Audit Assurance and Compliance Report: Risk Factors and Fraud

This report provides an in-depth analysis of audit assurance and compliance, focusing on the financial reporting of DIPL Corporation. The assignment begins by applying analytical procedures to the financial information, assessing the impact of the results on audit planning decisions. It then identifies the inherent risk factors arising from the nature of DIPL's business operations, linking these risks to potential material misstatements in the financial report. Furthermore, the report explores key fraud risk factors, including asset loss and financial reporting fraud, providing explanations and insights into the potential for fraudulent activities. The report references several academic sources, including works by Arens et al. (2016), Knechel and Salterio (2016), and others, to support its findings and conclusions. The report considers factors such as employee pressure, management integrity, and the nature of the business entity to assess the risks associated with financial misstatements. The analysis also includes the implications of IT implementation, staff management, and accounting practices on the overall risk profile of the organization.

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

1AUDIT ASSURANCE AND COMPLIANCE
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................3
Answer to Question 3:.....................................................................................................................5
References........................................................................................................................................8

2AUDIT ASSURANCE AND COMPLIANCE
Answer to Question 1:
Application of analytical procedures to the financial report information of DIPL
The various types of the information in the financial report has been based on DIPL
corporations and aimed to develop the relevant audit plan. The audit plan is also taken into
account as per the guideline followed based on the audit process. In common parlance, the
assessor has been get benefitted with the reasonable degree which has been conducive in averting
the misunderstanding with the relevant clientele. The different types of the analytical approach
have been further based on the various types of the considerations made with the specific
approach of the financial decisions. It has been important for the purposes of the various types of
the considerations are seen to be important for taking business decisions (Cannon and Bedard
2016).
The main form of the analytical approach has been based on common sizing and the
analysis with the reference point. This reference point has been helpful for the comparison of the
financial statements which has been seen to be based on the comparisons of the financial
declaration. This is considered important for audit plan.
Explanation of the way the results influence planning decisions for the audit
The results of the decisions has been based on the audit planning which has been
identified to be necessary for the various types of the analytical approach important in
disseminating information as per the financial statements. For example, the main outcome of the
ratio for DIPL corporations is seen to be 1.5 in 2015, 1.42 in 2013 and 1.46 in 2014. The
profitability impact has been shown with 0.068 in 2013, 0.60 in 2014 and 0.06 in 2015. It has

3AUDIT ASSURANCE AND COMPLIANCE
been further considered that the various types of the considerations made for the profitability
aspect has been based on revealing the relevant position with the net income earned by the firm
and from the depiction based on the net sales of the company. Despite of the various
considerations, the assessor needs to understand, whether the expenses are seen to be low or high
as per the requirement of the management to curtail time and budget. The favourable and the
various types of the unfavourable changes pertaining to the ratio and the factors are chosen as per
the soundness of the financial standings. Comparably in 2013 and 2015 the solvency has been
considered with 0.62 and 0.21 (Knechel and Salterio 2016).
Answer to Question 2:
Identification of inherent risk factors that arise from nature of business operations of DIPL
The different types of the factors in the auditing have considered various incidences of
ten misstatements in the financial announcements in a particular organisation. The various types
of the unsystematic and the systematic risks are based on the financial declarations and the
financial misstatements of DIPL Corporation. The various aspect of the risk has been further
seen to be detected as per the financial and the non financial factors. Nevertheless, the evaluator
may find it demanding to assert and linked the various risk correlated to the omission and the
diverse errors with the varied types of the risks with the diversified nature of the errors in the
business operations of DIPL (William Jr, Glover and Prawitt 2016).
As per the given scenario the various types of transactions has been based on the
management of DIPL Corporation. This can be further sequentially directed towards various
types of planning for the sales activities. In addition to this, the financial declarations are further
seen to be considered based on the various typeso the accomplishment related to the profit from

4AUDIT ASSURANCE AND COMPLIANCE
the various form of the revenue from the sales. The main analysis of the present study has been
able to reveal about the IT implementation procedure with the follow up of certain issues. DIPL
has been further not seen to be adequately active for staff management for the execution based
on the installation and the carrying out of the testing and reconciliation done at the end of year
(Winer et al. 2015).
The different aspects of the factors for the recording of the cash receipts have been taken
into account as per the inherent risk of the business concerns which has been not handled
appropriately. The staff members have been further seen to be involved in the different process
related to the sequence of account receivables:
Risk and way it might affect the risk of material misstatement in the financial report
The important incumbent risk associated to the material misstatement has been listed
below as follows:
Excessive pressure on employees and management- The immense pressure of workload has
led to various concerns based on poor bookkeeping. The particular attributes are further seen to
be based on the different types the consideration which are related to the poor liquidity, poor
operating outcomes and varies nature of the cash flow issues (Arens et al. 2016).
Risks of errors or else incorrect misrepresentation- the various types the complexities in the
errors has been considered as another aspect of the overall risk involved. This has been
represented on simultaneous basis.

5AUDIT ASSURANCE AND COMPLIANCE
Integrity of the entire management- The management team at DIPL has been able to relate to
the different types of the considerations associated to the reputational loss in the community as
well as business.
Unusual pressure on management- In several occasions due to the presence of the incentives
for the management it has been discerned that the varied nature of the incentives are taken into
account for the pecuniary declarations (Hummel, Schlick and Fifka 2017).
Nature of entity business- The various types of the growth leads of DIP has been seen to be
considered based on the different the competitive economic circumstances. These facets may
often lead to the root cause of the associated risks for the organization along with the different
types of the consideration which has been seen to be related to the inherent risk of the business
entity in terms of analysing the planning structure of the audit (Ghafran and O’Sullivan 2013).
Answer to Question 3:
A) Identification and explanation of two key fraud risk factors relating to
misstatements arising from fraudulent financial reporting
Asset Loss The different levels of the indicated risks have been seen to be associated
to the losses of the asset fraud. The dissatisfaction related to the
workforce has been further seen to be considered based on the varied
types of the important consideration which has been able to state on the
involvement of the fraud. In addition to this, the different types of the
expectations of the risks has been further seen to be considered as per the
financial outcomes which has been considered as per the performance
based targets, involving high risk of fraud. It has been further seen to be

6AUDIT ASSURANCE AND COMPLIANCE
discerned that the important considerations made in the report has been
also able to related to the various types of the factors which has been able
to related to the various aspects of averting the financial outcomes based
on averting the guarantees generated (Gul, Wu and Yang 2013).
Fraud incidence for
workforce
engagement
The important fraud risk related to the operations of DIP, has been
further seen to be linked to the operations of DIPL. The main aspects of
the operations associated to the huge pressure from the board have been
seen to be acquired from the novel accounting system. The various types
of the excess pressure from the employees has been further seen to be
considered based on the carrying out of the installation process in the
new IT systems which might result in accounting fraud. The main
consideration associated to this has been further able to show that the
employees may get involved in the fraud activities in order to handle the
various types of reconciliation process and material misstatement. He
main facets of the case study has been able to related to the different
types of incidence which are seen to be related to the incidence of
improper handling of the IT process and allocation of the transactions
which has been seen to be related to the end of each year. In several
occasions this may also lead to losses associated to the material
misstatement with the risk of fraud (Hamid, K. C. A., Othman and Rahim
2015).
Financial reporting
fraud
The main considerations of financial report have been considered as
another risk factor. The excessive pressure from the outside financiers

7AUDIT ASSURANCE AND COMPLIANCE
has been seen to be considered based on the different types of perspective
related to the meet certain goal and debt acquisition. The high risk factor
has been further seen to be improper as per the considerations made for
the increasing trend of revenue from 2013 to 2015. Also the gross profit
has increased in the same financial period. The loan amounting to 7.5
million agreement has been considered based on 1.5 current ratio and the
debt equity of the company has been discerned tp be lower than 1.
Unsuitable average
cost
The raw material in the inventory at a specific rate is not seen to be
appropriate with the present cost. The cost on paper was more than the
average cost. The fraudulent nature of the risk has been also seen to be
existing with the IT system, which is monitored at varied phases
(Nalewaik and Mills 2016).

8AUDIT ASSURANCE AND COMPLIANCE
References
Arens, A.A., Elder, R.J., Beasley, M.S. and Hogan, C.E., 2016. Auditing and assurance services.
Pearson.
Cannon, N. and Bedard, J.C., 2016. Auditing challenging fair value measurements: Evidence
from the field. The Accounting Review.
Ghafran, C. and O’Sullivan, N. (2013) ‘The governance role of audit committees: Reviewing a
decade of evidence’, International Journal of Management Reviews, 15(4), pp. 381–407. doi:
10.1111/j.1468-2370.2012.00347.x.
Gul, F. A., Wu, D. and Yang, Z. (2013) ‘Do individual auditors affect audit quality? Evidence
from archival data’, Accounting Review, 88(6), pp. 1993–2023. doi: 10.2308/accr-50536.
Hamid, K. C. A., Othman, S. and Rahim, M. A. (2015) ‘Independence and Financial Knowledge
on Audit Committee with Non-compliance of Financial Disclosure: A Study of Listed
Companies Issued with Public Reprimand in Malaysia’, Procedia - Social and Behavioral
Sciences, 172, pp. 754–761. doi: 10.1016/j.sbspro.2015.01.429.
Hummel, K., Schlick, C. and Fifka, M. (2017) ‘The Role of Sustainability Performance and
Accounting Assurors in Sustainability Assurance Engagements’, Journal of Business Ethics, pp.
1–25. doi: 10.1007/s10551-016-3410-5.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Nalewaik, A. and Mills, A., 2016. Project Performance Review: Capturing the Value of Audit,
Oversight, and Compliance for Project Success. CRC Press.