Auditing, Assurance, and Compliance Report: Case Study Analysis

This report provides a comprehensive analysis of auditing, assurance, and compliance, focusing on a case study of Double Ink Printers Limited (DIPL). The report begins with an assessment of how financial results impact audit planning, utilizing financial ratios such as profit margin, solvency, and current ratios to evaluate DIPL's performance from 2013 to 2015. It identifies declining profitability and solvency ratios as indicators of potential financial issues. The report then explains the concept of risk and its impact on material misstatements, highlighting inheritance risks stemming from inexperienced employees, an inadequate workforce, and the implementation of a new accounting system. Two key fraud risks are identified: manipulation in financial report preparation to secure loans and increased fraudulent activities within the workforce. Finally, the report explores the impact of these risk factors on audit procedures, emphasizing the need for enhanced monitoring systems and accurate material valuation. The analysis underscores the importance of robust audit procedures to mitigate financial risks and ensure compliance.

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

AUDITING, ASSURANCE AND COMPLIANCE
1
Table of Contents
Answer to Question 1: Impact of results on planning of audit..................................................2
Answer to Question 2: Explaining risk and its impact on material misstatement.....................4
Answer to Question 3a: Identifying two key fraud risk.............................................................5
Answer to Question 3b: Explaining the impact of risk factors on audit procedure...................7
Reference and Bibliography:......................................................................................................8

AUDITING, ASSURANCE AND COMPLIANCE
2
Answer to Question 1: Impact of results on planning of audit
From the evaluation of the case study, relevant analytical measures could be identified
for Double Ink Printers Limited (DIPL), which could help in identifying its relevant
performance. Moreover, the use of analytical procedures could directly help in evaluating the
results, which could motivate the company to conduct relevant audit procedures. The audit
procedures could directly allow the company to identify the relevant expenses and plan,
which needs to be conducted for completing the overall report. Moreover, the audit report
could directly help in pin pointing the overall problems that is been faced by the organisation.
ARSLAN & DEMİRKAN (2017) mentioned that the use of analytical approach mainly allow
the analyst to identify the needs of an audit report.
There are two different types of analytical approach, which could be used by the
analyst to evaluate the performance and identify the needs of an audit report. The analytical
approaches are ratios and benchmarking, which could be used by the analyst for detecting the
financial trend and manipulation that might be conducted by the organisation. The overall
variance and performance of the organisation is mainly compared with the help of
benchmarking process. On the other hand, ratios mainly help in identifying the overall trend
of the organisation over the previous fiscal year. Cuadrado-Ballesteros et al., (2017)
mentioned that with the help of ratios analyst are mainly able to compare and contrast
between different companies for identifying performance of the organisation.
Particulars 2015 2014 2013
Revenue 43,459,500 37,699,500 34,212,000
Total liabilities 13,897,500 5,120,250 3,780,000
Current assets 9,600,929 7,509,150 5,385,938
Depreciation 472,688 274,312 249,375

AUDITING, ASSURANCE AND COMPLIANCE
3
Net profit 2,972,183 2,291,362 2,359,190
Current liabilities 6,397,500 5,120,250 3,780,000
Profit margin 6.84% 6.08% 6.90%
Solvency ratio 24.79% 50.11% 69.01%
Current ratio 1.50 1.47 1.42
Moreover, relevant analytical measures such as ratios need to be conducted by the
organisation, which is directly used in identifying the needs of an audit report. From the
overall evaluation of the above table relevant rations such as profit margin, solvency ratio and
current ratio is mainly identified. There is relevant increment in overall current ratio for 1.42
to 1.5 in 2015, as compared from 2013. This rapid increment in the overall current assets of
the company and decline in profit margin mainly depicts a controversial stance. Furthermore,
the solvency conduction of the company also improved drastically from 2013 to 2015. The
overall net profitability of the company increased in 2015, whereas the profit margin
declined, which only indicates that the companies cost has increased. However, the current
ratio and solvency condition of the company has improved adequately (Eulerich, Henseler &
Kohler, 2017).
From the overall evaluation the performance of DIPL is not adequate, which mainly
represents the unfavourable changes that could be identified from the financial ratios of the
organisation. The declining profitability and solvency ratio, with the improving current ratio
indicates that there is a problem in the overall financial report of an
organisation. Inconsistency in the overall financial report mainly forces the company to
conduct an audit procedure.

AUDITING, ASSURANCE AND COMPLIANCE
4
Answer to Question 2: Explaining risk and its impact on material misstatement
The evaluation of the case study mainly helps in identifying the relevant risk factors
that is affecting operational capability of DIPL. Moreover, these risk factors are directly
increasing the material misstatement of the organisation and increasing the inheritance risk.
Furthermore, the evaluation of annual report also helps in identifying the inconsistency in
achieving the required target profits. This is mainly due to the inconsistency and
ineffectiveness of the management, who are not able to identify the macro and micro
economic factors affecting the operations of the organisation. Therefore, the reduced revenue
and profit attained by the organisation mainly leads to inheritance risk that might affect
Financial stability of the organisation (Farooq et al., 2017).
The second inheritance risk is mainly portrayed by the inexperienced employees, who
are directly affecting operations of the organisation. Employees have no professionalism,
which could help in increasing the work force productivity and profitability. These inefficient
and experienced employees would mainly make relevant mistakes in the operations of the
organisation, which directly increases the inheritance risk. Incapability of the workforce
could be identified with the help of this CEO selection conducted in DIPL. The inheritance
risk can be seen in the operations conducted by the workforce were not capable to do relevant
task in the organisation. The other inheritance risk mainly comes from the low number of
employees that is being used by the organisation to support its activities. This low work force
has been increasing the work pressure on employees and raises the chances of making
mistakes. Therefore, these reasons could be the major factors contributing to the inheritance
risk of DIPL.
The overall pressure portrayed by the organisation on its work force mainly increases
a chance of miss statement which directly increases the inheritance risk. The company mainly
implemented a new accounting system where Accountants were forced to use the system

AUDITING, ASSURANCE AND COMPLIANCE
5
more quickly than anticipated. The employees were not provided with adequate time to make
relevant reconciliation with the new software, which could directly increase the risk of
misstatement in its annual report. Furthermore, due to the excessive workload employees
started to conduct poor bookkeeping services, which directly increased issues in annual report
of the organisation. The rising risk of errors in the financial statement is mainly due to the
incompetency of the management to conduct relevant checks in the overall financial
statement of the organisation. The organisation also provided relevant hi incentives to
Management, which relevantly increase the material misstatement condition in the financial
report (Fuhrmann et al., 2017).
Answer to Question 3a: Identifying two key fraud risk
The two different types of risk that could be identified from the evaluation of the case
study, which are affected as follows.
Manipulation in the
preparation of financial
report
Manipulation and the financial report preparation is the second
major risk that could identified from the evaluation of the case
study. Currently, the organisation is mainly aiming to receive
loan from BDO finance, which relevantly needs different types
of requirements. The overall current ratio of the company needs
to be at 1.5, while debt to equity ratio needs to be below 1,
which could be difficult for the organisation to maintain in the
turmoil times. Therefore, there is a need for a fixed current ratio,
which could increase the overall fraudulent actions in the
organisation to comply with the loans provided by BDO
finance. the requirements of BDO Finance specific if the
overall current ratio and debt to equity ratio are not maintained

AUDITING, ASSURANCE AND COMPLIANCE
6
by the organisation then the company could take the finance
back at any time. This could mainly be harmful for the
organisation, as they need a relevant finance to continue with its
operations. Hence, relevant fraudulent activities could be
conducted by the management to comply with the loan
requirements and maintain its productivity (Green et al., 2017).
Increment in fraudulent
activities in the workforce
Fraudulent risk is mainly identified as the first risk, which could
directly affect operations of the organisation an increase the
misstatement condition. From the valuation of the case study it
is identified that DIPL employees could conduct the fraudulent
activity due to increased pressures imposed by the management.
The management directly force the employees to conduct a
massive change in the accounting system without relevant time
and workforce. This could directly increase the chance of
fraudulent activities conducted by the employees to complete
the task on time due to the pressure provided by the
management. These fraudulent activities could directly increase
the chance of material misstatement in the financial
report. Therefore, the accountant responsible for the
implementation of new accounting system directly increases the
inheritance of the organisation. Moreover, there is relevant risk
of inheritance that could be identified in the selection procedure
of CEO, which was conducted unethically. Therefore, it could
be understood that the management of DIPL is not able to
produce relevant integrity and accountability of the company's

AUDITING, ASSURANCE AND COMPLIANCE
7
operations in whole. Li et al., (2017) mentioned that Incremental
fraudulent activities in the organisation could directly reduce
viability of the organisations ability to continue with its
operation.
Answer to Question 3b: Explaining the impact of risk factors on audit procedure
From the evaluation of the risk relevant problems could be identified from the
operations of the organisation. For reducing the overall fraudulent activities relevant system
could be imposed, which could help me monitoring activities of the employees. The second
problem was mainly identified as the material valuation. The overall raw materials valued at
average pricing, where the actual prices are relatively higher. This mainly increases the
material misstatement in the annual report of the organisation. Furthermore, the calculation
technique does not allow the organisation to identify the actual expenses conducted by the
organisation (Nguyen & Kohda 2017). Thus, adequate audit report needs to be conducted for
evaluating the overall performance of DIPL from 2013 to 2015.

AUDITING, ASSURANCE AND COMPLIANCE
8
Reference and Bibliography:
ARSLAN, M. C., & DEMİRKAN, S. (2017). Auditing And Assurance Services. THE
JOURNAL OF ACCOUNTING AND FINANCE JULY 2017 SPECIAL ISSUE, 127.
Cuadrado-Ballesteros, B., Martínez-Ferrero, J., & García-Sánchez, I. M. (2017). Mitigating
information asymmetry through sustainability assurance: The role of accountants and
levels of assurance. International Business Review.
Eulerich, M., Henseler, J., & Köhler, A. G. (2017). The Internal Audit Dilemma-The Impact
of Executive Directors Versus Audit Committees on Internal Auditing Work.
Farooq, M. B., Farooq, M. B., de Villiers, C., & de Villiers, C. (2017). The market for
sustainability assurance services: A comprehensive literature review and future
avenues for research. Pacific Accounting Review, 29(1), 79-106.
Fuhrmann, S., Ott, C., Looks, E., & Guenther, T. W. (2017). The contents of assurance
statements for sustainability reports and information asymmetry. Accounting and
Business Research, 47(4), 369-400.
Green, W., Green, W., Taylor, S., Taylor, S., Wu, J., & Wu, J. (2017). Determinants of
greenhouse gas assurance provider choice. Meditari Accountancy Research, 25(1),
114-135.
Li, C., Raman, K. K., Sun, L., & Wu, D. (2017). The effect of ambiguity in an auditing
standard on auditor independence: Evidence from nonaudit fees and SOX 404
opinions. Journal of Contemporary Accounting & Economics, 13(1), 37-51.