Analyzing The Risks And Frauds For DIPL, An Auditor's Perspective Essay.

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.

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.

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.

Application of analytical procedures to the financial report

1.Application of analytical procedures to the financial report information of DIPL

The main types of the information provided in the report have been related to the different types of the developments in the audit plan. The plan for the audit has been further seen to be considered based on the audit cost at a reasonable level to consider the aversions which are related to the clientele. The main analytical approach has been further seen to be considered based on the different types the assumption which has been based on the various levels of the report which has been considered based on the dissemination of the information in the financial declarations (Kubuabola 2013).

The analytical considerations in the report have been considered with the downsizing of the analysis with the reference point. This has been further considered for the financial statement comparison for the various corporations. The main interpretations from the ratio have been further able to signify on the different types of the consideration which has been related to the audit planning (Ruhnke and Schmidt 2014).

Table 1: Ratio Analysis

(Source: as created by Author)

It has been further seen that the results has been considered as per the planning of the audit planning and it has been seen to be important for maintaining the analytical approach for the consideration of the financial statements. The main instance of the outcomes for the ratio has been considered with the current ratio of the firms for DIPL. This has been seen to be 1.42 in 2013, 1.46 in 2014 and 1.5 in the year 2015. The main form of the profit ration has been considered based on the 0.068 in 2013, 0.60 in 2014 and 0.06 in 2015. The important consideration for the profit margin has been able to depict the income earned thorugh the net sales from the DIPL (Ruhnke and Schmidt 2014). The assessor needs to under that the various considerations which have been seen to be conducive for understanding the expenses which has been seen to be bases on the concept of low or high in the management with the curtailment of the time and budget. The unfavourable and favourable changes relating to the factors have been considered based on soundness of the financial position and the audit assessment. In 2013 and 2015 the solvency ratio has been considered as 0.62 and 0.21 (Yasin and Nelson 2013).

2.Identification of inherent risk factors that arise from nature of business operations of DIPL

The main factors of the auditing have been shown with the several incidences with material misstatements in the financial announcement of a certain concern. The unsystematic and systematic risk has been further considered based on the financial declarations and financial misstatements of the corporation (Geertse et al. 2015). The main risks has been further detected based on the non financial and the financial factors. The evaluator may consider the detection of the risk which is seen to be based on the financial declarations which has been stated with the accomplishment from the profit and the revenue generated with the sales.  The present analysis has been able to evaluate on the risks correlated to the omission and diverse errors in the business operations (Lindeboom, van der Klaauw and Vriend 2016).

The accountants of the management and the total number of the transactions have been further seen to be considered based on the omissions by the management. This has been directed towards various types of the considerations revenue generated through the sales. The main considerations have been further seen to be based on the essential planning along with the sales activities (De George, Ferguson and Spear 2013).

The various types of the inherent risk and the way it can affect the material misstatement has been stated below:

• Excessive pressure on employees and management
• Risks of errors or else incorrect misrepresentation
• Integrity of the entire management
• Unusual pressure on management
• Nature of entity business

3.Identification and explanation of two key fraud risk factors relating to misstatements arising from fraudulent financial reporting

References

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