Auditing DHL: Procedures, Risks, and Internal Control Analysis

This memorandum provides a comprehensive audit of DHL, focusing on risk assessment, audit procedures, and internal controls. It discusses the risks associated with DHL's business, particularly concerning the new patient revenue system and the arrangements with Acuity Vision. The report covers key assertions at risk, implications for DHL's control environment, and the effectiveness of customer payment testing. It details audit procedures for accounts payable, key assertions related to overtime payments at Pellegrino Shores, and both preventive and detective internal control measures. The analysis includes the impact of business risks, such as fraud, on DHL's financial statements and the auditor's responsibilities. The report emphasizes the importance of understanding DHL's business and its risks to form relevant opinions on the financial statements, ensuring the removal of material misstatements and omissions. The document provides insights into additional audit work, key questions for internal audit, and the audit strategy to be employed, covering features of the engagement, reporting objectives, audit time, and communication nature. Furthermore, the report examines key account balances, assertions, and implications for environmental control within DHL.

Auditing
Name of the Student:
Name of the University:
Author’s note:

MEMORANDUM
To: Mr. Jek Porkins
From:
CC:
Subject: Related to audit procedures and assertions with respect to key risks.
Date: 12th September 2019
Introduction
The memorandum is prepared with the objective to discuss with the audit senior of DHL
regarding what are the risk associated with its business as well as to have information about his
accounts affected through the fraud. It discusses about audit work and procedure as well as audit
risks with respect to switchover of new patient revenue system of St Neville. The memorandum
further discusses about several assertions related to risk all due to paying of sales team of Acuity
Vision (Whittington & Margheim, 2014). Further it tends to include implications for control of
environment of DHL including the discussion about several issues that the management of DHL
would consider. The memorandum has emphasized on accounts payable tests with respect to test
of control, assertions for each test , conclusion along with reasons and also involves additional
procedures related to audit that can be performed(Kiesow, Zarvic & Thomas,2014. Moreover,
the memorandum focuses to discuss on key assertions those are at risk with respect to overtime

payment for Pellegrino Shores and it also involves preventive internal as well as detective
internal control measures for addressing the risk ascertained as well as identified.
Due to the fraudness caused by Pellegrino Shores business risk may be diverse and the largest
risk will get to continue for the company of DHL. The business risk that would take place due to
fraudness would cause failure into the business of DHL (Griffiths, 2016). It would take place in
the form of high level of financial risk, issues for cash flow, increase in the cost of production,
loss of profit, decrease in customers as well issues which are legal. The business risk would
impact as per the effect of fraudness by Pellegrino Shores are as follows:
 Due to business risk there is an impact as top down approach to be used in audit along
with the financial statements.
 Business risk would impact into merge of inherit as well as control risk for audit.
 The residual risk arising due to inherent as well as control risk through the impact of
business risk need to get reduced through the action of audit.
 Business risk can impact into the form of analytical process for verifying assertions of
financial statements.
 Business risk might impact into business failure that might lead the auditor to consider
going concern concept of the business client.
 Due to business risk the impact will be due to the fraudness is the audit should make
business more understanding such that large databases containing information is fruitful
(Knechel& Salterio, 2016).
Such business risk would enable the auditor to express further opinion that would be
relevant to financial statements. There should be removal in material misstatements as
well as removal of omission in case of financial statements (Keune & Johnstone, 2015).

The auditor becomes concerned about this business risk occurring as it might impact into
the financial statements and hence complete understanding of business of DHL is needed
to be known by the auditor as well as its risks even. As an impact of this business risk
occurring auditor shall plan the strategy of audit related to the risks of business.
Additional audit work to be undertaken with respect to new political revenue system:
a.) Associated audit risks:
There are audit risks that are associated with newly political revenue system. The risks are
 Inherent risks: This kind of audit risk is associated in the form of procedures to detect the
issues (Ruhnke & Schmidt 2014). The audit work might be in the form of audit plan,
proper approach of audit and strategies of audit. There is an audit plan to conduct internal
audit. The audit approach is used in the form of risk analysis to control internal
operations.
 Detection risks: The auditor should identify and correct misstatements of financial
statements at the time of auditing (Keune, & Johnstone, 2015). As a matter of audit work
there should be proper detection of risk by clear understanding of company, proper
methods to be used for identification of risk of financial report of the business.
 Control risks: As the form of audit work there should be proper investigation as well as
accuracy of financial statements (Chen, 2016). Fraud should be detected and areas should
be identified related to control risks. Proper planning as well as strategy should be made
and internal control should be there for financial reporting.

b.) Two key questions to ask internal audit
 How to measure internal audit and its effectiveness with respect to switchover of new
patient revenue system?
 What are the different risks that would affect implementation of strategic procurement to
be successful?
c.) The audit strategy used in the case of audit in this case should be short in terms of audit
for DHL (Wahl, 2015). If there there changes in case of conditions or result of procedures
related to audit in that case there must be significant audit strategy to be used. In case
there is an alteration then reason for such should be mentioned along with relevant
documents. The proper audit plan which should be more detailed than document related
to strategy as the audit plan would reveal about time, the extent of particular procedures
of audit which is to be conducted by the team of audit. Moreover, the document
containing strategy should include statement related to all decisions required to plan
audit. Proper audit strategy would involve:
 Features of the engagement
 Objectives of reporting
 Audit time
 Communication nature
 Relevant factors for engagement of efforts of the team
Additional information that is required with respect to Acquity Vision’s sale of medical supplies
will be:

a.) Key account balances well as assertions that are associated with risk due to the
arrangements to Acquity Vision’s for paying its sales team:
 Account balances: There should be assertions related to whether asset, liability
exists. Even there can be assertions in the form of determining whether this
company is able to control its rights for asset or not (Knechel & Salterio, 2016).
Further completeness related to all information are completely recorded or not
should be taken into account.
 Transaction classes: There should be assertions with respect to whether
transactions have been properly recorded. Further there can also be assertion that
can take place relating to accuracy where there should be amount that should be
recorded in the form of transactions appropriate manner.
 Presentation as well as disclosure: The assertions must be in the form of events
disclosed transactions as well as other matters. There should be completeness
relating to all disclosures that is important to be included. On the other hand
financial information should be properly presented as well as described.
b.) The implications for the environmental control within DHL including specific issues
which the management need to consider:
The key issue would be included in the form of following:
 Pollution as well as modern living would go in the same way but the costs related
to pollution are considerable as an issue (Barton & Bruder, 2014).
 Waste disposal is another issue. There is a need for improved waste disposal
 Climatic change also becomes an issue as it negatively would affect the
productivity of DHL.

 Solving of complex issues also becomes a problem. It is effecting DHL’s
individual, the company itself as well as the community.
There can be specific implications with respect to environmental control of DHL. There can be
an improvement into the environmental performance. This can be possible in the form of
environmental leadership and good corporate culture establishment which should be
demonstrated through senior manager of DHL. There should be acceptance of the policies and
there should be proper governing principles, clarity in standards of performance as well as
procedures of operation technologies and there should be proper system to measure performance.
There should be system to measure as well as evaluate environmental performance.
c.) The effectiveness of customer payment testing:
 Customer payment testing becomes effective when testing of payment
functionality is proper.
 Proper integrations with customer payment makes it effective.
 In case of customer payment testing security is considered to be most important
aspect for safety of customer payment transactions (Takanen et al., 2018)).
 Performance is another effective means of customer payment testing. In order to
achieve benchmark with respect to desired performance all factors should be
considered for making customer payment test effective.
 Proper database becomes another important aspect for successful customer
payment testing. Certain aspect should be considered keeping in mind about test
of customer payment that would make it to be effective.
In case of both accounts payable tests have been undertaken:

Test Type of test Key assertion Reasonabless of
conclusion
Additional
audit
procedures
1 Analysis of the
paper trails
Through the
process of
auditing vouching
for tracking the
records of
transactions is
necessary. There
should be proper
analyze of the
paper trail that
will require
auditors for
reviewing of
source documents
that are original
form. In the form
of purchase
orders, invoices of
With respect to test 1
it can be concluded
that proper vouching
technique is quite
necessary for keeping
as the record form that
what transactions have
taken place and also to
ensure that there
correct transactions
have taken place.
Proper documentation
is required to be
maintained to
maintain the purchase
orders and bank
records should be
appropriate such that
There should be
proper
discussion with
the concerned
for removal of
fraud and
improvement
and make an
outline for audit
and review on
internal control
for accounts
payable. There
should be full
documentation
with respect to
liabilities which
are unrecorded.

its vendor as well
as records in
bank. It will be
the responsibility
of the team audit
for selection of
such transactions
those are accurate
and it’s necessary
to ascertain the
invoiced terms of
the DHL.
there is no error.
Moreover, correctness
as well as accuracy
through audit
procedure is essential.
Further there
should be
detailed account
payable ledger
that needs to be
maintained.
2 Verification of
financial
statements
In this case
auditors will be
required to look
into the amounts
recorded in the
financial
statement of DHL
is accurate or not.
Further, there
should be review
on month end
It can be concluded
from test 2 that correct
checking of total
amount recorded as
per transactions in the
financial statement
should be noted down
as well. Auditor
should keep on
reviewing the process
in order to identify
After proper
completion of
full audit total
collection of
findings are
done and
recorded in the
audit report that
would include
the information
in terms of

basis in the form
of closing to make
sure that all items
gets posted in the
accounting period
correctly(Knechel,
& Salterio, 2016)
There should also
be review with the
procedure for
identification as
well as recording
of transactions.
Search for
invoices that has
been paid through
cash and liabilities
those remain
unrecorded should
be involved since
they are not
processed for
payment.
what transactions are
recorded in the
financial statements
and whether those
transactions are
accurate or not.
Unrecorded liabilities
need to be considered
to have proper
disclosure about the
balances of financial
statements.
financial
accuracy related
to accounts
payable and it is
concerned with
GAAP and
certain
improvement in
the form of
control are
required.

The key assertion at risk with respect to payment of overtime at Pallegrino Shores and an internal
control as well as detective internal control that would directly address the risk:
The key assertions with respect to payment of overtime at Pallegrino Shores are as follows:
 Occurrence: Occurrence test is done for checking if the payment related transactions has
taken place successfully (Shamsuddin & Johari, 2014). It becomes essential to check with
tax expenses that DHL would consider for employees of Pallegrino those exist and are
working overtime.
 Completeness: Understatement will not be the issue because majority of the employees
will send the notification to DHL (Schroeder, 2015) if they are unable to receive their
overtime payment through proper transactions. Testing in this case will not be necessary
for making sure about the audit client not understating the payment as an expense
towards Pallegrino Shores. It becomes essential to test the completeness of the assertion
through the list of present employees eligible to get overtime payment through the
records of human resources. Therefore, sample needs to be selected for employees to
make sure they have been paid properly.
 Authorization: It should be properly noticed that whether audit client management has
taken into account with appropriate internal control as well as other procedures those are
authorized while handling of overtime transactions. It is essential to make sure about
personnel file with updates as well as time sheets should be reviewed for assuring abut
payment of overtime.

 Accuracy: There is also a requirement for testing of accuracy with respect to know about
transactions of payment are error free (Larner, 2014). For overtime payment purpose
related to Pallegrino Shore it is important to check with total amount being paid as well
as classification of accounts is also necessary for being sure about transactions related to
overtime payment are correct and accurate.
Preventive internal control as well as detective internal control that would directly address the
risk:
 Access correct data: It should be ensured that correct data about the employees are
available at the time of payment and it should be properly analyzed by using of
 Custom scripts in order to extract the data (Romney, Steinbart & Cushing, 2000).
 There should be skills present for gathering of data and for ensuring about
accuracy of data gathered before analyzing it.
 Continuous improvement: If there comes the case of improper transactions related to
payment then DHL should consider ongoing process to be as kind of waste or frauds that
needs to get changed. Further company has to incorporate analytical scripts to remove the
falseness and make the transaction to be more effective.
 Take proper action on time: Management need to take proper action against the fraudness
taking place in terms of transaction of payment of overtime to protect from failure.
Proper initiatives are needed to be taken including change in process r might be in
improvement in technology.
Conclusion