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Liquidity Ratio

What Is the Problems Were Hindering Progress of DIPL?

The overall evaluation of the results of DIPL could directly help in understanding the requirements of an audit procedure, which could directly help in identifying the financial condition of the company. In addition, relevant analytical approach could be used in identifying the overall financial condition of the company, which could directly allow the analyst to initiate an audit procedure. Moreover, the overall use of analytical approaches such as benchmark approach and ratio analysis approach could directly help in influencing the audit procedures of an organisation. Albeksh (2016) stated that relevant valuation of financial ratios could directly help in identifying the financial position of an organization. In this context, it could be understood that benchmarking could also be used in identifying the overall financial positron and loopholes in operations of the company. Therefore, the overall ratios are mainly used in identifying the financial condition of DIPL, which could directly help in understanding the condition of the company.

Liquidity ratio

2013

2014

2015

Current ratio

             1.42

          1.47

          1.50

Quick assets

             0.83

          0.94

          0.85

The overall liquidity condition of DIPL could be identified from the above table, which is relevantly increased over the period of three fiscal years. The overall liquidity positron of the company has improved over the time, where its quick ratios has not improved, as it current ratio. This only indicates that accumulation of inventory is relevantly higher for the company.

Efficiency ratio

2013

2014

2015

receivables turnover

           13.78

          8.73

          8.57

Days in receivables

           26.49

        41.83

        42.61

Inventory turn over

           12.50

        11.84

          8.82

The above table mainly indicates the overall efficiency ratio, which has gradually improved over the period of three years, where the company’s efficiency has increased. This only indicates that overall financial stability of the company and receivables have relevantly increased over time. This could directly help in identifying the overall financial stability of the company. Baylis et al. (2017) mentioned that evaluation of overall financial ratios could directly help in identifying the overall financial stability of the company.

Solvency ratio

2013

2014

2015

Debt to equity

41.31%

47.48%

113.44%

Debt to capital

7.25%

5.42%

31.69%

Interest coverage

41

40

                5

The above table mainly helps in identifying the overall solvency condition of DIPL, where relevant financial position of the company could be evaluated. However, it is mainly seen that financial position of the company has drastically declined in financial year 2015. This relevant decrease in financial stability raises the concern for DIPL, where the organisation is not able to generate the required level of profit to support its debt obligations. Bendovschi and Ionescu (2015) argued that financial ratios mainly lose its friction when unethical measures are used in drafting the financial report of an organisation.

Efficiency Ratio

Profitability ratio

2013

2014

2015

gross profit

17.55%

16.13%

15.20%

net profit

6.90%

6.08%

6.84%

Return on total asset

18.25%

14.41%

11.37%

ROE

25.78%

21.25%

24.26%

Lastly, with the help of above table relevant profitability ratio of the organisation could be identified, which might directly help in understanding the revenue generation capacity of the organisation. The overall profitability ratios such as net profit margin, gross profit margin, return on total assets and return on equity has mainly declined in 2015 as compared to 2013 fiscal year. This mainly states the overall expenses of the company have gradually increased over time, which has directly affected its profitability condition.

Therefore, from the overall evaluation of the financial ratios of DIPL relevant errors in the financial condition of the company could be identified. There is relevant improvement in the overall current ratios, whereas profitability of the company declined. This only indicates that relevant evaluation is needed to understand the overall operations of the company, which could only be conducted with the help of audit procedure. Furthermore, the inconsistency in the overall financial report of DIPL mainly initiated the use of audit report for understanding the lack in financial report that is been reported by the organisation. Duncan and Whittington (2016) mentioned that use of financial result evaluation mainly allows the analyst to whether the company needs relevant audit procedure.

The overall risk that could direct influence the material misstatement risk of DIPL is mainly depicted as follows.

Risk

Inheritance risk

Material misstatement

Implementation of accounting system

The overall misreporting, which could be conducted by the employees is relevantly possible. In addition, the overall implementation of new accounting system could also increase the inheritance risk.

The overall financial reporting could mainly be conducted by the forceful implementation of the new accounting technology, which is been conducted by DIPL. This could directly result in overstated or understated financial report due to the manipulation that is conducted by the employees. Moreover, the limited employee that was allotted by DIPL for the implementation of the new accounting system could not handle the overall completion of the transactions (Erickson, Goldman and Stekelberg 2015).

Financial reporting risk

The second inheritance risk is mainly dependent on the strategic alignment and environmental factors of that are imposed on the operations of the company.

The overall second material misstatement is mainly identified from the overall manipulation, which could be conducted by the management to maintain a certain level of current and debt ratio. The management could have manipulated or inflated the financial report for supporting the financial obligation of the company. Thus, the overall financial risk could directly result in material misstatements, which needs to be evaluated by the auditors (Knechel and Salterio 2016).

The two inheritance risk that is depicted in the above table mainly states the overall manipulations, which could be found in the financial report of DIPL. Therefore, this identified risk could directly influence the financial stability of the company, which is not depicted in its financial report. Koinig, Tjoa and Ryoo (2015) mentioned that the identification of relevant material misstatement risk could mainly help the auditors to take relevant precaution, which could help in identifying viability of the financial report. Moreover, the inherent risk that is identified from the overall valuation of DIPL case study could directly increase the chance of material misstatement in its financial report.

Fraud risks

Identification of fraud risk

Audit impact

The misrepresentation of financial records

The misrepresentation of the overall Financial report of DIPL could be conducted by the management, as it needs to maintain a relevant financial condition to support its loan requirements. DIPL mainly need to have a current ratio of 1.5 and debt to equity ratio less than 1. This only indicates that the manipulations could have been conducted by the management to ensure commencement of the overall ratios. In addition the identification of the overall fraud could directly increase the material misstatement in the annual report, which could only be detected with the help of relevant audit procedures (Lenz and Hahn 2015).

The audit process needs to be conducted with sincerity, which for help in identifying the manipulation that is conducted by the organisation. Furthermore, relevant experience people are also needed for the audit procedure, as it could help in identifying the ways in which the company has manipulated the financial records (O’Regan 2017).

The manipulation from transactional error

The second fraud risk is mainly identified from the overall transaction manipulation that might be conducted by employees, while implementing the new accounting system. There was a relevant pressure on the employees, while changing the overall accounting systems. This pressure on the employees could have told them to use manipulations in the transaction recordings. These manipulations in the overall accounting system could have led to the material misstatement of financial report (Shafii, Abidin and Salleh 2015).

Relevant checks needs to be conducted on the overall sales receipts and other transactions conducted by the company in the three fiscal years. Moreover the new accounting system needs to be evaluated with the old system, where all the transactions are recorded. This could mean we have the auditors to identify the problem and manipulation that has been conducted by the employees.

The above table mainly helps in identifying the overall fraud risk that could be hampering the overall financial statement of DIPL. in addition relevant audit procedures also provided in the table which can help auditors to adequately evaluate the actual financial performance of the organisation. Moreover, the overall fraudulent was mainly derived from the tell management that is been conducted in DIPL (Short and Toffel 2015).

The overall identified risk mainly represents the Chance of manipulation, which could be conducted by the management of DIPL. this could mean to be conducted due to the loan obligations that is used by the company to support its future activity.  Euro loan requirements means the company to hold a relevant financial condition or else it would directly be nullified by the finance provider.  Therefore, relevant manipulations could have been conducted by the company to ensure continuity of a loan process. Hence, auditors need to adequately evaluate the overall financial condition of the company by implementing proper methodology. Moreover, your auditor's also needs to be cynical while evaluating the overall financial report of DIPL. Proper system in the auditing process also needs to be conducted, which might increase the chance of fraud detection conducted in the preparation of the financial report (Uc and Haxhiraj 2015).

Reference:

ALBEKSH, H.M., 2016. Compliance of Auditors to Ethics and Rules of Professional Conduct and Its Impact on Audit Quality. Imperial Journal of Interdisciplinary Research, 2(12).

Baylis, R.M., Burnap, P., Clatworthy, M.A., Gad, M.A. and Pong, C.K., 2017. Private lenders’ demand for audit. Journal of Accounting and Economics.

BENDOVSCHI, A.C. and IONESCU, B.?., 2015. The Gap between Cloud Computing Technology and the Audit and Information Security. Audit Financiar, 13(125).

Duncan, R.A.K. and Whittington, M., 2016. Enhancing cloud security and privacy: the power and the weakness of the audit trail. Cloud Computing 2016.

Erickson, M.J., Goldman, N.C. and Stekelberg, J., 2015. The cost of compliance: FIN 48 and audit fees. The Journal of the American Taxation Association, 38(2), pp.67-85.

Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.

Koinig, U., Tjoa, S. and Ryoo, J., 2015, June. Contrology-an ontology-based cloud assurance approach. In Enabling Technologies: Infrastructure for Collaborative Enterprises (WETICE), 2015 IEEE 24th International Conference on (pp. 105-107). IEEE.

Lenz, R. and Hahn, U., 2015. A synthesis of empirical internal audit effectiveness literature pointing to new research opportunities. Managerial Auditing Journal, 30(1), pp.5-33.

O’Regan, G., 2017. Software Quality Assurance. In Concise Guide to Software Engineering (pp. 131-138). Springer International Publishing.

Shafii, Z., Abidin, A.Z. and Salleh, S., 2015. Integrated internal-external Shariah audit model: A proposal towards the enhancement of Shariah assurance practices in Islamic financial institutions (No. 1436-7).

Short, J.L. and Toffel, M.W., 2015. The integrity of private third-party compliance monitoring.

Üç, M. and Haxhiraj, E., 2015. The Perceptions on IIA’s Standards and Internal Audit Quality: Evidence from Albania Banking Industry. Mediterranean Journal of Social Sciences, 6(1), p.147.

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