Audit, Assurance and Compliance TRIMESTER 2, 



The term audit means to evaluate the internal control of an organisation. In the business environment, internal control is important to achieve the business goal and objective in the effective manner (Chaumont, 2013). In the same concern, this audit report enhances the knowledge on the some significant terms of the audit process.

This report is important to define and preliminary analytical procedure in the audit. Furthermore, in the next section, the reader can enhance the knowledge on the inherent risk factors. Along with this, it also explains how risk affects the business. Likewise, it also identifies two key fraud risk factors and how they affect the business.

Audit, Assurance and Compliance TRIMESTER 2,  INDIVIDUAL ASSIGNMENT 1 Introduction The term audit means to evaluate the internal control of an organisation.

IssueSituationAnalytical ProceduresInfluence on Planning Decision
In the regard of this case, DIPL approached an auditor to develop the internal control in the organisation. Hence, this scenario requires to apply the preliminary analytical procedures

based on the background information for DIPL.

In this audit process, preliminary analytical procedure is helpful for the auditor to better understand the nature, process, goals and objective etc. It focuses on the both financial and non financial activities. It is a significant phase of the audit process. Typically, the main objective of preliminary analytical procedure is to understand the operation and nature of business. Along with this, it also has objective to identify financial statement accounts and error in them. As concerning of the case of Double Ink Printers Ltd (DIPL), it is found that DIPL is publishing firm that publishes books, magazines and advertising material. The company prints according to the orders of the customers. In this, the average printing days are two business days for the small order by the customers and five to ten days for the large orders (Dennis, 2015). The company also has a website where customers can make order online. Along with this, the company also provides the facilities to download the books and magazines online.


The company has two sources from which it purchases the materials of printing such as paper, ink and binding material. In this, DIPL purchases 50% material from Australian sources and 50% from the Asian countries. During the warehousing the material, company receives all the essential bills and documents. It makes payment in the relevant currency of the country from which it is purchased. At the end of financial year 30 June, the company keeps closed its warehouse from 28 June to 30 June. DIPL always wants to add a book to DIPL’s digital library. In this, books are available in the PDF format and one the book is transformed in the digital format then the publisher can order according to needs (Ferrell & Fraedrich, 2014). In the sale of each book publisher pays 5% commission. DIPL also charges annual storage fee in the advance. DIPL took a loan of 7.5 million from BDO finance ltd. It helped the company to maintain current ratio and debt to equity ratio.

In the financial year 2015, William Jackson was appointed was named the new CEO of the company. It has broad experience in the printing business. It recommended to DIPL to develop the internal control system to avoid the business risk. In the context of the IT system, the company adopted the new system in the operation.

It helped the company to maintain its general ledger system. In the relation of the financial information, it is found that in the financial year 2013, 2014 and 2015, the total asset were 12930000, 15903900, and 26147991 in the given order. Furthermore, the liabilities were recorded 3780000, 5120250 and 13897500 for the year 2013, 2014 and 2015. At the same time, equity value was recorded 9150000, 10783650 and 12250491.

The revenue from operations is looking increasing year by year. For the financial year 2013, 2014 and 2015, revenues from operations were recorded 34212000, 37699500 and 43459500 respectively. In this, it was found that gross profit for the financial years 2013, 2014 and 2015 were 6004500, 6079500 and 6604500. Simultaneously, the profit after tax of DIPL was recorded 2359190, 2291362 and 2972183 for given financial years.


The results of the audit can affect the stock price of the company (Marchetti, 2011). The audit result has a great impact of the stock price of the company. Along with this, audit result can also have an influence financial source of DIPL. It is possible that due to bad audit result, the company can fail to attract the new investors in the market. On the other hand, good audit result attracts more investor for the company.

In the business environment, when a company wants to issue new shares then company likes to share its financial results among the potential customers. Hence, it can be said that the financial result will influence the planning of the company in the context of the investment and equity planning (Knapp, 2012).


Answer 2

IssueInherent risk factorsAffect of Risk Factor
As conducting the audit process of DIPL, there is a need of the identify two inherent risk factors that arise

from the nature of DIPL’s business operations. It also requires to explain why it is risk and its impact.

In the business scenario, an effective planning of an audit process is a helpful auditor to concern on all the areas of the business. It is also helpful to minimise the risk and conduct the business process in the effective manner. This process helps the auditor to achieve the objective of the audit process. In the audit planning of DIPL, it is found that inherent risk I presented. In the audit process, the inherent risk is known as a factor and control risk. In the audit process, it is important to minimize the material misstatement risk. In the other words, it is defined that inherent risk refers to the use of the incorrect information in the financial statements due to the lack of the accurate control (Sandretto, 2011). For example, inherence risk can be seen where the business process is large and there is a need of maintaining lots of accounts.


In the same concern of this, it is found the inherent risk is presented in the context of DIPL. In this, the possibility of theft or fraud is a factor that leads to the inherent risk in the business operation. In the business operation of DIPL, some assets are associated with the possibility of theft and fraud. Their accounts and balance concerned inherent risk. Along with this, another factor of inherent risk factor is available of the financial. It may be possible due to calculation and incorrect information, the financial statement of the company will represent the wrong result (Whittington & Delaney, 2011). Even though, it is possible that error in the financial statement can intentionally and without intestinally.

Furthermore, it is also found that in the business operation of DIPL, there are various elements that can bring error in the actual available balance at the end of the financial year. In this, it is identified that company sells products through the both online and offline ways that can risk as the inherent risk.

Answer 3

Issue Key Risk FactorsRisk Factors Identification
As conducting the audit process, there is requirement to identify two key fraud risk

Factors. At the same time, there is also a need to how these factors are identified and their impact.

In a firm, the management team is responsible for developing and implementing the control in the business. In the same concern of this, the management is also liable to adopt the accurate accounting policies for representing the financial statements. The adoption of the sufficient accounting policies helps the organisation to establish and maintain the effective and accurate internal control. It minimise the possibility of the fraud activities in the business operation. In the auditing process, the main aim of the auditor is to find out the fraud and error in the financial statements (Moroney, et al. 2012). In the audit process, fraud is a legal concept that affects the business activities. In this business scenario, fraud and error are both are different. In this, fraud represents misstatements are intentional. In the reference of DIPL is fraud can be found in its financial statement. In the auditing process of DIPL, auditor can find two factors of the fraud. In this, first factor of the fraud is that Management or employees have an incentive or are under pressure. On the other hand, second factor of the fraud is that Individuals involved are able to rationalize committing a fraudulent act.


In the audit, process risk factor is associated with the increase of risk of loss in the business. Sometime, auditors use the determinant to access the level of the risk factor in the auditing process. The auditor uses the financial principles to identify the risk factor in the audit process. Along with this, there are also some significant techniques that help the auditors to identify the risk factors (Zeng, 2012). The identification of the risk factor is helpful the audit process to represent the effective result. It also helps the auditor to conduct audit process in the effective manner. The identification of the risk factor is helpful to achieve the objective of the audit process.



From the above discussion, it is identified that audit is vital process of the business that enables the firm to represent the accurate financial result front of the investors. In order to attract the more customers, it is essential to for a company to represent the error less financial statement. It increases the reliability of the firm among the investors and helps to rise the more fund for business operation.



Chaumont, M. (2013) The risk-based audit approach: Auditing. Germany: GRIN Verlag.

Dennis, I. (2015) Auditing Theory. UK: Routledge.

Ferrell, O. C. & Fraedrich, J. (2014) Business ethics: Ethical decision making & cases. USA: Cengage learning.

Knapp, M. C. (2012) Contemporary Auditing. USA: Cengage Learning.

Marchetti, A. M. (2011) Enterprise Risk Management Best Practices: From Assessment to Ongoing Compliance. USA: John Wiley & Sons.

 Moroney, R., Campbell, F. & Hamilton, J. (2012) Auditing, Google eBook: A Practical Approach. USA: John Wiley & Sons.

Sandretto, M. J. (2011) Cases in Financial Reporting. USA: Cengage Learning.

Whittington, R. & Delaney, P. R. (2011) Wiley CPA Exam Review 2012, Auditing and Attestation. USA: John Wiley & Sons.

Zeng, D. (2012) Advances in Computer Science and Engineering. USA: Springer Science & Business Media.

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