Audit, Assurance, and Compliance: DIPL Case Study Analysis Report

This report provides a detailed analysis of audit, assurance, and compliance for Double Ink Printers Limited (DIPL). It begins with an examination of audit planning, emphasizing the value of analytical approaches, particularly in assessing financial information through ratio analysis and benchmarking. The report then identifies various risk factors stemming from DIPL's business operations, including issues related to management practices, staffing levels, and CEO succession. Furthermore, it delves into fraud risks, differentiating between types of risks, such as those related to employee dissatisfaction and financial reporting pressures. The analysis encompasses a discussion of financial reporting and how the need to meet certain financial targets can contribute to fraud risk. The report concludes with an assessment of the valuation of raw materials and provides recommendations on how to monitor tasks to detect fraudulent activities.

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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Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................4
Answer to Question 3:.....................................................................................................................6
Answer to Part A:........................................................................................................................6
Answer to Part B:.......................................................................................................................10
References:....................................................................................................................................11

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Answer to Question 1:
In the method of preparing the audit plan of Double Ink Printers Limited (DIPL), the
analytical method associated with financial information provides immense value. On the
contrary, audit plan delivers the required directions and guidelines to the auditors during the
audit6 operations. Precisely, audit plan enables the auditors in maintaining the cost of audit in a
particular limit for preventing misunderstanding with the audit clients (Alam 2014). The
analytical approach related to the financial information of DIPL denotes the method of spreading
financial information from the various financial declarations of the organisation. The method of
analysing the financial information of the organisations could be carried out through several
mechanisms.
With the help of analytical approach for assessing the financial information, the
accountants and financial analysts of the organisations could utilise such information for
undertaking different financial and accounting decisions (Baylis et al. 2017). The common size
analytical approach enables in the method of dissecting the financial declaration of the
organisations from the common points of reference. One of the primary benefits is that it helps in
extending support in contrasting the financial reports from various financial timelines.
The accountants and financial analysts could utilise different lines of items from the
financial reports and they could verify their base of preparation for the organisations. For
instance, the registration procedure of different financial and accounting items in the financial
reports such as net liabilities, assets, owner’s equity and others could be considered coupled with
assessment of digression from the normal scenario (Brawley et al. 2015). Benchmarking is the
main analytical process of financial information and this method could be utilised for evaluation

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of the audit plan of the organisation. The benchmarking process helps in identifying the
variances in the financial reports of the organisations and the real reasons behind the occurrences
of these variances could be ascertained by identifying the root cause of these variances. Besides
the process of benchmarking, ratio analysis is adjudged as a major analytical method of financial
information of the organisations. Ratio analysis is immensely beneficial in contrasting the
financial statements of two or more organisations for preparing the plan of audit (Chambers and
Odar 2015).
Explanation:
The adopted analytical approaches of the organisations in evaluating the financial
information has significant effect on the development of the process related to audit planning and
this is crucial to spread financial information amongst the different departments of the
organisations. The following ratios have been considered for this purpose:
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
The above table signifies that the current ratio of DIPL has increased from 1.42 in 2013
to 1.46 in 2014 and it has increased further to 1.50 in 2015. The profit margin of the organisation
has been fluctuating over the years, which has helped in revealing the amount of net profit
gained in contrast to the net sales (Cohen and Simnett 2014). Moreover, this profitability analysis
gives the financial analysts and accountants with the view to determine the expenditures of the

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organisation. Besides, it enables the financial analysts and accountants to gain an overview of the
effectiveness of the organisational budget along with the need for business diversification
(Decaux and Sarens 2015).
The favourable and unfavourable changes in the financial performance and ratios of
DIPL enable the auditors to create an insight about the existing financial position of the
organisations. In this context, the solvency ratio has been considered, which has declined over
the years. Such evaluation is helpful in determining the desirable or undesirable trend of the
organisational performance over the subsequent years. The contrast of ratios has its significance
in ascertaining whether the existing cash flow of the organisation is adequate for meeting both
short-term and long-term obligations.
Precisely, it could be stated that the comparison and evaluation of financial performance
and ratios enables the financial analysts and accountants for ascertaining the relative financial
position of the organisation over three-year period. It enables in ascertaining whether the existing
financial position of the organisation is desirable or not. In case of the latter, the management of
the organisation is required to undertake corrective actions for reviving its overall financial
performance. Due to all these reasons, the analytical procedure pertaining to financial
information has significant value (Duncan and Whittington 2014).
Answer to Question 2:
Certain risk factors could be raised from the business operations of DIPL. In accordance
with the case study, the management of an organisation has failed to enter various business
transactions of the organisation. This procedure has direct relationship with the inconsistencies in
the planning of different marketing and sales activities of the organisation (Earley et al. 2016).

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The overall financial analysis carried out in the context of DIPL states that the organisation has
failed to accomplish the targeted level of profit from the overall sales revenue. The primary
reason is the ineffectiveness and inefficiency of the management of the organisation in business
operations. Therefore, it could be observed that the organisation has failed to gauge the effect of
different micro and macro-economic factors having impact on the business operations of DIPL
like political, economic and social factors. Hence, it could be stated that the lower revenue and
profit margin of the organisation has resulted in inherent risks (Graham 2015).
Moreover, the staffs of DIPL have increased rapidly and as a result, the inherent risk has
increased as well. The inherent risk level of the organisation rises because of the lack of
professionalism and experienced proficiency of the staffs. This is because the success of a
business is reliant largely on the performance of its staffs (Homb et al. 2014). Due to such
inexperience and inefficiency of the workforce of DIPL, there is greater chance of inherent risks,
since the employees are bound to conduct mistakes. Based on the provided case of DIPL, the
issues could be found in the succession process of CEO of the organisation. Due to this, such
process has resulted in rise in inherent risks of the organisation. The main inherent risk could be
observed in the ineffective method of selecting the CEO succession of the organisation.
Besides this, it could be observed that DIPL does not have sufficient staffs for managing
its business operations. This reason has resulted in rise in inherent risks in the overall business
functioning of DIPL. Hence, from the above evaluation, it could be observed that these are the
primary reasons of the rise in inherent risks in the business operations of DIPL (Jones and
Beattie 2015).
Explanation:

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It has been observed that there is huge amount of workload on the employees of the
organisation. The increasing workload results in poor bookkeeping of the organisation and this
problem further results in different issues of cash flow, ineffective operating results ineffective
solvency and liquidity position of the organisation. Besides this, the risk of error could be
depicted in the financial statements due to lack of effective interpretation. In this context, the
management of DIPL needs to play an effective role. It has been observed that the DIPL
management lacks accountability and integrity and due to this reason, they are encountering the
concern of losing reputation in the business community. The greater incentive structure related to
management forms additional pressure on management and it results in material misstatements in
the financial reports (Levy 2015).
Answer to Question 3:
Answer to Part A:
In the current business organisations, fraud risk is adjudged as the main risk in the
context of the same. Due to the occurrence of such fraudulent risk, the business organisations
often incur severe losses in its business assets (Martin, Sanders and Scalan 2014). In majority of
the situations, the primary dissatisfaction could be observed among the workforce and such
dissatisfaction often compel them to engage in various types of frauds in organisations. Another
primary reason of fraud is the expectation of various investors of the organisations. The
organisations often make promises for achieving a specific financial performance that
contributes to greater fraud level (Nalewaik and Mills 2016).
Types of risk Identification
Fraud risk In the context of the business operations of

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DIPL, the main risk that could occur from its
business activities is the involvement of the
staffs in various kinds of fraudulent activities.
This could take place due to dissatisfaction of
the employees. In accordance with the
provided case of DIPL, it could be observed
that there is enormous pressure from the part of
the board of the organisation to adopt a new
system of accounting. The adoption of this new
system of accounting develops a heavy
pressure on the workforce of the organisation
and such pressure results in fraud. Hence, it
could be stated that for coping up with the
reconciliation pressure, the staffs might adopt
fraudulent activities, which would lead to
incorrect handling of the overall procedure
resulting in material misstatements.
According to the case study, it could be
observed that the procedure of inefficient
handling of the implementation of new
information technology results in ineffective
treatment of few primary financial and
accounting transactions at the finish of the

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year. This overall process might result in loss
of material misstatements and financial
information.
Due to such inexperience and inefficiency of
the workforce of DIPL, there is greater chance
of inherent risks, since the employees are
bound to conduct mistakes. Based on the
provided case of DIPL, the issues could be
found in the succession process of CEO of the
organisation. Due to this, such process has
resulted in rise in inherent risks of the
organisation. The main inherent risk could be
observed in the ineffective method of selecting
the CEO succession of the organisation. It has
been observed that the DIPL management
lacks accountability and integrity and due to
this reason, they are encountering the concern
of losing reputation in the business community.
Process of financial reporting Another major risk is associated with the
procedure of financial reporting. The greater
risk of ineffective financial declarations could
be viewed, if additional financial expectations
could be observed from different stakeholders

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for the financial declarations. This is true in
cases of announcement from the management
of the organisation to achieve particular target
of performance and particular target of the
objectives for debt acquisition. Based on the
financial reports of DIPL, it could be observed
that there is rise in revenue of the organisation
from 2013 to 2015. Besides this, there is rise in
gross income and net income of the
organisation. Based on the case study, it could
be stated that DIPL has acquired a loan of 7.5
million from BDO Finance in 2015.
According to the case study, it could be
observed that in accordance with the agreement
of loan, DIPL is required to maintain a current
ratio of 1.5 and debt-to-equity ratio below 1.
The requirement of this particular arrangement
might be to develop pressure on the
organisation for repaying the loan in
accordance with the agreed timeline. These
needs could result in fraudulent activities, since
DIPL might manipulate the financial
statements for false depiction of the financial

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condition of the organisation. If DIPL is not
able to maintain the needed benchmark, the
organisation would not be eligible to obtain
loan from BDO Finance (Pitt 2014).
Answer to Part B:
Based on the provided case, it could be observed that the process of valuation of the raw
materials of the organisation based on average cost is not appropriate and effective, since the
present paper cost is above the average cost. The primary risk in the detection of fraudulent
activities of the staffs for implementing new system of information technology could be
identified by monitoring the tasks in various phrases of jobs. Besides this risk, the risk associated
with the process of financial reporting could be detected through evaluation of the different
financial reports and statements of the organisations on the part of the accountants and financial
analysts through different control and analytical mechanisms. Such process of monitoring is
required to be conducted in a timely manner (Warren 2014).

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References:
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Baylis, R.M., Burnap, P., Clatworthy, M.A., Gad, M.A. and Pong, C.K., 2017. Private lenders’
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Brawley, S., Clark, J., Dixon, C., Ford, L., Nielsen, E., Ross, S. and Upton, S., 2015. History on
trial: Evaluating learning outcomes through audit and accreditation in a national standards
environment. Teaching and Learning Inquiry: The ISSOTL Journal, 3(2), pp.89-105.
Chambers, A.D. and Odar, M., 2015. A new vision for internal audit. Managerial Auditing
Journal, 30(1), pp.34-55.
Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda. Auditing: A
Journal of Practice & Theory, 34(1), pp.59-74.
Decaux, L. and Sarens, G., 2015. Implementing combined assurance: insights from multiple case
studies. Managerial Auditing Journal, 30(1), pp.56-79.
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.
Earley, C.E., Hooks, K.L., Joe, J.R., Polinski, P.W., Rezaee, Z., Roush, P.B., Sanderson, K.A.
and Wu, Y.J., 2016. The Auditing Standards Committee of the Auditing Section of the American
Accounting Association's Response to the International Auditing and Assurance Standard's