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

This report analyzes the audit, assurance, and compliance aspects of a case study. It begins by identifying relevant audit plans based on the evaluation of the case study of DIPL, and how results could influence audit procedures. The report then depicts different risks and their impact on material misstatements, including inheritance risk arising from issues like employee pressure and ineffective management. The report also mentions key fraud risks, such as employee manipulation and financial report manipulation. Finally, it outlines how these identified fraud risks could lead to specific audit procedures. The analysis includes financial ratio evaluations and their implications for the company's performance, as well as a discussion of potential corrective measures. The report uses various academic sources to support its findings, including studies on audit procedures and risk assessment.

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: Mentioning how results could influence audit procedures...................2
Answer to Question 2: Depicting different risk and its impact on material misstatement........4
Answer to Question 3a: Mentioning two key fraud risk............................................................5
Answer to Question 3b: Mentioning how identified fraud risk could lead to audit...................7
Reference:..................................................................................................................................8

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Answer to Question 1: Mentioning how results could influence audit procedures
From the evaluation of the case study of DIPL relevant audit plans could be
identified, which might be used in evaluating the financial information of the company. The
relevant analytical approach could be used in identifying the overall financial trend, which
might be used in identifying the overall needs for an audit operation. Baylis et al. (2017)
stated that with the help of audit procedures organisation are able to identify the minimum
expenses needed for completing the audit procedure. Furthermore, relevant analytical
approach can be used in identifying the overall financial trend of DIPL. The overall use of
common sized analytical approach could directly allow the analyst to use the approach for
analysing the overall financial reports declared by the organisation.
The use of relevant analytical approach such as ratios and benchmarking could be
identified as the viable approach for analysing performance of DIPL. In addition, the use of
benchmarking could directly help in identifying the overall financial stability of the
organisation. The use of benchmarking could directly allow the analyst to evaluate the overall
financial performance of the organisation, where relevant problems in operations could be
identified. Moreover, relevant ratios could also be used in the analytical approach, where it
might directly compare returns of the company with its previous fiscal year. Duncan and
Whittington (2014) mentioned that ratios mainly allow the organisation to identify the
relevant trend in the overall financial report, which could help in detecting the overall
progress and decline in the financial stability of an organisation. Therefore, ratios are mainly
used as the overall analytical approach for evaluating the performance of the DIPL in the
three fiscal years.
Particulars 2013 2014 2015
Net profit 2,359,190 2,291,362 2,972,183

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Current liabilities 3,780,000 5,120,250 6,397,500
Current assets 5,385,938 7,509,150 9,600,929
Revenue 34,212,000 37,699,500 43,459,500
Total liabilities 3,780,000 5,120,250 13,897,500
Depreciation 249,375 274,312 472,688
Solvency ratio 69.01% 50.11% 24.79%
Current ratio 1.42 1.47 1.50
Profit margin 6.90% 6.08% 6.84%
The overall evaluation of the above table relevant ratios of DIPL could be identified,
where relevant financials trend in the performance of the organisation could be pinpointed.
The overall financial ratios of the company mainly improved over the period of three fiscal
years, where only the profit margin of the company declined. However, both sales and net
profit of the organisation has drastically increased, which only indicates the high-end
expenses conducted by the organisation. Moreover, relevant improvement in solvency and
current ratio of the company could be seen. The declining solvency condition mainly states
the company’s overall financial position, which is improving. The current ratio of the
company has also increased to 1.50 in 2015, which depicts ability of the company to support
its short-term obligations. Moreover, the overall declining profitability and increment in
relevant expenses could be identified from the overall evaluation of ratios (Homb et al.
2014).
From the overall evaluation of ratios, relevant undesirable trend of the company
performance could not be identified. This undesirable trend in the overall financial condition

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of DIPL is mainly identified from the evaluation of ratios. The ratio evaluation mainly helps
in identifying the overall position where the company’s operations are desirable or not could
be identified. Therefore, adequate corrective measures need to be conducted by the
management of DIPL for identifying the current financial position of the company. This
mainly helps in identifying the needs for relevant audit procedures needed by the organisation
(Hut-Mossel et al. 2017).
Answer to Question 2: Depicting different risk and its impact on material misstatement
The evaluation of the overall case study of DIPL mainly helps in pin pointing the
relevant risk, which is directly increasing the chance of material misstatement. The two
different type of material misstatement risk could be identified, which could directly increase
the inheritance risk of DIPL. The first risk of inheritance can be portrayed from the omission
in the record keeping where the employee of the organisation did not conduct relevant
transactions. The management mainly needed a new system, which increased pressure on the
employees to covert the transaction and relevant use the system at short durations. This
increased pressure on the employees could directly increase the overall misstatement risk,
which could directly increase organisations inherence risk. There are relevant problem, which
could be identified from the overall evaluation of the case study. The current employee that is
maintained by the company is not relevant for the finance department, which is increasing the
overall misstatements in the organisation (Schmidt, Wood and Grabski 2016).
Moreover, the company has also failed achieve the targeted profits, where the
management is mainly responsible. The management was not putting all the relevant input in
the business for supporting the activities and achieving the targeted goals. The lack of
integrity and motivation level in management was relevantly low, which is directly affecting
the overall performance of the organisation. In addition, the relevant complexities could be

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identified from selection process that was used by the management in promoting a new CEO.
This ineffective process of the management could directly affect the overall inheritance risk
of the organisation, which could in turn hamper relevant problems faced by the company.
Furthermore, there is relevantly low employees, which is been employed by the organisation
in changing the overall accounting system. This could directly increase the overall
manipulations and material misstatements, which in turn could increase the inheritance risk
of the organisation. Shafii, Abidin and Salleh (2015) mentioned that the overall increment in
the inheritance risk could increase the implementation of audit report for identify the overall
financial condition of the company.
Therefore, from the evaluation it could be understood that there is excessive
workloads on the employees, as new accounting system is been imposed by the organisation.
This excessive pressure has mainly increased the chance of material misstatement and
omission of relevant transaction in the financial report. Moreover, there are relevant issues in
the poor booking system, which could directly affect the overall financial report of the
organisation. Thus, the organisation is mainly portrayed high-end incentives to its
management, which raise the unethical concern that might increase material misstatement
affecting its financial report.
Answer to Question 3a: Mentioning two key fraud risk
There are relevant different types of risk, which could hamper operation of the
company and increase its material misstatement. The overall risk such as fraudulent activities
risk and financial misstatement risk are mainly identified from the overall case study. The
explanations of the overall risks are mainly depicted as follows.
Fraudulent
activities of the
The overall fraudulent activities are mainly detected from the
employees of DIPL, where the workforce of the organisation is mainly

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employees manipulating relevant transactions. Management mainly forced the
employees to use the new counting machine, which increased relevant
pressure. Thus, it is determined that overall manipulations conducted
with employee for directly increases the material misstatement in the
financial report of the organization. Fraudulent activities used by the
employees in completing the change in accounting software would it
increase the material misstatement and increase the inheritance risk.
Furthermore, there was relevantly minimum workforce present in the
organization, with relevant low experience and efficiency. This mainly
increase the chance of material misstatement, employees will not be
able to adequately record all the transactions conducted by the
organization (Thaweejinda and Senivongse 2014).
Manipulation in the
financial report
The second fraud can be detected from the overall manipulations
conducted in the financial report. The organisation need a loan of 7.5
million from BDO Finance, which has a relevant measures that needs
to be maintained by the organisation for the continuing the loan. DIPL
mainly needs a current ratio of 1.5 and debt to equity ratio less than 1.
Therefore it could be estimated that the management could manipulate
the overall values in the financial report to comply with the loan
requirements, as it needs the loan to continue with its business
operation. This could mainly increase the overall material
misstatement, where relevant inheritance risk increases (Schmidt,
Wood and Grabski 2016).

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Answer to Question 3b: Mentioning how identified fraud risk could lead to audit
The overall case study mainly helps in identifying the overall risk that is affecting the
overall financial report of the organisation. There are relevant frailer activities, which could
be conducted but the employee, when implementing the new accounting system. The pressure
inputted by the management could have led to the overall manipulation of the financial
report. Therefore, the organisation could use adequate monitoring system, which could
adequately reduce the overall fraudulent activities in DIPL. Moreover, the valuation of raw
materials is relevantly valued at wrong cost, where the average costing is used, while the use
of normal costing needs to be conducted. This could directly help in reducing the overall
manipulations in the financial report. Thus, the use of overall audit procedures could directly
help in identifying the overall problems that is hindering operations of the organisation
(Winer et al. 2015).

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Reference:
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.
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.
Homb, N.M., Sheybani, S., Derby, D. and Wood, K., 2014. Audit and feedback intervention:
An examination of differences in chiropractic record-keeping compliance. Journal of
Chiropractic Education, 28(2), pp.123-129.
Hut-Mossel, L., Welker, G., Ahaus, K. and Gans, R., 2017. Understanding how and why
audits work: protocol for a realist review of audit programmes to improve hospital care. BMJ
open, 7(6), p.e015121.
Schmidt, P.J., Wood, J.T. and Grabski, S.V., 2016. Business in the Cloud: Research
Questions on Governance, Audit, and Assurance. Journal of Information Systems, 30(3),
pp.173-189.
Shafii, Z., Abidin, A.Z. and Salleh, S., 2015. Integrated internal-external Shariah audit
model: A proposal towards the enhancement of Shariah assurance practices in Islamic
financial institutions (No. 1436-7).
Thaweejinda, J. and Senivongse, T., 2014, May. Semantic search for cloud providers with
security conformance to Cloud Controls Matrix. In Computer Science and Software
Engineering (JCSSE), 2014 11th International Joint Conference on (pp. 286-291). IEEE.