Detailed Audit, Assurance, and Compliance Report on DIPL's Financials

This report provides a comprehensive analysis of audit, assurance, and compliance issues related to DIPL's financial performance. The executive summary highlights problems hindering DIPL's progress and identifies material misstatement and fraud risks that could manipulate financial statements. The report examines inheritance risks, including the impact of implementing a new accounting system and financial reporting risks, and suggests relevant audit procedures. It analyzes financial ratios (liquidity, efficiency, solvency, and profitability) to identify inconsistencies and potential errors. The report also explores fraudulent activities, such as misrepresentation of financial records and transactional errors, and their impact on audit procedures. The analysis includes the influence of results on audit procedures, the impact of material misstatements, and the identification of fraud risk factors. The report concludes by emphasizing the importance of a cynical approach and proper auditing systems to detect fraud in DIPL's financial reporting. The report is a student contribution published on Desklib, a platform offering AI-based study tools.

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

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Executive Summary:
The overall report mainly states the problems that were hindering the progress of DIPL.
Furthermore, assignment also focuses and identifying the overall material misstatement risk
and fraudulent risk, which might be used in manipulating the financial statement of the
organisation. The report directly identifies different types of inheritance risk and then needed
audit procedures for confronting the risk in the financial report. Furthermore, relevant audit
procedures are directly provided in the report it could be used by auditors for analysing the
financial report of DIPL.

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Table of Contents
Question 1: Audit procedures influenced by results..................................................................3
Question 2: Material misstatement influencing inheritance risk................................................5
Question 3a: Fraudulent activities of risk factors......................................................................7
Question 3b: Fraud risk affecting audit procedure.....................................................................9
Reference:................................................................................................................................10

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Question 1: Audit procedures influenced by results
The overall evaluation of the results of DIPL could directly help in understanding the
requirements of an audit procedure, which could directly help in identifying the financial
condition of the company. In addition, relevant analytical approach could be used in
identifying the overall financial condition of the company, which could directly allow the
analyst to initiate an audit procedure. Moreover, the overall use of analytical approaches such
as benchmark approach and ratio analysis approach could directly help in influencing the
audit procedures of an organisation. Albeksh (2016) stated that relevant valuation of financial
ratios could directly help in identifying the financial position of an organization. In this
context, it could be understood that benchmarking could also be used in identifying the
overall financial positron and loopholes in operations of the company. Therefore, the overall
ratios are mainly used in identifying the financial condition of DIPL, which could directly
help in understanding the condition of the company.
Liquidity ratio 2013 2014 2015
Current ratio 1.42 1.47 1.50
Quick assets 0.83 0.94 0.85
The overall liquidity condition of DIPL could be identified from the above table,
which is relevantly increased over the period of three fiscal years. The overall liquidity
positron of the company has improved over the time, where its quick ratios has not improved,
as it current ratio. This only indicates that accumulation of inventory is relevantly higher for
the company.
Efficiency ratio 2013 2014 2015

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receivables turnover 13.78 8.73 8.57
Days in receivables 26.49 41.83 42.61
Inventory turn over 12.50 11.84 8.82
The above table mainly indicates the overall efficiency ratio, which has gradually
improved over the period of three years, where the company’s efficiency has increased. This
only indicates that overall financial stability of the company and receivables have relevantly
increased over time. This could directly help in identifying the overall financial stability of
the company. Baylis et al. (2017) mentioned that evaluation of overall financial ratios could
directly help in identifying the overall financial stability of the company.
Solvency ratio 2013 2014 2015
Debt to equity 41.31% 47.48% 113.44%
Debt to capital 7.25% 5.42% 31.69%
Interest coverage 41 40 5
The above table mainly helps in identifying the overall solvency condition of DIPL,
where relevant financial position of the company could be evaluated. However, it is mainly
seen that financial position of the company has drastically declined in financial year 2015.
This relevant decrease in financial stability raises the concern for DIPL, where the
organisation is not able to generate the required level of profit to support its debt obligations.
Bendovschi and Ionescu (2015) argued that financial ratios mainly lose its friction when
unethical measures are used in drafting the financial report of an organisation.
Profitability ratio 2013 2014 2015
gross profit 17.55% 16.13% 15.20%

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net profit 6.90% 6.08% 6.84%
Return on total asset 18.25% 14.41% 11.37%
ROE 25.78% 21.25% 24.26%
Lastly, with the help of above table relevant profitability ratio of the organisation
could be identified, which might directly help in understanding the revenue generation
capacity of the organisation. The overall profitability ratios such as net profit margin, gross
profit margin, return on total assets and return on equity has mainly declined in 2015 as
compared to 2013 fiscal year. This mainly states the overall expenses of the company have
gradually increased over time, which has directly affected its profitability condition.
Therefore, from the overall evaluation of the financial ratios of DIPL relevant errors
in the financial condition of the company could be identified. There is relevant improvement
in the overall current ratios, whereas profitability of the company declined. This only
indicates that relevant evaluation is needed to understand the overall operations of the
company, which could only be conducted with the help of audit procedure. Furthermore, the
inconsistency in the overall financial report of DIPL mainly initiated the use of audit report
for understanding the lack in financial report that is been reported by the organisation.
Duncan and Whittington (2016) mentioned that use of financial result evaluation mainly
allows the analyst to whether the company needs relevant audit procedure.
Question 2: Material misstatement influencing inheritance risk
The overall risk that could direct influence the material misstatement risk of DIPL is
mainly depicted as follows.

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Risk Inheritance risk Material misstatement
Implementation
of accounting
system
The overall misreporting,
which could be conducted by
the employees is relevantly
possible. In addition, the
overall implementation of new
accounting system could also
increase the inheritance risk.
The overall financial reporting could
mainly be conducted by the forceful
implementation of the new accounting
technology, which is been conducted by
DIPL. This could directly result in
overstated or understated financial
report due to the manipulation that is
conducted by the employees. Moreover,
the limited employee that was allotted
by DIPL for the implementation of the
new accounting system could not
handle the overall completion of the
transactions (Erickson, Goldman and
Stekelberg 2015).
Financial
reporting risk
The second inheritance risk is
mainly dependent on the
strategic alignment and
environmental factors of that
are imposed on the operations
of the company.
The overall second material
misstatement is mainly identified from
the overall manipulation, which could
be conducted by the management to
maintain a certain level of current and
debt ratio. The management could have
manipulated or inflated the financial
report for supporting the financial
obligation of the company. Thus, the
overall financial risk could directly

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result in material misstatements, which
needs to be evaluated by the auditors
(Knechel and Salterio 2016).
The two inheritance risk that is depicted in the above table mainly states the overall
manipulations, which could be found in the financial report of DIPL. Therefore, this
identified risk could directly influence the financial stability of the company, which is not
depicted in its financial report. Koinig, Tjoa and Ryoo (2015) mentioned that the
identification of relevant material misstatement risk could mainly help the auditors to take
relevant precaution, which could help in identifying viability of the financial report.
Moreover, the inherent risk that is identified from the overall valuation of DIPL case study
could directly increase the chance of material misstatement in its financial report.
Question 3a: Fraudulent activities of risk factors
Fraud risks Identification of fraud risk Audit impact
The
misrepresent
ation of
financial
records
The misrepresentation of the overall Financial
report of DIPL could be conducted by the
management, as it needs to maintain a relevant
financial condition to support its loan
requirements. DIPL mainly need to have a
current ratio of 1.5 and debt to equity ratio
less than 1. This only indicates that the
manipulations could have been conducted by
the management to ensure commencement of
the overall ratios. In addition the identification
The audit process needs
to be conducted with
sincerity, which for help
in identifying the
manipulation that is
conducted by the
organisation.
Furthermore, relevant
experience people are
also needed for the audit

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of the overall fraud could directly increase the
material misstatement in the annual report,
which could only be detected with the help of
relevant audit procedures (Lenz and Hahn
2015).
procedure, as it could
help in identifying the
ways in which the
company has
manipulated the financial
records (O’Regan 2017).
The
manipulation
from
transactional
error
The second fraud risk is mainly identified
from the overall transaction manipulation that
might be conducted by employees, while
implementing the new accounting system.
There was a relevant pressure on the
employees, while changing the overall
accounting systems. This pressure on the
employees could have told them to use
manipulations in the transaction
recordings. These manipulations in the overall
accounting system could have led to the
material misstatement of financial report
(Shafii, Abidin and Salleh 2015).
Relevant checks needs to
be conducted on the
overall sales receipts and
other transactions
conducted by the
company in the three
fiscal years. Moreover
the new accounting
system needs to be
evaluated with the old
system, where all the
transactions are recorded.
This could mean we have
the auditors to identify
the problem and
manipulation that has
been conducted by the
employees.

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The above table mainly helps in identifying the overall fraud risk that could be
hampering the overall financial statement of DIPL. in addition relevant audit procedures also
provided in the table which can help auditors to adequately evaluate the actual financial
performance of the organisation. Moreover, the overall fraudulent was mainly derived from
the tell management that is been conducted in DIPL (Short and Toffel 2015).
Question 3b: Fraud risk affecting audit procedure
The overall identified risk mainly represents the Chance of manipulation, which could
be conducted by the management of DIPL. this could mean to be conducted due to the loan
obligations that is used by the company to support its future activity. Euro loan requirements
means the company to hold a relevant financial condition or else it would directly be nullified
by the finance provider. Therefore, relevant manipulations could have been conducted by the
company to ensure continuity of a loan process. Hence, auditors need to adequately evaluate
the overall financial condition of the company by implementing proper methodology.
Moreover, your auditor's also needs to be cynical while evaluating the overall financial report
of DIPL. Proper system in the auditing process also needs to be conducted, which might
increase the chance of fraud detection conducted in the preparation of the financial report (Uc
and Haxhiraj 2015).

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Reference:
ALBEKSH, H.M., 2016. Compliance of Auditors to Ethics and Rules of Professional
Conduct and Its Impact on Audit Quality. Imperial Journal of Interdisciplinary
Research, 2(12).
Baylis, R.M., Burnap, P., Clatworthy, M.A., Gad, M.A. and Pong, C.K., 2017. Private
lenders’ demand for audit. Journal of Accounting and Economics.
BENDOVSCHI, A.C. and IONESCU, B.Ş., 2015. The Gap between Cloud Computing
Technology and the Audit and Information Security. Audit Financiar, 13(125).
Duncan, R.A.K. and Whittington, M., 2016. Enhancing cloud security and privacy: the power
and the weakness of the audit trail. Cloud Computing 2016.
Erickson, M.J., Goldman, N.C. and Stekelberg, J., 2015. The cost of compliance: FIN 48 and
audit fees. The Journal of the American Taxation Association, 38(2), pp.67-85.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Koinig, U., Tjoa, S. and Ryoo, J., 2015, June. Contrology-an ontology-based cloud assurance
approach. In Enabling Technologies: Infrastructure for Collaborative Enterprises (WETICE),
2015 IEEE 24th International Conference on (pp. 105-107). IEEE.
Lenz, R. and Hahn, U., 2015. A synthesis of empirical internal audit effectiveness literature
pointing to new research opportunities. Managerial Auditing Journal, 30(1), pp.5-33.
O’Regan, G., 2017. Software Quality Assurance. In Concise Guide to Software
Engineering (pp. 131-138). Springer International Publishing.