Auditing and Assurance Report: DIPL Financial Analysis, Risks & Fraud

This report provides an in-depth analysis of auditing and assurance principles, focusing on the application of analytical techniques to financial reports, particularly those of DIPL. It examines the influence of audit planning decisions, including the use of ratio analysis and benchmarking, to assess a company's financial health. The report identifies inherent risk factors arising from DIPL's business operations, such as marketing strategy failures, employee proficiency gaps, and IT system implementation issues. Furthermore, it explores how these risks can lead to material misstatements in financial reporting. The report also identifies and discusses two vital types of fraud risks related to misstatements arising from financial reporting, along with the risks of fraud leading to considerable losses of fraud assets. The analysis encompasses various aspects, from excessive management pressure to the integrity of management, and how they contribute to the overall risk profile of the firm.

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
Name of Student:
Name of University:
Author’s Note:

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Answer 1:
Application of Several analytic techniques of analytics to the financial report as well as
information of the DIPL:
There is a chance of development of the audit plan by the analytic techniques of the
report information of the financial nature of the DIPL. At the time the audit is undertaken, the
plan of audit can be thought of as a specific guideline requiring to be maintained. In a more
specific manner it can be said that the task of maintenance cost of the audits is that in which the
assessors are assisted. This is thought to be quite reasonable. It also helps to avoid any nature of
problems of client as well as authority misunderstandings. The procedure or the way in which the
dissemination of the financial declaration as well as the information is performed, are the
analytic approach to the declaration or the financial statement of the DIPL firm. Several
mechanisms assist the evaluation process along with the utility. It also facilitates the entire
process and the mechanism along with the operations. The analytic approach for the declaration
analysis which is by nature, financial has certain benefits. It is possible for several accountants to
decipher important information to help them in drawing major business conclusions. This system
of work also favours financial analysts.
Analysing the financial declaration of a reference point which is common is helped by the
analytic approach to the common sizing. This also assists in the comparison of statements
financial in nature in terms of several time points or in terms of different corporations. Several
lines of mentioned items in the economic report as well as the style of reporting can be
understood and analysed by the assessors. Considering an example we can say that the nature in
which a particular item is registered the items being the net assets as well as the net liabilities

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should be considered also along with the owner equity in the financial reporting of the firm as
also the digression of the normal has a requirement to be established. The method of analysis
needs to be used for the plan execution as well as analysis in connection to the audit which is
nothing but benchmarking. This is not improbable as benchmarking is regarded as a procedure
for analysis. The variance of the actual economic declaration found from the benchmark helps in
evaluation of the deviation as also in the analysis of the reason behind the detected variance for
the root cause (Hayes, Wallage and Gortemaker 2014).
In addition to this it can be said that ratio analysis is thought of as an analytic approach of
an appropriate nature that assists in the economic declarations in the assessment of the audit plan.
Results of the audit planning decisions, their results and influence:
The results of the planning decision regarding the audit and its plan are generally
influenced by the analytic method of thinking, and their results which are found such that the
dissemination of financial statement information can be conducted. Citing an example it can be
said that the outcomes of the ratio analysis for example the current ratio of the firm namely
DIPL is calculated as 1.42 in 2013, 1.46 in 2014 and 1.5 in 2015. Also it can be said that the
profit margin or the ratio of profitability has been enumerated to be 0.068 in 2013, 0.60 in 2014
and 0.06 in 2015. The specific profit ratio helps to reveal the state or condition of the income
earned by the net sales of the DIPL firm (Arens et al. 2016). It can also be said that the net
income earned by the firm assist the assessor in knowing the nature of the expenses whether high
or low. It also helps to understand whether the firm management control the requirement of the
budget curtail as well as the expenses of the firm. The favourable as well as the changes which
are unfavourable can be utilized as a reference factor in the audit or assessment of the DIPL
firm’s financial health as also the soundness along with the overall condition of the firm

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(Knechel and Salterio 2016). The ratio useful for determining the trends both desirable as well as
undesirable is the solvency ratio (Cannon and Bedard 2016). It is calculated to be 0.62 in 2013,
0.44 in 2014 and 0.21 in 2015. In order to evaluate whether the total cash flow of the economic
corporation is adequate or not in meeting the short and long term liabilities of the DIPL firm the
three –year period ratio proves useful. The assessors can understand the financial position of the
firm relatively in connection to this time period as well as factors unfavourable or undesirable in
any way.
Answer 2:
Identification of inherent risk factors that arise from the business operations of the DIPL:
It can be stated that there exists several significant factors which influence audit and also
involve incidence of misstatements of the material in the announcements of economic nature
concerning specific issues. It can be asserted however that several forms of the systematic as
well as unsystematic risks are present which assist in the reflection of financial misstatements in
the declarations of the financial companies (Barton and Bruder 2014). There is also a probability
of the detected risks being due to both financial as well as non-financial factors that ultimately
help avoiding the a definite corporation for reflecting a modest, fair as well as free view for
pertinent economic declarations. It can also be asserted that an evaluator has a possibility of
finding it challenging to examine and recognise several risks. According to the opinion of
William it can be said that the identified risks can be connected to several risks which are
associated with the omission with the risks of several diverse errors that cannot be considered for
a specific book-keeper. All in all it can be said that the inherent risk has a chance of coming from
the operations of business in connection to the DIPL (Beasley 2015).

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On the basis of a provided study it can be thought that there certainly are numerous
transactions which are specifically deleted by the accountants or the corporation management
authorities of the DIPL. However, this can sequentially lead to the inconsistencies that
specifically owe the ineffectual marketing strategies, in majority which are assisted by the
activities related to marketing (Eilifsen et al 2013). Additionally it can be stated that the
economic declarations as also their evaluations reveal that the firm completely failed to attain the
level of profit which is considered beneficial for the sales of revenue. In particular it might be
due to the failure of the firm’s management in relation to the concerned particular requirement
identification. Also the consequent adjustments of the corporation’s functionalities are also
considered. As a suitable conclusion it can be said that the business organisation’s failure in
analysing the micro and macro economic factors that might possibly exist in form of social
economic as well as political factors are understood. The poor sales figures of the firm reflect
such failures (DeFond and Zhang 2014).
It is due to the DIPL workers that several escalations have been received regarding the
overall inherent risks. Lack of proficiency and also knowledge of the company employees have
led to considerable escalation and risks of the firm. It might also be due to the establishment of a
particular work concern concerning the business depending on the staff-member’s consistency.
The non-proficient work forces can also improve the inherent risks as mistakes are bound to
occur. Errors of exclusion or removal constitute the misstated announcements being pecuniary
on nature.
Apart from the facts discussed above, the other noteworthy aspects contributing to the
risks inherent are possible to be divided into numerous segments in a particular manner, which
cover environmental as well as external aspects, materialistic misstatements in the particular time

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periods which are not recent and the falsified exercises are also considered. Numerous
environmental facts pointing towards inherent risks that constitute swift changes in places where
there is a possibility of issue existence connected to the valuation of inventory, generic market
competition as also the shortage of adequate capital.
The current case of the DIPL and its complexities reveal that the CEO’s succession
included inherent risks. The aspect of succession of the CEO is different as there lies a certain
individuality of the candidates. It can somehow be said that several risks are inherent in the CEO
succession method as also the procedure quality regarding the choice, the selection ease as well
in the handling process. Thus the process end without the strategy compliance, late initiation as
well the CEO’s inadequate involvement has a chance of leading to inherent risks in the company.
The given scenario as well as its analysis states that IT system and its implementation has
led to several issues. An adequate number of staff were not present to carry out the execution and
installation procedure. The testing and the reconciliation were not possible to be carried out
before the new arrangement prior to the end of the year. The initial testing process revealed that
the steps which were undertaken were not accurate and not in proportion with the accurate time
period. The misstatement of the material due to the underlying factors was caused due to it. It
was due to the hidden factors involving error or omission in a specific economic declaration.
It can be asserted further that the cash receipt and its records by the professionals in the
field of finance on behalf of the company have a chance of reaching out to the inherent risks in
the mishandling occasion. A proper and methodical sequence is required to be followed by the
employees in order to ensure that the account receivables are registered in a proper manner. The
receivable ledger’s proper maintenance and the proper registration of the account receivables

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need to be registered. In addition the reconciliation of the bank needs to be recorded in a proper
manner. In addition to this, the generated revenue from the e-book taking reprint of the textbooks
needs to be considered regarding a complexity of the process (Louwers et al 2015).
Along with the valuation process several raw materials at certain costs which are average
was unsuitable the average cost being much lower than the present cost of paper.
Risk and its ability to affect the material misstatement risk in the financial report:
The risks inherent in the procedure can be understood as well as successfully identified
due to the susceptibility of an assumption pinpointed regarding the material misstatement.
Excessive employee and management pressure:
Excess workload on the members of the staff of the firm leads ot poor levels of
bookkeeping. Few important issues like the propensity in encountering issues of cash flow, low
level of liquidity as well as poor outcomes of operation occur (Nalewaik and Mills 2016).
Risks of errors or incorrect misinterpretations:
There is the existence of certain reliability as well as the intricacy due to the risk of error
as well as the misinterpretation of the risk occurs simultaneously.
Integrity of entire management:
The management at the DIPL firm essentially does not have the integrity requisite so
there is the expectation of the prepared reputation as well as business community as an entirety.
Unusual management pressure:

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There is a chance of misstatements in the declarations of a pecuniary nature due to the
incentives in the management.
Nature of business entity:
DIPL leads to a massive amount of financial growth along with the circumstances of a
competitive nature. There is a chance of factors impacting the overall underlying risks in the
entities of the business.
Answer 3:
Identification and understanding of two vital types of fraud risks relate to the
misstatements arising from the financial reporting frauds.
Risks of fraud lead to the considerable losses of the fraud assets. The dissatisfaction of
the work force due o the tremendous work load has a chance of inducing fraud involvement.
The most important fraud risks that occur due to the DIPL firm operations include the
engagement of the workforce in the fraudulent actions as also the dissatisfaction level of the
employees (Duncan and Whittington 2014).
A separate fraud risk possible is the reporting financial fraud risk. During the excessive
expectation from the outside financers for declaration of financial announcements or for meeting
certain targets a huge risk of improper financial announcements is present (William, Glover and
Prawitt 2016).
Explanation of the risk factor identification:

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Depending on the case given, it can be asserted that the process of evaluation for
numerous several raw material inventories were not suitable as the average cost of paper was
much below the cost of paper. The risk of financial reporting can be detected by the monitoring
of the control statements over the course of time.

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References
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Pearson.
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Beasley, M.S., 2015. Auditing cases: An interactive learning approach. Prentice Hall.
Cannon, N. and Bedard, J.C., 2016. Auditing challenging fair value measurements: Evidence
from the field. The Accounting Review.
DeFond, M. and Zhang, J., 2014. A review of archival auditing research. Journal of Accounting
and Economics, 58(2), pp.275-326.
Duncan, B. and Whittington, M., 2014, September. Compliance with standards, assurance and
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