the internal control system of the organization and depth to which
he has to conduct its activities to get the actual result for the operation undertaken.
All these procedures provide auditor a direction towards which he has to work in order to get the
result for which he can formulate report which depicts true and fair view on the financial
statement. The results of the analytical procedures heavily affect the decision of the auditor in
performing Audit and assurance. If the result obtained in performing this activity is positive he
will conduct the audit in less detailed manner taking the reference of the internal control system
of the firm. On the other hand if he encounters weakness in the internal control system he will
focus more on the information provided by the organization and will go in detailed manner in
order to provide opinion (Christensen, 2012).
From the above discussion it can be proved that planning of the auditor is very important to carry
out the activity in a planned manner. Therefore analytical procedures are performed in
mathematical or physical manner in order to check the genuinity of the transactions recorded in
the financial statement. The results obtained by the procedure applied make the altar in a position
to question the management about the mismatch of the result with the transactions recorded.
Whether the organization is small or large auditor need to apply these procedures in order to
come to the result to get the direction of work to be performed by him. This not only provides
him the knowledge to conduct the activity but also about the chances of fraud conducted by the
management.
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Question 2
Inherent risks are the risks which are inbuilt in the internal control system of the organization.
These risks are difficult to be detected by the auditor until he undergoes the detailed examination
of the internal control system of the firm. This affects the quality of the financial statement but
also the opinion and the report formulated by the auditor on the same.
The inherent risks which the organisation can face are provided as:
1. Material misstatement: This is a inherent risk which can be present in any type of
organization. These are the errors which can be intentionally or non intentionally performed
by the person providing the information in the financial statement. This can be happen even
if the person takes due diligence in performing the activity. Therefore it is important to
understand by the auditor about the knowledge possessed by the person who is recording the
transactions so that he can form the opinion on the true and fair view of the financial
statement. To check the auditor need to study the internal control system to make Reliance on
the knowledge and capability of the person recording and preparing financial statement
(Messier Jr, 2010).
2. Person charged with governance: Where the person in management or those who are
charged with governance to take care about the financial statement and to provide the
information needed by the auditor it is necessary to check about the decision taken power and
the knowledge possessed. If the management has proper knowledge about the financial
statement and have the capability to analyze the mistakes it can we analyze that the internal
control system of the organization is strong and the auditor is in a position to provide true
and fair view on the financial statement.
These inherent risks affect the quality of the audit performed by the auditor and the report
formulated on the true and fair view of the financial statement. If the auditor is not able to check
the inherent risk of the organization he will not be able to report correctly on the records of the
organization. If the auditor is able to detect the inherent risk he will perform the audit procedure
in that manner by which all the areas will be covered and he will be able to analyze every aspect
connected with the inherent risk so that proper view can be taken.
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Question 3
DIPL is a firm conducting printing activity. There can be chances of fraud in the organization
either from the employees or through management. The chances of fraud can be occur through
orders taken through online mode. The organization has to take care about the recording of the
orders received and proper documentation should be present so that any person connected with
the activity cannot perform fraud and take personal profit out of it (Norman, 2010).
This firm is conducting its activity all over the world especially in Australia and other Asian
countries so it is very important to check the recording of the transactions which are in different
currencies. Proper conversion should be there by the person recording the transaction and should
be followed by the management to check that proper care is taken and the person is not indulging
in any fraudulent activity.
The system should be developed in such a manner that there are no chances by the personal in
carrying out fraudulent activity. Proper updating of the system should be there and each activity
should be supervised properly. If proper care is not taken by the management it will affect the
procedure undertaken by the auditor and he will not be able to perform does that procedure while
conducting audit activity. This will also affect the reporting requirements and the opinion of the
auditor which will ultimately affect the true and fair view of the report on the financial statement
(Budescu, et. al., 2012)
The higher the fraud risk is there will be more chances to lower the quality of the report and the
results obtained. It is not necessary that order will be able to detect the error or fraud as he is
placed to check the transactions and their fairness and he is not investigating the records.
So it is very important for the firm to provide every assistance and documents to the auditor so
that he can perform its duties in a proper manner. From the records obtained by the firm he will
able to detect the chances of fraud and the strength of the internal control system which will help
in preparing its report in a clean manner and we will be able to provide true opinion on the
fairness of the financial statement.
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The quality of audit is dependent upon the strength of the internal control system which provides
the chances of fraud in the firm.
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References
 Budescu, D. V., Peecher, M. E., & Solomon, I. (2012). The joint influence of the extent and
nature of audit evidence, materiality thresholds, and misstatement type on achieved audit
risk. Auditing: A Journal of Practice & Theory, 31(2), 19-41.
 Norman, C. S., Rose, A. M., & Rose, J. M. (2010). Internal audit reporting lines, fraud risk
decomposition, and assessments of fraud risk. Accounting, Organizations and Society, 35(5),
546-557.
 Messier Jr, W. F. (2010). Opportunities for Task‐Level Research within the Audit Process.
International Journal of Auditing, 14(3), 320-328.
 Christensen, B. E., Glover, S. M., & Wood, D. A. (2012). Extreme estimation uncertainty in
fair value estimates: Implications for audit assurance. Auditing: A Journal of Practice &
Theory, 31(1), 127-146.
 Brown-Liburd, H., Issa, H., & Lombardi, D. (2015). Behavioral implications of Big Data's
impact on audit judgment and decision making and future research directions. Accounting
Horizons, 29(2), 451-468.
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