Inherent Risk Factor of DIPL-Free-Samples-Myassignmenthelp.com

Questions: 1.Explain how your results influence your planning decisions for the audit for the year ending 30 June 2015. 2.Identify two Inherent risk factors that arise from the nature of DIPLs Business Operations. 3.Identify and Explain two key fraud risk factors relating to Misstatements arising from Fraudulent Financial Reporting to which DIPL may be susceptible. 4.Clarify how the risk factors recognized that influence the conduct of the audit Answers: 1.Applying analytical procedures to the financial information for DIPL for the last three years The Analytical procedures is conducted on the financial report of companies such as DIPL are properly explained in this question. The development of plan for audit activities are assisted by the financial reports of the company. While undertaking the audit function, the audit plan which is used as a specific guideline should be followed strictly. It is very an important role of the assessor that to check that costs of audit at a reasonable level. In addition to this, the assessor must also assist in reducing the probability of misunderstanding with the customers. In the financial declarations for the firm DIPL analytical process should be used this refers to the broadcasting of such information which can be accessed from the financial declaration of the business enterprise. By the utilization of a variety of mechanisms the given process are needed to be evaluated. It is very important to study the financial declarations where several accountants and financial analysts gather informat ion that in turn assists in arriving at final decision-making activities on using the analytical approach (Sarens 2015). The main objective of analytical approach of common sizing is to evaluate the financial declarations based on a common specific point. Further, it helps in comparing the financial statement for a particular given period of time. Checking the type of reporting and to look after the different line of items which are already mentioned in the financial report is an important responsibility of the assessor. For example, it depends on the facts that how items are recorded such as net assets, net liabilities which goes along with the equity of the owner as presented in the financial reporting and also scrutinizing the detour after comparing with the normal activities. Moreover, one of the important analytical procedure which are present during analyzing the plan of audit is benchmarking. Apart from this, deviation of original financial declaration from that of the benchmark targets at identifying deviation and the reason for any detected variance for the purpose of defining actual problem ( Rao 2017). Thus for assessing the plan of audit activities and essential analytical approach in order to compare financial declarations, ratio analysis can be used as one of the important and effective tool. Clarify how the results can manipulate scheduling decisions for the audit for the year ended 30th June 2015 Particulars 2013 2014 2015 Profit Margin 0.068 0.60 0.06 Solvency Ratio 0.62 0.44 0.21 Current Ratio 1.42 1.46 1.50 The results of the planning is primarily explained in this question which had been done during the audit planning which also effects the outcome of the analytical approach which is adopted for the purpose of getting access to information from the financial statement (Sethi et al. 2017). An important role is played by Ratio analysis which helps to get information about the companys financial position. One such ratio that denotes profitability margin is the Profitability Ratio. It also represents profits that are earned by the organization and also looks over the overall the firms performances. In the past three years Profitability Ratio of DIPL from the year 2013, 2014, 2015 are 0.068, 0.60 and 0.06 respectively. Current Ratio which assists in determining and assessing the position of liquidity of DIPL for the year 2013, 2014 and 2015 stands at 1.42, 1.46 and 1.5 respectively. Generally, 2:1 is considered to be the ideal current ratio. Then comes the solvency ratio of DIPL for the year 2013, 2014, 2015 that are 0.62, 0.44 and 0.21 respectively. It is found that the overall cash flow remains adequate for meeting both short term and as well as the long term liabilities for DIPL after comparing the results of the ratio for the three consecutive years which are 2013, 2014 and 2015. Thus, it can be said that it is the assessors responsibility to understand the firms relative positive for three successive years and analyzing all those factors that may or might lead to some undesirable or unfavorable situation of business enterprise. 2.Identifying two inherent risk factor that arise from the nature of DIPL trade process The two inherent risk factors that are faced by DIPL in their business operations are required to be identified in this question. One of the most significant factors that also needs serious concern during conducting audit is the material misstated figures that are present in the financial declaration of the business (Carnegie and OConnell 2014). In order to get accustomed with different systematic and unsystematic risks it is very important to identify the financial declaration which are mentioned in the financial statements. A true and fair view of the financial statement which are either financial or non-financial can be drawn from these statements. Hence, evaluation of different types of risk is an important role of the assessor. One amongst many other risks that may leads to substantial error which results from activities such as operation, environment and nature of accounts is the Inherent risk. All though there are several different types of risks that might have some substantial impression on the financial statement. The bookkeeper cannot predict the risk after the omission is correlated as diverse error (Zhang 2017). It is noted from the case study that several transactions that were overlooked by the management of DIPL had been misplaced by the accounts. Ineffective planning of sales and also ineffective marketing activities which lead to inconsistencies are found. It is found that DIPLs financial declaration analysis favors the profit level which is produced out of revenue. The failures which needs adjustments in the functionalities and also in identification of requirement which are necessary for maintaining the required profit may also be faced by the management. The Macro and Micro economic factors needs to be identified by the management in terms of social, political and others as the business faced failure. The poor sales figures of DIPL can be found at the inherent level of risk that leads to risk while analyzing the financial declarations (McKee 2015). The different factors can be found which leads to inherent risk into numerous sectors. Material misstatement can be spotted in business enterprise due to falsification of different items and also due to some external factors which concerns the environment. Risk that affect the risk of material misstatement in the financial report There are some risk which are identified and those are needed to be considered as vulnerability in connotation with the misstatement of material for given assertion. Some of those risks are stated below: Excessive pressure on employees and also on the management is one of such identified inherent risk. Poor bookkeeping is the result of excessive load of work upon the staff members of the business. Certain qualities that causes issues relating to cash flow along with poor operating outcomes of the business can be found accompanied by poor liquidity. Misinterpreted error or risk of errors is another risk of the identified inherent risk. Reliability and also complexity is hampered by error or misrepresentation. As said earlier, unusual work load or pressure on management is another identified inherent risk. Sometimes it might happen that the management may get inducements or incentives for their job and it is not stated in the financial declaration (Soh et al. 2015). Integrity among the complete management is one of the identified inherent risk. Management of DIPL severely lacks required integrity and expects to be prepared for the loss of prestige or reputation in the overall community of the business. Nature of entity business is another inherent risk which is also identified. Growth of major economic and competitive environments are the outcome of business operations at DIPL. Apart from these, several risk can also be noted that lead to the business entitys general inherent risk. 3.Identify two key fraud risk factors relating to misstatement that arise from fraudulent financial coverage to which DIPL may be susceptible The substantial loss may be encountered by a business entity due to their assets that are the results of several fraudulent actions. Apart from this, when the workers are not satisfied then such fraud in business might occur which results in excessive workloads. Moreover, as a result of the management as also due to pressure from different investors, who for the purpose of attaining definite goal reports pecuniary outcomes, the business entity might meet high degree of fraud risk. In DIPL case study, in real the company suffers risk that occurs from the nature of operating and instigating the staff for engaging in fraudulent actions due to high dissatisfaction level. This is the outcome of the fact that the novel system of accounting had increased pressure and workloads on the staff members and on workers (Tang 2017). During the installation process of IT system at DIPL, it faces several fraudulent activities which in turn increases unnecessary and extreme pressure on employees. 4.Clarifiny how the risk factors recognized that influence the conduct of the audit The identification of risk that are related along with application of novel IT system of accounting for observing the happenings at different levels is the responsibility of the auditor. As the cost of paper is higher than the companies average cost, the process of raw material valuation is adopted by DIPL. For the purpose of evaluating and monitoring financial statements and various mechanisms the auditors are held responsible (Kend et al. 2014). As a result, for any business enterprise it assists in detection of risks in the financial statement in the early stages. References Askary, S. and Van Sant, R., 2014. An educational theory for teaching auditing and assurance after Enron.International Journal of Management in Education,8(3), pp.302-320. Carnegie, G.D. and OConnell, B.T., 2014. A longitudinal study of the interplay of corporate collapse, accounting failure and governance change in Australia: Early 1890s to early 2000s.Critical Perspectives on Accounting,25(6), pp.446-468. Kend, M., Houghton, K.A. and Jubb, C., 2014. Competition issues in the market for audit and assurance services: are the concerns justified?.Australian Accounting Review,24(4), pp.313-320. McKee, D., 2015. New external audit report standards are game changing.Governance Directions,67(4), p.222. Rao, S., 2017. CURRENT STATE OF ASSURANCE ON SUSTAINABILITY REPORTS.CPA Journal. Sarens, G., 2015. Guest editorial on internal assurance: a concept in evolution.Managerial Auditing Journal,30(1). Sethi, S.P., Martell, T.F. and Demir, M., 2017. Enhancing the role and effectiveness of corporate social responsibility (CSR) reports: The missing element of content verification and integrity assurance.Journal of Business Ethics,144(1), pp.59-82. Soh, D.S., Leung, P. and Leong, S., 2015. The development of integrated reporting and the role of the accounting and auditing profession. InSocial Audit Regulation(pp. 33-57). Springer International Publishing. Tang, Q., 2017. Institutional Influence, Transition Management, and the Demand for Carbon Auditing: The Chinese Experience. Zhang, Y., 2017. Corporate Social Responsibility Assurance.Encyclopedia of Business and Professional Ethics, pp.1-5.