Analyzing Financial Data For Audit Planning: A Case Study Of Double Ink Printers Limited Essay.

Question 1: As an auditor, you are conducting your preliminary analytical procedures based on the background information for DIPL contained in the case. Apply analytical procedures to the financial report information of DIPL for the last three years. Explain how your results influence your planning decisions for the audit for the year ending 30 June 2015.

Question 2: You are conducting your risk assessment of DIPL, as part of the planning for your audit for the year ended 30 June. Identify two inherent risk factors that arise from the nature of DIPL’s business operations. Explain why it is a risk and how it may affect the risk of material misstatement in the financial report.

Question 3: As part of your audit of DIPL for the year ended 30 June 2015, you are considering the risk that fraud may have occurred (a) Based on the background information for DIPL contained in the case, identify and explain two key fraud risk factors relating to misstatements arising from fraudulent financial reporting to which DIPL may be susceptible. (b) Explain how the risk factors identified in (a) above would affect the conduct of the (a) audit. 

Value of investigative strategy in audit planning

1. In the technique for setting up the audit plan of Double Ink Printers Limited (DIPL), the investigative strategy related with financial data gives gigantic esteem. Actually, audit plan conveys the required bearings and rules to the evaluators amid the audit operations. Exactly, audit plan empowers the evaluators in keeping up the cost of audit in a specific point of confinement for anticipating misconception with the audit customers (Alam 2014). The logical approach identified with the financial data of DIPL indicates the technique for spreading financial data from the different financial assertions of the organization. The strategy for breaking down the financial data of the organizations could be brought out through a few systems.

With the assistance of diagnostic approach for evaluating the financial data, the accountants and financial investigators of the organization s could use such data for undertaking distinctive financial and accounting choices (Baylis et al. 2017). The normal size explanatory approach empowers in the strategy for dismembering the financial presentation of the organizations from the regular perspectives. One of the essential advantages is that it helps in expanding support in differentiating the financial reports from different financial courses of events.

The accountants and financial experts could use diverse lines of things from the financial reports and they could confirm their base of planning for the organizations. For example, the enlistment methodology of various financial and accounting things in the financial reports, for example, net liabilities, resources, proprietor's value and others could be viewed as combined with appraisal of straying from the typical situation (Brawley et al. 2015).

Benchmarking is the primary diagnostic procedure of financial data and this strategy could be used for assessment of the audit plan of the organization. The benchmarking procedure helps in distinguishing the changes in the financial reports of the organizations and the genuine explanations for the events of these differences could be learned by recognizing the underlying driver of these fluctuations. Other than the procedure of benchmarking, ratio investigation is declared as a noteworthy scientific technique for financial data of the organizations. Ratio examination is colossally advantageous in differentiating the financial explanations of at least two organizations for setting up the arrangement of audit (Chambers and Odar 2015).

The embraced scientific methodologies of the organization s in assessing the financial data has huge impact on the improvement of the procedure identified with audit arranging and this is vital to spread financial data among the diverse bureaus of the organizations. The accompanying ratios have been considered for this reason:

Analyzing financial data of DIPL

Clarifications:

2.

Certain risk components could be raised from the business operations of DIPL. As per the contextual investigation, the administration of an organization has neglected to enter different business exchanges of the organization. This method has coordinate organization with the irregularities in the arranging of various showcasing and deals exercises of the organization (Earley et al. 2016). The general financial investigation did with regards to DIPL states that the organization has neglected to finish the focused on level of benefit from the general deals income. The essential reason is the insufficiency and wastefulness of the administration of the organization in business operations. In this manner, it could be watched that the organization has neglected to gage the impact of various miniaturized scale and full scale financial components having sway on the business operations of DIPL like political, financial and social elements. Consequently, it could be expressed that the lower income and overall revenue of the organization has brought about inalienable dangers (Graham 2015).

Additionally, the staffs of DIPL have expanded quickly and thus, the innate risk has expanded too. The inalienable risk level of the organization rises in view of the absence of polished skill and experienced capability of the staffs. This is on the grounds that the accomplishment of a business is dependent to a great extent on the execution of its staffs (Homb et al. 2014). Because of such naiveté and wastefulness of the workforce of DIPL, there is more noteworthy possibility of intrinsic dangers, since the representatives will undoubtedly lead botches. In view of the given instance of DIPL, the issues could be found in the progression procedure of CEO of the organization. Because of this, such process has brought about ascent in natural dangers of the organization. The primary intrinsic risk could be seen in the inadequate strategy for choosing the CEO progression of the organization.

Other than this, it could be watched that DIPL does not have adequate staffs for dealing with its business operations. This reason has brought about ascent in characteristic dangers in the general business working of DIPL. Subsequently, from the above assessment, it could be watched that these are the essential reasons of the ascent in natural dangers in the business operations of DIPL (Jones and Beattie 2015).

It has been gathered that there is high measure of workload on the representatives of the organization. The expanding workload brings about poor accounting of the organization and this issue additionally brings about various issues of income, insufficient working outcomes incapable solvency and liquidity position of the organization. Other than this, the danger of blunder could be portrayed in the financial articulations because of absence of compelling understanding. In this unique situation, the administration of DIPL needs to assume a compelling part. It has been watched that the DIPL administration needs responsibility and uprightness and because of this reason, they are experiencing the worry of losing notoriety in the business group. The more noteworthy motivating force structure identified with administration shapes extra weight on administration and it brings about material misquotes in the financial reports (Levy 2015). 

Benchmarking and ratio analysis for audit planning

3. a) In the present business organizations, extortion risk is pronounced as the primary risk with regards to the same. Due to the event of such fake risk, the business organizations frequently acquire serious losses in its business resources (Martin, Sanders and Scalan 2014). In greater part of the circumstances, the essential disappointment could be seen among the workforce and such disappointment frequently constrain them to participate in different sorts of fakes in organizations. Another essential reason of extortion is the desire of different financial specialists of the organizations. The organizations regularly make guarantees for accomplishing a particular financial execution that adds to more prominent misrepresentation level (Nalewaik and Mills 2016).

b) In light of the given case, it could be watched that the procedure of valuation of the crude materials of the organization in view of normal cost is not suitable and viable, since the present paper cost is over the normal cost. The essential risk in the discovery of deceitful exercises of the staffs for executing new arrangement of data innovation could be recognized by checking the assignments in different expressions of occupations. Other than this risk, the risk related with the procedure of financial announcing could be distinguished through assessment of the diverse financial reports and explanations of the organizations with respect to the accountant s and financial auditors through various control and expository instruments. Such procedure of checking is required to be led in a convenient way (Warren 2014). 

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