University Audit Assurance and Compliance Report for DIPL Analysis

This report, focusing on audit assurance and compliance, analyzes the financial reporting of DIPL. It begins with applying analytical procedures to the financial information, examining ratios such as current ratio, profit margin, and solvency ratio across multiple years to identify trends and their impact on audit planning. The report then identifies inherent risk factors arising from the nature of DIPL's business operations, including issues related to employee competency, IT implementation, and CEO succession. These risks are linked to potential material misstatements in the financial reports. Finally, the report identifies and explains two key fraud risk factors related to misstatements arising from fraudulent financial reporting, such as asset loss and financial reporting fraud, providing a comprehensive overview of the audit process and risk assessment.

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

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Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................3
Answer to Question 3:.....................................................................................................................6
Reference.........................................................................................................................................8
List of Appendix..............................................................................................................................9

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Answer to Question 1:
Application of analytical procedures to the financial report information of DIPL
The main type of the financial report of DIPL has been able to develop the audit plan.
The planning of the audit has been followed with the time of undertaking of the same. In
general, the assessor in terms of maintaining the costs associated to audit at a reasonable stage.
This has been further seen to assist in terms of maintaining the audit cost and assist in avoiding
of misunderstanding of clientele. The financial declaration of DIPL is associated to the
dissemination from the financial declaration from the firm (Kend et al., 2014).
Analytical approach of the common size has been based on common reference point and
financial declaration. This has been further seen to help in the comparison of the financial
statement with different periods based on different corporations. The assessors of this can further
consider the different line items which have been mentioned in the financial report. For example,
the registering process of the items such as net assets and net liabilities along with owner’s in the
financial reporting of the company and infer the deviation from the normal reporting.
It has been further seen that ratio analysis can be considered as an appropriate analytical
approach which can be used for the assessment of audit plan and financial declarations (William
et al., 2016).
Explanation of the way the results influence planning decisions for the audit
Particulars 2013 2014 2015
Current ratio 1.42 1.46 1.50
Profit margin 0.068 0.60 0.06

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Solvency ratio 0.62 0.44 0.21
Table 1: Ratio Analysis
(Source: as created by Author)
The main result of the planning decision has been further considered necessary for the
evaluation of the results which has been seen to be influenced by the financial statements. The
outcomes of the ratio such as current ratio of DIPL are seen to be calculated as 1.42 in 2013, 1.46
in 2014 and 1.5 in 2015. The profitability ratio has been further computed based on profit margin
which has been discerned as 0.068 in 2013, 0.60 in 2014 and 0.06 in 2015. This particular factor
is conducive in revealing the condition of net income which has been earned by the firm in
compared to the net sales of DIPL. This is further seen to be conducive in understanding the
expenses are low or high whether the management to requirement to cut down the budget and
expend the same on firm. The comparison of the ratio in three year has been able to understand
the relative position of firm in three periods and further analyse the factor which has led to
undesirable and unfavourable condition of the corporation (Arens et al., 2016).
Answer to Question 2:
Identification of inherent risk factors that arise from nature of business operations of DIPL
The important factor has been seen to be based on auditing which comprise of the
incidence associated to material misstatement in the financial declaration of certain concern.
However, it can consider making forms of the systematic as well as unsystematic risks which has

4AUDIT ASSURANCE AND COMPLIANCE
been further seen to reflect the way financial misstatements are taken into consideration for
corporations. Despite of this, the risks associated may be seen to be based on both financial as
well as non-financial factors which can be possible for the financial and non-financial factors.
These factors can further avert a specific corporation for reflecting a true as well as fair view of
pertinent financial declarations. The identified risks can be further linked with the different risk
correlated based on the correlated to omit the risks of diverse errors which is not possible for a
particular bookkeeper. With essence of the risks diverse errors, the specific bookkeeping has
inherent risk which may be seen to take place from the nature of operations of DIPL (Messier et
al., 2014).
Based on the given considerations made in the study, it can be made certain that there has
been number of transactions which are related to accountants otherwise which has been not been
seen with corporation DIPL. The sequential direct lead in terms of the inconsistencies
particularly related to the ineffective planning of the sales activities. In addition to this, the
financial declarations have been seen to reveal the fact which the firm has failed to accomplish
the designated level of profit from the revenue based on sales. In particular the management
failure has been identified in terms of the specific requirements which have been further
identified with consequent adjustment of the functionalities.
Apart from the workers, DIPL has escalated the overall risk. Due to the lack of
proficiency and experience of the employees the inherent risk has increased substantially. This
has been observed due to the competency of member of the staff. The non-proficient workforce
can enhance the inherent risk to commit mistakes. The errors of the exclusion and the instances
have been considered based on misstated in the pecuniary announcement.

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The significant facts of the contribution towards the existing risks can be categorised
based on sections specifically devised for the environmental concerns along with external facets,
material misstatements in previous periods along with falsified exercises. Based on the
evaluation of the given case it has been seen that DIPL has been able to reflect on the significant
amount of inherent risks in the process of succession of CEO. In general CEO may be considered
as a different candidate and other individuals. However, some of the inherent risks involves
quality of procedure for selection and transition handling process. Hence, there are several risks
associated for the commencement of the process without complying with the strategy, inadequate
CEO involvement and the departure of candidates (Waldron, 2016).
Based on analysis of the case it is further revealed that the various types of
implementations for novel IT procedure have generated certain problems. DIPL did not had
sufficient number of staffs to handle the execution and carrying out of the reconciliation before
the new arrangement prior to the ear end. The initial testing process has revealed that the
transactions were not apportioned the correct time. This led to several incidents of material
misstatements and ministers of other inherent risks for omission in specific financial declaration.
In addition to this the recording of cash receipts were seen to be done by professional’s
expertise in finance we’re not able to handle the risks in an appropriate manner. The total
member of the staff needed to follow the proper sequence for Accounts Receivable and
registering the Accounts Receivable ledger for proper maintenance of the same. In addition to
this the bank reconciliation also needs to be regarded in an appropriate manner. The registering
of the revenues generated from the ebook and taking account of the reprint of textbooks may lead
to diverse nature of inherent risks due to several complexities involved in the process.

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Additionally, the evaluation process of raw material inventory was not seem to be
suitable since present cost of the paper was significantly higher than the average cost.
Risk and way it might affect the risk of material misstatement in the financial report
The identified the natures of the inherent risks are associated to material misstatement.
Excessive pressure on employees and management: - In general due to excessive burden on
staff members the bookkeeping gets affected. There has been certain attributes namely
propensity to encounter issues associated to cash flow, low liquidity with were operating
outcomes.
Integrity of the entire management:- DIPL lacks in terms of integrity and requisite and is also
expected to prepare for the loss of reputation.
Unusual pressure on management: - in several cases the material misstatements leads to
pecuniary declarations.
Nature of entity business: The leading growth process of DIPL has been considered with
competitive scenario. However, these factors might affect the overall inherent risk involved in
the business and audit planning structure (Arens et al., 2015).
Answer to Question 3:
A) Identification and explanation of two key fraud risk factors relating to
misstatements arising from fraudulent financial reporting

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Some of the well-known explanations of the fraud risk associated to material misstatements have
been listed below are as follows:
Asset Loss The fraud risk involved asset loss due to the dissatisfaction in the workforce for
excessive pressure on the employees. The investors report has indicated on
specific problems for target leads which leads to increased problems.
Fraud incidence for
workforce
engagement
The excessive burden on the employees may often lead to subsequent material
misstatement. The execution of the implementation for IT has also led to
inappropriate allocation of transaction at the year end.
Financial reporting
fraud
These types of fraud may be as a result excessive expectation from the
financiers on particular performance target to qualify for acquiring debt,
which is often seen to consist of high risk of improper financial
announcements. Based on the declarations made by the company the
revenue has been accrued as loan amounting to 7.5 million particularly
from BDO Finance. In addition to this, DIPL has to maintain the current
ratio of 1.5 and debt equity lower than 1
Unsuitable average
cost
Based on the depictions made from the report it can be clearly stated that the
raw material valuation was not suitable as the present paper cost was
considerably high.

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Reference
Arens, A. A., Elder, R. J., Beasley, M. S., & Hogan, C. E. (2016). Auditing and assurance
services. Pearson.
Arens, A. A., Elder, R. J., Beasley, M. S., & Jones, J. (2015). Auditing: The Art and Science of
Assurance Engagements. Pearson Canada.
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.
Messier, W. F., Glover, S. M., & Prawitt, D. F. (2014). Jasa audit dan assurance: pendekatan
sistematis. Jakarta: Sa-lemba Empat.
Waldron, M. (2016). The Future of Audit. CFA Institute Magazine, 27(3), 55-55.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic
approach. McGraw-Hill Education.

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List of Appendix
Financial Ratios of DIPL
Particular 2013 2014 2015
Net Income/ Profit Ratio
Net Profit $23,59,190 $22,91,362 $29,72,183
Sales $3,42,12,000 $3,76,99,500 $4,34,59,500
Net Income/Profit Ratio
=
2359190/3421200
0*100
=
2291632/3769950
0*100
=
2972183/4345950
0*100
6.90% 6.08% 6.84%
Current Ratio
(Total Current Assets / Total
Current Liabilities)
Total Current Assets $53,85,938 $75,09,150 $96,00,929
Total Current Liabilities $37,80,000 $51,20,250 $63,97,500
Current Ratio 1.42:1 1.47:1 1.50:1
Debt to Equity Ratio
Total Liabilities $37,80,000 $51,20,250 $13,89,7500
Total Equity $91,50,000 $1,07,83,650 $1,22,50,491
Debt to Equity Ratio 0.41:1 0.47:1 1.13:1
Allowance for Doubtful Debts $1,65,000 $2,10,000 $2,40,000
Account Receivables $26,47,500 $4,53,000 $ 53,13,309
Allowance for Obsolescence of
Inventory $1,06,312 $1,25,876 $0

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Foreign Exchange Loss – Non
operating Expense $38,500 $49,750 $0
Interest Bearing Loans $0 $0 $75,00,000