Detailed Financial Audit Assurance and Compliance Report Analysis

This report, focusing on audit assurance and compliance, begins with an application of analytical procedures to the financial information of DIPL, detailing how data from financial reports informs audit planning. It then identifies inherent risk factors arising from DIPL's business operations, examining how these risks can lead to material misstatements in financial reports. The report also identifies and explains key fraud risk factors related to misstatements stemming from fraudulent financial reporting, including asset loss and employee fraud. Financial ratios, such as the current and solvency ratios, are analyzed to assess DIPL's financial position. The study also highlights the impact of excessive workloads, employee pressure, and the nature of the business on the accuracy of financial reporting. This report is contributed by a student to be published on Desklib, a platform providing AI-based study tools for students; explore the content and enhance your understanding.

Running head: AUDIT ASSURANCE AND COMPLIANCE
Audit Assurance and Compliance
Name of Student:
Name of University:
Author’s Note:

1AUDIT ASSURANCE AND COMPLIANCE
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................3
Answer to Question 3:.....................................................................................................................5
Reference List..................................................................................................................................8
List of Appendix............................................................................................................................10

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Answer to Question 1:
Application of analytical procedures to the financial report information of DIPL
The data sourced from the financial report of DIPL has been conducive in the
development of the audit plan. The planning process has been based on particular guideline
which has been undertaken as per the audit process. This has helped the assessor in considering
the audit cost and helps in the aversion of the misunderstanding of the clientele. DIPL has
considered the analytical approach with the dissemination of the information as per the financial
declarations. The primary process of the evaluation of the analytical approach has been
considered based on the specific approach for the financial declarations, financial analysts and
management accountants (Yasin and Nelson 2013).
The main consideration for the analytical approach has been further seen with the
reference point formed as per common sizing. Common sizing has been seen to be conducive in
the comparison of the financial statements as per different period in varied range of corporations.
The ratio analysis has been further compared based on the financial declarations in the planning
of the audit (Bell, Causholli and Knechel 2015).
Explanation of the way the results influence planning decisions for the audit
The various types of the decision of planning have been stated based on analytical
approach and disseminating information in the financial statements. For example the current
ratio of the various firms for DIPL has been considered as 1.42 in 2013, 1.46 in 2014 and 1.5 in
2015. The profitability factor has been considered as per the ratio, which is calculated as 0.068 in
2013, 0.60 in 2014 and 0.06 in 2015. The profitability and the profit margin of the company have

3AUDIT ASSURANCE AND COMPLIANCE
been further able to reveal that the position of the net income which has been earned by the
company in compared to the net sales. Despite of this consideration, the assessor needs to
understand, if the expenses are low or high and the management team is having the necessity to
curtail the budget and time. The unfavourable and the favourable have been seen based on the
soundness in the financial position and audit assessment. Comparably in 2015 and 2013 the
solvency ratio of the company has been seen to be 0.62 and 0.21 (Lindeboom, van der Klaauw
and Vriend 2016).
Answer to Question 2:
Identification of inherent risk factors that arise from nature of business operations of DIPL
The different level of the auditing factors has been considered based on the several
incidences of material misstatements in the financial announcements in a certain organisation.
The various types of the systematic and the unsystematic risk have been further seen to be based
on the financial declarations of the corporation. It has been further assessed that the risks has
been considered on both financial as well as non-financial factors. Nevertheless, an evaluator
needs to consider the detection of the various types of the risks. The risks may be further seen to
be linked with the risks interrelated to the omission and diverse errors as per the diversified
nature of the operation of business for DIPL (Giard et al. 2016).
As per the given scenario it has been seen that several transactions were omitted by the
accountants otherwise by the management of the DIPL. This can be further sequentially based on
the different types of the inconsistencies in the planning and the sales activities. The various
types of the depictions of the financial declarations has been further associated to the
accomplishment of the profit from the revenue acquired from the sales. The present analysis has

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been able to specify about the IT implementation process which has been able to state about the
different types of the concerns associated to the particular issues. DIPL corporation being short
on staff has found it difficult to handle the various types of the execution process related to the
installation process and carrying of the reconciliation and the testing process of the new
arrangement by the year end (Duncan and Whittington 2014).
The main considerations of the cash receipt have been depicted by the finance
professionals and the inherent risks associated to the concerns. The staff member has been
further able to handle the various types the associated issues which are seen to be related to the
appropriate sequence for account receivables (De George, Ferguson and Spear 2013).
Risk and way it might affect the risk of material misstatement in the financial report
The various types of the inherent risk as per material misstatements are listed below as
follows:
Excessive pressure on employees and management- The excusive workload on the staff
members has been seen to be the main cause for the deteriorating bookkeeping. The identified
attributed encountered for the poor liquidity has been based on the various types ofthe opeatin
outcomes and issues pertaining to cash flow.
Risks of errors or else incorrect misrepresentation- The intricacies identified and the erros in
the financial statement has been simultaneously misstated.
Integrity of the entire management- The management of DIPL has been essentially seen to
lack the various types of the considerations related to reputational loss for business and
community.

5AUDIT ASSURANCE AND COMPLIANCE
Unusual pressure on management- In several occasions the incentives for the management are
based on the incentives acquired for the pecuniary declarations and misstatements.
Nature of business- DIPL has been seen to be majorly contributing for the competitive
circumstances. The various types of the aforementioned facets has been seen to be associated the
differ type the consideration which is further seen to be related to the inherent risks of the audit
planning and the audit structure (Laili and Khairi 2013).
Answer to Question 3:
A) Identification and explanation of two key fraud risk factors relating to
misstatements arising from fraudulent financial reporting
Asset Loss The identified risks have been seen to be associated to the various
degrees of the losses resulting in the fraud of the assets. The
dissatisfaction of the workforce has been further related to the different
types of considerations which have been further seen to be based on the
expectations of fraud risks. In addition to this, the expectations of the
investors has been seen in terms of the different types of types of the
consideration which has been taken into the consideration from the
various types the associated risk which are seen to be related to the
performance based targets and high amount of risk of fraud. The various
types of the other considerations of the risk of fraud has been further seen
to be associated to different types of the consideration made for the
different financial outcomes in averting the guarantees generated

6AUDIT ASSURANCE AND COMPLIANCE
(Modugu and Anyaduba 2014).
Fraud incidence for
workforce
engagement
The different types of the fraud risks have been further seen to be
associated to various types of the operations in DIPL. Some of the main
types of the consideration have been further seen to be related to the
acquisition of the novel accounting system. The excess amount of the
e4mployee pressure has been seen to be evident in the IT systems and
fraud in the accounting. It has been further revealed that the employees
may get involved in fraud activities and handle the reconciliation process
leading to material misstatements. The given case study has been able to
focus on several occasions of improper handling of IT process and
improper allocation of the transactions every year (Hamid, Othman and
Rahim 2015).
Financial reporting
fraud
The fraud reporting in the financial statement has been further assessed
on the several types of factors which has been seen to be associated to the
outside financiers and may declare specific announcements on the
financial management which will be able to comply with the debt
acquisition. The high risk in the financial statement has been seen to be
evident with improper financial announcements (Asnawi 2013). The
financial position of DIPL has been determined has the various types of
the consideration based on the increasing trend of revenue from 2013 to
2015. In addition to this, the gross profit of the concern has been seen to
be related to the various types of the consideration made as per the
financial period in 2013 to 2015. The different aspects of the study has

7AUDIT ASSURANCE AND COMPLIANCE
been further able to state on the loan amounting to 7.5 million in the loan
agreement and in addition to this able to maintain in the current ratio of
1.5 along. In addition to the debt equity rate of the company it has been
further discerned that the debt equity of the company has been lower than
1. This particular requirement has been seen to be related to improper
reflections of the financial position (Beattie, Fearnley and Hines 2013).
Unsuitable average
cost
Based on the stated consideration made in the study. The raw material in
the inventory has been based on the certain consideration for the average
costs and present cost which has been not seen to be suitable for the cost
of paper, as it is more than the average cost. The risk of the fraud has
been further seen to be evaluated based on the different types of the
consideration which has been seen to be related to the IT system and
monitored on regular basis (Mohd Yusof, Lai and Yap 2014).

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Reference List
Asnawi, M. (2013) ‘The impact of audit rate, perceived probability of audit on tax compliance
decision’, Journal of Indonesian Economy and Business, 28(2), pp. 292–307. doi:
10.1017/CBO9781107415324.004.
Beattie, V., Fearnley, S. and Hines, T. (2013) ‘Perceptions of factors affecting audit quality in
the post-SOX UK regulatory environment’, Accounting and Business Research, 43(1), pp. 56–
81. doi: 10.1080/00014788.2012.703079.
Bell, T. B., Causholli, M. and Knechel, W. R. (2015) ‘Audit Firm Tenure, Non-Audit Services,
and Internal Assessments of Audit Quality’, Journal of Accounting Research, 53(3), pp. 461–
509. doi: 10.1111/1475-679X.12078.
Duncan, B. and Whittington, M. (2014) ‘Compliance with Standards, Assurance and Audit: Does
this Equal Security?’, in Security of Information and Networks (SIN), 2014 Proceedings of the
7th International Conference on, pp. 77–84. doi: 10.1145/2659651.2659711.
De George, E. T., Ferguson, C. B. and Spear, N. A. (2013) ‘How much does IFRS cost? IFRS
adoption and audit fees’, Accounting Review, 88(2), pp. 429–462. doi: 10.2308/accr-50317.
Giard, M., Laprugne-Garcia, E., Caillat-Vallet, E., Russell, I., Verjat-Trannoy, D., Ertzscheid, M.
A., Vernier, N., Laland, C. and Savey, A. (2016) ‘Compliance with standard precautions: Results
of a French national audit’, American Journal of Infection Control, 44(1), pp. 8–13. doi:
10.1016/j.ajic.2015.07.034.
Hamid, K. C. A., Othman, S. and Rahim, M. A. (2015) ‘Independence and Financial Knowledge

9AUDIT ASSURANCE AND COMPLIANCE
on Audit Committee with Non-compliance of Financial Disclosure: A Study of Listed
Companies Issued with Public Reprimand in Malaysia’, Procedia - Social and Behavioral
Sciences, 172, pp. 754–761. doi: 10.1016/j.sbspro.2015.01.429.
Laili, N. H. and Khairi, K. F. (2013) ‘IFRS Compliance and Audit Quality Among Big 3
Auditors: The Case of Goodwill Impairment’, SSRN Electronic Journal. doi:
10.2139/ssrn.2358336.
Lindeboom, M., van der Klaauw, B. and Vriend, S. (2016) ‘Audit rates and compliance: A field
experiment in care provision’, Journal of Economic Behavior and Organization, 131, pp. 160–
173. doi: 10.1016/j.jebo.2015.08.016.
Modugu, K. P. and Anyaduba, J. O. (2014) ‘Impact of tax audit on tax compliance in Nigeria’,
International Journal of Business and Social Science, 5(9), pp. 207–215.
Mohd Yusof, N. A., Lai, M. L. and Yap, B. W. (2014) ‘Tax non-compliance among SMCs in
Malaysia: tax audit evidence’, Journal of Applied Accounting Research, 15(2), pp. 215–234. doi:
10.1108/JAAR-02-2013-0016.
Yasin, F. M. and Nelson, S. P. (2013) ‘Audit Committee and Internal Audit: Implications on
Audit Quality’, International Journal of Economics, Management and Accounting International
Journal of Economics Management and Accounting, 20(122), pp. 187–218. doi:
10.1108/02686909310036223.

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List of Appendix
Financial Ratios of DIPL
Particular 2013 2014 2015
Net Income/ Profit Ratio
Net Profit $23,59,190 $22,91,362 $29,72,183
Sales $3,42,12,000 $3,76,99,500 $4,34,59,500
Net Income/Profit Ratio
=
2359190/3421200
0*100
=
2291632/3769950
0*100
=
2972183/4345950
0*100
6.90% 6.08% 6.84%
Current Ratio
(Total Current Assets / Total
Current Liabilities)
Total Current Assets $53,85,938 $75,09,150 $96,00,929
Total Current Liabilities $37,80,000 $51,20,250 $63,97,500
Current Ratio 1.42:1 1.47:1 1.50:1
Debt to Equity Ratio
Total Liabilities $37,80,000 $51,20,250 $13,89,7500
Total Equity $91,50,000 $1,07,83,650 $1,22,50,491
Debt to Equity Ratio 0.41:1 0.47:1 1.13:1
Allowance for Doubtful Debts $1,65,000 $2,10,000 $2,40,000
Account Receivables $26,47,500 $4,53,000 $ 53,13,309
Allowance for Obsolescence of
Inventory $1,06,312 $1,25,876 $0