Financial Audit Report: Double Ink Printers Limited (DIPL) Analysis

This report presents an in-depth analysis of the audit conducted on Double Ink Printers Limited (DIPL). It begins by examining the analytical processes used in the audit plan, including the application of financial ratios like solvency, profit margin, and current ratio to assess DIPL's financial performance over three years. The report delves into the factors contributing to material misstatements in financial disclosures, identifying both systematic and unsystematic risks, such as employee-related issues, external environmental factors, and management integrity. It further explores risk factors associated with DIPL's financial reporting procedures, including employee involvement in fraudulent activities and the impact of new accounting software implementation. The analysis includes detailed tables of financial ratios and discusses the implications of these ratios on the company's financial health. The document concludes by examining the potential for fraudulent activities within the company and the challenges associated with management integrity.

Running head: AUDIT
Audit
Name of the Student:
Name of the University:
Author’s Note:

1
AUDIT
Table of Contents
Answer to Question No 1...........................................................................................................2
Answer to Question No 2...........................................................................................................4
Answer to Question No 3...........................................................................................................7
Part A.....................................................................................................................................7
Part B....................................................................................................................................10
Reference List..........................................................................................................................11

2
AUDIT
Answer to Question No 1
The analytical process that persists with the financial data of Double Ink Printers
Limited (DIPL) has been an influential factor for the construction of their audit plan. The
constructed plan could be regarded as a parameter that would become a key to be followed
during the preparation of the audit. These parameters have been helpful to the auditor in order
to keep track of the entire cost that would be required during the computation of the audit at
an efficient degree and this would aid in lowering the gap of understanding with the
customers. The analytical method for the financial declarations of DIPL specifies the process
of dissemination of the data (Audit & Australia 2015). These processes of assessment can be
undertaken making use of a variety of techniques. On the other hand, by taking assistance
analytical method of examining the financial declarations, various financial experts and the
accountants as well could interpret the data for attaining the decisions that would be
beneficial for the business.
The generalising of the analytical process assists in examining the financial
disclosures at a general reference point. As an outcome, the financial records can be
differentiated with reference to the numerous entities or with the time schedule. The auditors
try to think of several items that have been disclosed in the financial statement with respect to
the financial reporting technique (Sarens et al., 2013). An example can be drawn that like the
registration of the items that are inclusive of liabilities, assets and the equity stakeholders in
the reporting of the financial statements of DIPL along with investigating deviations from the
practical situation. It has been observed that benchmarking has been regarded as a process of
evaluation and this process can be used in a precise manner for the scrutiny and the
evaluation of the audit plan (Stevens 2014). The differentiation in the real financial
announcement from the benchmark aids in discovering the variances and is aids in assessing
the discovery of the factors of the recognised variances. Furthermore, the ratio analysis could

3
AUDIT
be attuned as an effectual technique of evaluation that can be exploited for the explanation of
the financial declarations that is attached with the evaluation of the audit plan.
Explanation to the Case Study
The end result of the decision planning related with the planning of the audit is
persuaded mostly through the results of the analytical process in order to publicize the data
from the financial statements. The tables given below provide the financial ratios that have
been constructed with respect to the case study.
Particulars 2013 2014 2015
Solvency ratio 0.62 0.44 0.21
Profit margin 0.068 0.60 0.06
Current ratio 1.42 1.46 1.50
The table that has been computed above has revealed that the current ratio of DIPL
has grown over the last three years. Furthermore, the margin profit has been noticed to be
changing for the last few years. By taking assistance of the ratios computed above, the net
profit margin of DIPL can be contrasted with the total profit that has been created (Wang et
al., 2015). Conversely, this could be of significant value to the auditor in gaining an
indication of whether the expenses are higher or are lower and if the administration of DIPL
has the requirement to decrease the budget and the total expenditure of the same. The
alterations in the ratio whether positive or adverse can be exploited as a preferential reason
for examining the authenticity and the preciseness of the financial situation of DIPL. For
instance, the solvency ratio that has been constructed in the table above assists in
understanding the positive and the adverse patterns in the entire financial condition of DIPL
(Brown et al., 2015). In a comparable manner, the comparison of the ratios for the last three

4
AUDIT
years would be helpful in giving out the knowledge of eliminating the long and short term
compulsions of the organization. Therefore, the auditors can get effective knowledge of the
comparative situation of DIPL for the past three years along with examining the issues that
leads to unwanted condition of DIPL.
Answer to Question No 2
There are several factors that are intrinsic in nature during the constitution of the
incidence of the misstatement of the materials in the financial disclosures of a specific
individual. Conversely, it is natural for the existence of several types of unsystematic and
systematic risks that shows a path for the misstatement of the financials in the financial
declaration of DIPL. Furthermore, the discovered threats may be due to the financial and the
non-financial reasons, which can consequently prevent a specific entity in showing a positive
viewpoint of the financial statements. According to Stanislaus, et al., (2016), the risks that
have been recognised may be related with the numerous threats of elimination that has been
doubled with the threats of several undesirable mistakes for a specific accountant. Therefore,
this could be understood as a intrinsic threat that arises from the activities of DIPL.
Moreover, the DIPL employees are does not have sufficient insights and has a lower
level of proficiency level. That has led to the rise in the level of internal risk for DIPL.
Additionally; this shortage of experience may lead to the commitment of faults thereby
leading to the increase in the level of risk (Pascoe, et al., 2014). This has been mainly because
of the fact that the staffs constitute a key part of DIPL and it is impossible for DIPL to ensure
the success of their business and future growth without an efficient contribution from the
employees. Another key factor that leads to the rise of risk can be segregated into two
segments mainly the external aspects and the environmental prospect for the misstatement of
the materials during the past and the fraudulent practices. The factors that are environmental

5
AUDIT
in nature helping in discovering the internal risks comprises of the swift modifications where
the problems could be related to the valuation of the inventory, rise in the degree of
competition in the economy and the deficiency in the amount of capital (Stute et al., 2014).
Furthermore, there exists a probability of misstatement of the materials, which could be
influential for directing DIPL in the past of risk for the future years to come.
The assessment of the current case study that is related to DIPL explains the fact that
the problems and the convolutions that are associated to the progression of the CEO consists
of the internal threats as well (Christopher 2015). In this respect, the changes in the CEO can
be modified to be dissimilar as the nominees are entities. Therefore, the progress of the
procedure without any alignment to the plan, delayed instigation of the method, inefficient
initiation of the CEO and rise in the level of employee attrition may lead to such risks.
The examination of the given case study has given out the answer that the
introduction procedure if the IT mechanism has been the cause for the rise of specific
problems. There has been a scarcity of employees in DIPL for handling the method of
installation and execution while undertaking the examination and the reconciliation before
implementation of the fresh arrangement during the completion of the accounting year
(Harrison 2015). Furthermore, the primary evaluation has discovered that numerous
transactions that were undertaken were not maintained in a precise manner. Therefore, this
has led to the misstatement of the documents because of the inherent reasons, which has been
discovered to be an omission error within a specific financial declaration.
The DIPL employees are required to pursue a suitable series for the registration of the
values of the accounts receivable and the ledgers related with the accounts receivable.
Furthermore, the reconciliation of the bank is required to be maintained in an effective
manner as well (Gurran et al., 2013). Along with this, the revenue registration that is obtained

6
AUDIT
from the e-book and allowing for the textbook printing on the coming years could lead to
several intrinsic threats due to the intricacy linked with the procedure. Therefore the
inventory valuation that is in relation to the raw material at an aggregate cost is not ideal as
the aggregate cost is lower than the current paper cost (Arntz-Gray 2016). The intrinsic costs
that have been disclosed can be adjusted as the vulnerability of a distinct affirmation in
accordance to the misstatement of the materials and they have been explained below:
Rise in the pressure on the management and the employees
It has been noticed that due to the increase in the work pressure of the employees who
are working in DIPL, there has been fraudulent accounting within the company (Bunker
2015). As an outcome the numerous qualities have occurred that are inclusive of the
inclination in differentiating cash flows, improper liquidity and operational outcomes.
Misrepresentation
The increasing pressure of work on the employees of DIPL has led to the ineffective
accounting. It is due to this effect that several aspects have taken place that is inclusive of the
tendency in meeting the cash slow statements, operational outcomes and inadequate liquidity.
Overall management integrity
According to the case study, the administration of DIPL has ineffective integrity and
is predicted to be aware of fall in the brand image within the society of business (Alzeban, &
Gwilliam 2014).

7
AUDIT
Overall management integrity
In accordance with the provided case study, the DIPL administration has the
integration deficiency and it is anticipated to be prepared for any sort of reputation loss in the
organizational society.
Abnormal burden on the management
It has been observed that frequently there has been a survival of remunerations for the
administration. As an outcome, it may lead to financial reporting misstatement.
Nature of business entity
DIPL has sustained to expansion for the key competitive and economic situations.
Furthermore, these aspects may have an impact on the intrinsic threats of the business for the
evaluation of the framework of audit planning in a suitable manner.
Answer to Question No 3
Part A
The data with respect to DIPL has been obtained taking the assistance of the provided
case study and this data has been influential for the disclosure of the potentiality for the
implementation of a precise construction of the financial report procedure of DIPL. The
various significant risk factors that are linked with the utilisation of the practices have been
shown in the table below:

8
AUDIT
Risk Type Explanation
Workforce engagement in fraudulent
activities
After the examination of the data that has
been observed from the case study of DIPL,
it can be cited that the significant counterfeits
of risk is in association to the employees of
DIPL as they have the probability to be
related to the activities. The significant
factors that is related with the threat is the
dissatisfaction among the employees of
DIPL. In accordance to the case study, there
have been an surveillance that there have
been a huge strain from the management side
so that the new accounting concept can be
introduced. It has been noticed that the
introduction of the new accounting process
creates a massive stress in the employees,
there is a rise in the level of threat as the
staffs may be related with various fake
practices (Morse & Deutsch 2016). Hence, in
order to perform as a remedy for the method
of reconciliation, the DIPL staffs improvise
several false practices and these methods
may lead to the misstatement of the financial
reports. With respect to the case study that is
under consideration. due to inefficient use of

9
AUDIT
the new software of accounts, the accountants
of the organization has not been able to
maintain in a precise process the primary
accounting and the financial transactions for
the current financial year. Additionally, the
fraud risks can be understood in the process
of selecting the succession of the CEO of
DIPL. It is because f this event that there has
been a rise in the internal risks of the firm.
Processes related to financial reporting There have been various risks that have been
observed with respect to the process of
financial reporting of DIPL. In this condition,
if the employees have significant financial
predictions from the performance of DIPL,
there is a rising chance of alterations in the
financial reports that has tried to influence
the stakeholders that the firm has been
undergoing efficient activities and rise in the
financial revenue (Bunker 2014). Hence it
can be stated that the fraud risk in the
construction of the financial reports id the
significant threats of DIPL.

10
AUDIT
Part B
According to the DIPL case study, there have been a key shortage in the raw material
valuation of DIP, that is dependent on the computation of the average cost. The main reason
has been the rise in the paper cost that is a value more than the average cost. Thus it can be
said that it is not a precise method. The fundamental threat related with the implementation of
the new system of accounting can be understood by taking help of understanding the various
performance phase inside the firm. Moreover, the examination and the scrutiny of the
financial reports of DIPL is helpful to the management to find out the fraud risks that is
linked with the construction of the financial reports. The analysis of the ratios and the other
financial techniques would be helpful for the identification of the precise results. Hence, it is
important for the DIPL management to conclude the evaluation and the investigation within a
stipulated time period.

11
AUDIT
Reference List
Alzeban, A., & Gwilliam, D. (2014). Factors affecting the internal audit effectiveness: A
survey of the Saudi public sector. Journal of International Accounting, Auditing and
Taxation, 23(2), 74-86.
Arntz-Gray, J. (2016). Plan, Do, Check, Act: The need for independent audit of the internal
responsibility system in occupational health and safety. Safety Science, 84, 12-23.
Audit, A. I., & Australia, I. (2015). SUBMISSION: AUSTRALIAN INFRASTRUCTURE
AUDIT.
Brown, A., Santilli, M., & Scott, B. (2015). The internal audit of clinical areas: a pilot of the
internal audit methodology in a health service emergency department. International
Journal for Quality in Health Care, mzv085.
Bunker, R. (2014). How is the compact city faring in Australia?. Planning Practice &
Research, 29(5), 449-460.
Bunker, R. (2015). Can We Plan Too Much?–The Case of the 2010 Metropolitan Strategy for
Adelaide. Australian Journal of Public Administration, 74(3), 381-389.
Christopher, J. (2015). Internal audit: Does it enhance governance in the Australian public
university sector?. Educational Management Administration & Leadership, 43(6),
954-971.
Gurran, N., Norman, B., & Hamin, E. (2013). Climate change adaptation in coastal Australia:
an audit of planning practice. Ocean & coastal management, 86, 100-109.
Harrison, M. (2015). Implementing the 2014 changes to internal audit. Governance
Directions, 67(1), 38.