Risk Assessment and Analysis: IPH Limited Audit and Assurance Services

This report presents an audit risk assessment of IPH Limited, a leading intellectual property services company. It begins with an executive summary and an introduction to the company's background, including its founding and financial performance. The report then delves into audit risk, encompassing business and inherent risks such as technology disruption, competition, and regulatory reforms. It examines specific areas like fixed assets, intangible assets, and the company's share price, assessing their potential impact on financial statements. The report also considers control risk and the company's risk management policies. An analytical review is conducted, including the analysis of current, debt, and debt-equity ratios, along with net profit margins, to evaluate the company's financial position. The audit planning implications are discussed, and the report concludes with an overview of the company's risk profile and strategic aims.

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Running head: AUDITING AND ASSURANCE SERVICES
AUDITING AND ASSURANCE SERVICES
Name of the Student
Name of the University
Author Note

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Executive Summary
In this report, the risk assessment report has been discussed of the IPH limited. The risk
management policy does take care of the organizations risks. All the risk is being discussed
and evaluated, and from the audit committee take care of the financial statements. The risk
committee helps the organization and control the system with the help of the management.
The report includes the analytical review and the ratio analysis.

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Table of Contents
Introduction................................................................................................................................4
Background................................................................................................................................4
Audit Risk..................................................................................................................................5
Business Risk.............................................................................................................................5
INHERENT RISK......................................................................................................................6
FIXED ASSETS.....................................................................................................................6
INTANGIBLE ASSETS........................................................................................................7
IPH Limited’s SHARE PRICE..................................................................................................7
CONTROL RISK.......................................................................................................................7
REGULATION..........................................................................................................................7
AUDIT PLANNING IMPACT..................................................................................................8
Analytical Review......................................................................................................................8
Current Ratio..........................................................................................................................8
Debt Ratio..............................................................................................................................9
Debt-Equity Ratio..................................................................................................................9
Net Profit Margin.................................................................................................................10
Conclusion................................................................................................................................10
References................................................................................................................................11
Appendix..................................................................................................................................12

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Introduction
IPH Limited is one of the leading company in Asia-Pacific region which offers a wide
range of Intellectual Property services and products. In 2014, IPH Limited was the first
company of the Intellectual Property services group to be listed in the Australian Securities
Exchange. The company mainly focuses on the needs of the clients, they provide an excellent
service delivery, they value their innovation and there is an effectiveness and engagement in
the involvement of the people. IPH Limited does follow a Risk Management Policy, where
the stakeholders of the organization get involvement and the risks and the controls in the
company is treated by this policy where there is an involvement of them.
The policy of the Risk Management is based on the AS/NZS ISO 31000 standard, i.e.
“Risk Management-Principles and Guidelines”. In that procedure, there are many principles,
which provides the company with an effective risk management policy. This report presents
the assessing and the identification of the risk of material mismanagement through the
understanding of the IPH Limited.
Background
IPH Limited was founded in 1887 and it is the holding company of the Spruson &
Ferguson. It started patent and trademarks attorney firms, which was the first in the Australia.
It became the first company of the IP services group, to be in the list of the Australian Stock
Exchange(Iphltd.com.au, 2019). In the financial year of 2018, the directors declared a
dividend because of the strong performance of the company. The final dividend was declared
at 11 cents per share, and the dividend for the entire year declared was 22.5 cents per share,
which was an increase of 2.3 percent from the year before. From the annual report of the
organization, it can be seen that there is an increase of 2.1 per cent in Statutory EBITDA, but

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there is also a decline of the Statutory Net Profit after Tax (NPAT) by 5.2 per cent. The
percent of the patent filings has increased by 5.6 in the financial year 2018. The sales revenue
growth has achieved a growth rate of 26.1%, this is because of the strong performance of the
organization.
Audit Risk
Business Risk
 Technology Disruption: As IPH Limited deals with the IP services, in some
markets there is an increase of the electronic systems and processes which is
mainly regulated by some authorities, so there can be high chance of the
Technology disruption (Knechel & Salterio, 2016). Thus, the IP expertise will
protect the clients with the Company’s services and through an effective
technology development the company manages the effect from the technology
disruption.
 Competition and Market conditions: The market place which the company
operates changes depending on certain circumstances like political and
economic. Most of the operations with the leading IT sectors is supported by
the IPH group. Thus, the client appreciates the way IPH group work because it
maintains a good relationship and understands the need of the client.
 Regulatory Reforms: the company reviews all the regulations which is
required for the operation purpose. There is a constant development of the
revenue streams in the markets. There is an involvement of the shareholders
where they try to attain a short term profitability of the IPH limited. The
company announced at the financial report of 2018 that there is a share buy-

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back of ordinary shares up to $40 million. In the period of 30 June 2018, at an
average price of $ 4.38 per share, there are 621,816 of the shares which has
been bought back.
INHERENT RISK
IPH Limited does have a risk committee which follows the risk management policy,
some of the risk which in most part cannot be avoided and can affect the performance of the
organization is the inherent risk(Iphltd.com.au, 2019). As the competition increases, there is
a problem in the disruption of the technology. Thus, it will affect the operations in the
organization, and there can be misrepresentation of the financial statements if there is any
absence of the financial controls by the auditor. As it is seen in the Corporate Governance
Statement of the IPH Limited, the organization has identified that to run an effective
management it is important to have a sound risk management framework. Thus, through this
risk management system all the risks which is involved in the systematic way, can be
managed through all the policies and processes. The Risk Committee comprises of a
minimum of three independent non-executive directors, and it will be headed by a director
who is not the chairman of the company. As per the director’s review, through risk
management framework (RMF) all the risk are monitored. This framework includes ASX
Principles and Australian standard AS ISO 31000:2009 Risk management – Principles and
guidelines.
FIXED ASSETS
IPH limited has property, plant and equipment and there are many intangible assets
which is mainly measured on the basis of cost and the depreciation is calculated at cost less
accumulated depreciation. The assets are depreciated on the basis of the straight-line method
as it was useful for the calculation of the financial statements and if there is any accumulation

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needed for the impairment that is also provided. The maintenance of the assets is applicable
and the cost is added upon the valuation of the assets. The risks which are related to the fixed
assets are:
 Determination of the useful life of assets
 Overstatements of the assets
 Ownership of the actual assets.
INTANGIBLE ASSETS
Goodwill are recorded annually, for the impairment and the cost which is
accumulated impairment losses. The acquisition intangibles and the goodwill has increased
form the last year, i.e. from 212.9 to 266.3.
IPH Limited’s SHARE PRICE
The share price of the IPH Limited is based on the current earnings. The share price
of the organization does indicate the performance of the company. If the there is a high risk
involved in the management, it can be in the part of the equity of the financial statements
because there can be a manipulation of the financial statements. From the statements, it can
be seen that the issued capital has increased from 223.6 to 262.8.
CONTROL RISK
IPH Limited has a risk management for controlling the risks, so that it can detect any
misrepresentation of the financial statement(Iphltd.com.au, 2019). There is an appropriate
system by which the organization uses for the identification of the risks. The risk
management assures that the processes which are used are effective in controlling the risks.

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REGULATION
The Risk management is enhanced with both the external and the internal
stakeholders. In the Corporate Governance, there is a part which includes the reporting of the
risk management performance (William, Glover & Prawitt,2016). It follows the Principle 7
(Recognize and manage risk) in the ASX Corporate Governance Council, Corporate
Governance Principles and Recommendations (3rd edition).
Compliance with ASX Corporate governance principles and recommendations
ASX Corporate Governance Council aims to enhance the transparency and credibility
of the Australia’s capital market, which is published in the ASX document, ‘Third Edition
Principles of Good Corporate Governance and Best Practice Recommendations’ (Guidelines).
AUDIT PLANNING IMPACT
In the process of implementing the audit process, the audit risk has a low level of
acceptability. The board has a concern for the satisfaction of the management framework.
The board gets an assistance in the process from the Audit Committee and the Nomination
and Remuneration Committee (Junior, Best & Cotter,2014). The committee looks up on the
operational, financial and the compliance risk which is related to the financial management of
the organization. The periodical review of the Company’s risk profile is maintained and the
responsibility is given by the Executive Management.
Analytical Review
This method is used by the auditor to determine the risk associated with the
organization’s financial statement. Auditor to carry the analytical review uses financial ratio
of the organization, which helps to know whether the organization does have any materiality
in the financial statement or not.

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Current Ratio
This ratio shows the liquidity position of the organization’s financial statement as how
the company can settle their current liability with the benefit of current asset. The current
assets were increased from 65884 in 2017 to 88667 in 2018 and in comparison to the current
liabilities it was 27017 in 2017 to 32598 in 2018. Thus, it can be seen that there was more
increase of current assets than current liabilities. From the calculation it can be seen that there
is a rise in the current ratio that signifies the organization does have a proper liquidity in the
financial position as in 2017 it was 2.44, and in 2018 it is 2.72. Company has good liquidity
position that can attract more number of investors in the organization.
Debt Ratio
This ratio shows the way that how an organization can manage the asset in the
business. From the calculation it is seen that, there is a subsequent increase in the ratio from
0.16 in 2017 to 0.27 in 2018, which signifies that the assets are being financed by equity.
This show that the company can easily manage the asset without taking any additional debt in
the organization.
Debt-Equity Ratio
The composition of equity and debt in the organization is shown here. The ratio
shows that there is an increase in the ratio i.e. from 0.20 of 2017 to 0.37 in 2018, which
signifies that the company has increased the debt in the organization. The company should
maintain an accurate ratio as high amount of debt may result in insolvency of the
organization.
Net Profit Margin
The amount of profit which the organization earns for its shareholders is displayed
here. The ratio shows that there is a decrease in the revenue of the organization from 0.24 of

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2017 to 0.18 of 2018, which is not a good indication for the organization; as it denotes that it
will not be able to attract the customers in their business and is losing its market share in the
industry.
Conclusion
From the above report it can be seen that the as IPH Limited is one of the oldest
company in the segment of providing the IP services, they are more preferred by the clients.
They do understand the demand of the clients, and accordingly they provide the services.
They have their risk management system, and their company operates as per the rules and
regulations. They have their effectiveness on their policy. As per their Audit Committee goes
the performance of the organization is very good. Furthermore, IPH Limited has a clear
strategic aims and it can be demonstrated by the risk management system. The involvement
of the management is good in running the organization.

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References
Griffiths, P. (2016). Risk-based auditing. Routledge.
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance: a
historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1),
1-11.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.
Simnett, R., Carson, E., & Vanstraelen, A. (2016). International archival auditing and
assurance research: Trends, methodological issues, and opportunities. Auditing: A
Journal of Practice & Theory, 35(3), 1-32.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A
systematic approach. McGraw-Hill Education.
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content/uploads/2015/09/Risk-Management-Policy-201509.pdf
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content/uploads/2018/10/20181022-IPH-Annual-Report-for-the-year-ended-30-June-
2018.pdf
Iphltd.com.au. (2019). Retrieved 16 September 2019, from https://www.iphltd.com.au/wp-
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