Comprehensive Audit Assurance and Compliance Report for DIPL Company

This report provides an in-depth analysis of the audit assurance and compliance for DIPL, an Australian-based printing company. It begins with an introduction to the company and the purpose of examining its financial statements, focusing on ratio analysis and the verification of statement accuracy. The report then delves into analytical procedures, comparing financial data over three years (2013-2015) to assess trends in liquidity, profitability, and capital structure ratios. It highlights significant changes, such as fluctuations in current and quick ratios, operating profit margins, and debt-to-equity ratios, and discusses their implications for the company's performance. The report also examines inherent risk factors, including intentional misstatements, international and domestic reporting standards, and key fraud risk factors like interest amounts and debt-to-equity ratios. It identifies potential fraud activities and the auditor's role in mitigating these risks, emphasizing the need for accurate financial reporting and compliance with accounting standards to avoid non-compliance risks and ensure stakeholders' trust. The analysis includes a discussion of how auditors can identify and address the identified fraud risks and other inconsistencies in the financial statements.

Audit Assurance and Compliance
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Introduction
In this the introduction is given about the DIPL, it is an Australian based company. The company
start the work of printing. In addition to this company’s financial statement is being examined to
assess the ratio and to verify the faithfulness of the statements. In this Company will discussed
on some other factors such as inherent risk factor and other factors such as to impress the
shareholders by doing some manipulation in the financial accounts of the company.
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Question 1.
In this DIPL have to follow the analytical procedure so by the help of this procedure difference
coming in financial data from last years can be easily examines with this analytical procedure. In
addition to this with the help analytical procedure examines of ratios can be done on the
company. In this report financial statement and examine of ratios of the company of last three
years has been discussed below:-
Statement for analytical analysis (presenting calculation of ratios)
Computation of ratio analysis
Liquidity ratio 2013 2014 2015
Current ratio 1.42485132
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1.46655925 1.50073137
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0.017751573
Quick ratio 0.82797619 0.944834334 0.84727299
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0.007768664
Working capital 16,05,938.0 23,88,900.0 32,03,429.0 0.331580049
Profitability Ratios
2013 2014 2015
Operating Profit Margin 0.10097772
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0.089047255 0.08898715 -
0.039581594
Net Profit Margin 0.06895796
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0.060779639 0.06838972 -
0.002746837
Return on Capital
Employed
0.4 0.3 0.2 -
0.160459244
Return on Equity 0.25783497
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0.212484827 0.24261746 -
0.019673454
Return on Total assets 0.18245862
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0.144075478 0.11366773
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-
0.125673945
Debt equity ratio
Capital structure ratio 2013 2014 2015
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Debt- equity 0.41311475
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0.474816041 1.13444432
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0.582025183
Interest coverage ratio 40.9420590
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40.1257067 4.78608308 -
0.294367022
Efficiency ratio
Efficiency ratio 2013 2014 2015
Receivable turnover ratio 11.08401323 9.2532887
Creditor turnover ratio 12.68542199 11.2358522
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Inventory turnover ratio 12.83396414 10.7576597
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Assets turnover ratio 2.614942828 2.06694628
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In this report we will discussed about the many changes has been calculated of the financial data
of company from last two years. To be more profitable, the company has to change their plans
and strategies and also have to make some changes in another process (Well, 2017). The new
variation of the company also leads the company from the front for holding the share of the
market in the share market.
In this case study of the company various ratios is been examined on the company, financial
factors are being measure after examined due to changes have being done by the company. In
this new factor is introduce knows as liquidity ratio by the help of this ratio there is increments of
1.77% in company current ratio. The big factor of increments in current ratio is, high turnover of
the company in last years. Due to high turnover of the company working capital of the company
will raise automatically. The effect of this the present working capital was 16, 05,938 AUD it has
been increased by 32, 03,429 AUD in year 2015.In addition to this by introduce of the quick
ratio company easily managed the liquidity and also managed the capital structure of the
company properly and fulfil the various types of requirements of the company.
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The company introduce the profitability ratio which is used to measure the profit of the company
but from last year it has been measured that profit is reducing because of the changes made by
the company for the internal and external users. It has been noticed that there is reduction of
3.95% of operating profit margin in the year 2013 and the rate of operating profit margin in
present is 1.009% in the year 2015 the rate is estimated as .88%. Due to this the financial
condition of the company has gone down it has been effect by the some related factors of the
profitability ratio. It has been notice that measurement of the profit of the company is decrease
and it can be shows with the help of ROCE, return on total asset ratios, ROE and Net profit
margin.
In addition to this, introducing the capital structure ratio and efficiency ratio which helps the
company for the growth and performance of the company ( Hoelzer, 2011). The company
follows the capital structure ratio from last two years and due to effect of this there is increment
of 58.20% in debt equity ratio. The reason behind the changes made in the debit equity ratio is
due to differences in the liabilities and assets of the company from last two years.
There are the various ratios related to profitability ratio some of these are discussed below-:
Assets turnover ratio, receivable turnover ratio, inventory turnover ratio, efficiency turnover
ratio, Creditor turnover ratio and receivable turnover ratio by the help of these ratio company
growth and performance can be examine with the help of these ratios and working capital is also
examines with the help of these ratios ( Iverson, 2013).
In this case study, it has been mentioned that because of the modification is done in the business
strategies and plans, functions, and operations etc. due to this many changes have been done with
the help of ratios. Due to this, it has become the difficult job for the auditors to examine the
changes and act on them. It has been examining that changes have been occurring due to mistake
and inaccuracy made by Jay and associates ( DeGeorge , 2014). It became the duty of Stewart
and Kathy to find out the errors and frauds and act on them straightway.
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Question 2.
Stewart and Kathy’s is the new client of DIPL, and it is a duty of auditor to examines the risks
elements of company and it is a duty of auditor to solve the risks elements and having the
abilities to take a decision on risks elements and also have the capabilities for taking the healthy
decision for the company ( Handsworth, 2012). After study the company report, it has been
noticed that company is facing the several problems by inherent risk factors. Inherent risks
factors are discussed in details such as:-
Intentional Misstatement
The inherent risk factor of the company is discussed in details such as:-
 In this accountant makes the financial statement of the company, without considering to
any accounting principles which states that there should be a proper guideline and the
rules and principle for preparing the financial statements shall be followed ( Fernando,
2012).
 Mostly accountant are involved in the frauds activities while preparing the financial
statement of the company accountant do the frauds in this.
In this case, study after examines the DIPL’s report, it has been noticed that increments are done
on revenue in last year, in addition to this some other factors also represent the growth of the
company. According to this company, profit is still less ( Hoelzer, 2011). This factor has been
taking place, the reason behind this is paying the high tax return to the government of Australian,
it happens due to the high profits. Due to this company is involved in the frauds activates they
decrease the profit of the company to pay the less tax to the government of the Australia and
shows the low profit. This fraud activates can be done by the company by doing the false
transaction so that the profit can be decreased.
In this case study, it examines the some ratio that the impressive performance and growth of the
company, it may be possible only when these facts are shown in the financial statements by the
result of this stakeholder of the company may get impressed and they can invest more in
company and it can be profitable facts for the company ( Fernando, 2012). So company’s
interest charges have been increased by high rates these types of activities has been including in
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the frauds activity so the effect of this increase the interest rate charges results of that massive
amount of loan. With this there is complexity has been done in the financial statement of the
company. In addition to this, the rate of depreciation has been increased. Some other factors are
mentioned such as high salaries has been given to the employee which is not necessary. Another
reason of inherent risk factor for DIPL, is that wrong statement has been done in the books of
accounts by the auditor. To avoid the inherent risk factor company have to avoid the all frauds
activates and other some facts so that by avoiding these factors a company can achieve their
objectives and works on their growth and performance of the company.
International and domestic reporting
In addition to this, business of the company can easily managed at domestic level and individual
business can easily be managed by the company in Australia. In addition to this to do the
business at international level company have to follow the principle and rules of IFRS and
GAAP and also follows the all the requirements related to this process. Following the general
accounting`s rule and standards could facilitate the company in owing favour of huge
investments by FDIC. Beside this, getting huge amount if investment could support the company
in resolving several issues. It has been mentioned in this case study it shows that rules and
regulation of the general accounting and the guideline does not follow as a result of this
appropriate manner is not followed by them in preparing the financial statements ( Thibodeau &
Freier, 2013). This may result in the rise in non-compliance risk for DIPL. In this report, it
examines that it is bestial for the company to follows the accounting standards, rules, and
regulation in an effective manner while preparing the final financial statements.
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Question 3.
In this report of the company some factors are examined, which represents the misstatements in
financial statements to measures the cause of risks. Some of the factors and cause of risks are as
follows:-
Key fraud risk factor:
A. Interest amount- Company`s amount of interest in year 2013 was AUD 84379.0; in
contrast to this, 8089038.0 AUD was the interest amount represented in year 2015
( Thibodeau & Freier, 2013). The variation in interest amount of last two year was
285.87%. In perspective to the loan taken by the company could be determined as this
loan amount was merely taken to maintain the liquidity position as well as capital
structure. In this report, it has been examined that huge amount of interest is still high and
due to this company have to pay the high amount of tax to the Australian government
( DeGeorge , 2014). There has been increment in the company`s revenue in previous
year, which can be a cause for DIPL to reimburse high tax of return to the government of
Australia. In order to not pay the tax, company might have presented the amount of
interest as higher as to decrease the amount of profit into the final statements of company.
B. B. Debt to equity ratio- Assessment of DIPL`s Debt to Equity ratio is being done. The
debt to equity ratio, of company was 0.47 in 2014, whereas increment of ratio was 1.13 in
year 2015. In this there is not Hugh amount is required to start the new projects. The
amount is shown to disturbed the stakeholders and government and other stakeholder’s
decisions ( Albuquerque, 2010).
Identification of key fraud risk factors
The financial factors depicted from the case study are analysed by the auditor to identify the
factors which are interrelated to the practice of fraud activities. Several process of the company
are being studied such as- e-book revenue process, cash receipts, inventory and purchase,
printing process and the process related to finance department; besides the inherent risks factors
were also considered by the auditor (Well, 2017). The information is being examined by the
company’s financial statement and from BOD’s meeting and the company’s new financial
decisions ( Hoelzer, 2011). Company’s also examined the auditors so that auditors can do the
frauds in while preparing the final statement of the company. In this company have to pay
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attention tows the works of the auditors while preparing the financial statements of the company.
The company has to follow some various facts so that profit margin ratio of the company can be
examined.
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Conclusion
Analysing the whole report, supports in reaching at a conclusion, that unethical activities as well
as the fraudulent practices were carried out by the company. These practices were being carried
out to put positive impression on the company`s stakeholder, as by portraying the financial
statement in such a way that represented the effective financial condition of the company. For
this aspect, the accounting standards, rules and principle were also being neglected or not
followed. In order to make impression on the shareholders or investors, the company indulged in
unethical practices and fraud which could be a reason that lead to inherent risk. In addition to this
inherent risk factors has been solved by not doing the frauds activates so that auditors can
prepare the final statement of the company without doing any frauds activates. In this auditors
have to follow the rules and principle of the general accounting so that the proper accounting can
be done in the company’s financial statements. In addition to this, the job of the auditor is to find
out the errors and frauds and not involve in the frauds activities of the company.
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