Financial Information Offers Considerable †Myassignmenthelp.Com

Question: Discuss About The Financial Information Offers Considerable Support? Answer: Introducation At the time of preparing the plan of audit in the context of DIPL, the analytical method associated with financial information offers considerable support. On the contrary, audit plan helps in giving the required directions and instructions to the auditors while carrying out the operations of audit. In a precise manner, the plan of audit provides the auditors with an opportunity in maintaining the cost of audit to a specific degree for curbing any sort of confusion with the clients (Chou 2015). The analytical method related to the financial information of the organisation denotes the method of transferring financial information from various financial organisational announcements. The method of evaluating financial information of the organisations could be conducted through specific mechanisms. This analytical method helps in assessing the financial information, which would enable the financial analysts and accountants for making certain financial and accounting decisions. The analytical approach is common size that enables in the method of dissecting the financial announcements of the firm from pertinent reference points. The fundamental advantage is that it lends support to differentiate the financial statements from specific timelines (Cohen and Simnett 2014). With the help of financial reports, the financial analysts and accountants could utilise different lines of items along with the checking the preparation base for the organisations. For instance, the method of registration of different financial and accounting items in financial statements like overall liabilities, owners equity and assets could be adjudged along with investigation of detour from the regular position. The major analytical method of financial information is benchmarking and it is possible to use this method for dissecting the audit plan of the organisation. In addition, this method of benchmarking helps in detecting the variances in the financial statements of the organisations and the actual reasons behind the happening of such variances could be ascertained by evaluating the actual causes of these variances. Besides the process of benchmarking, ratio analysis is adjudged as a primary analytical method pertaining to the financial information of the firms. Thus, ratio analysis is of utmost importance for differentiating the financial statements of two or more organisations for preparing the plan of audit (Duncan and Whittington 2014). Explanation: The analytical methods of the organisations in assessing the financial information could result in considerable effect on the creation of the process of audit planning and this is crucial to transfer the financial information among the different departments of the firm. The below-mentioned ratios have been taken into account for meeting the purpose: 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 According to the above table, the current ratio of DIPL for the years 2013, 2014 and 2015 have been obtained as 1.42, 1.46 and 1.50 respectively. Another instance has been depicted in the form of profit margin, which has been 0.068, 0.60 and 0.06 in the years 2013, 2014 and 2015 respectively. This evaluation of profit margin helps in depicting the amount of net profit gained in contrast to the net revenues of DIPL. Moreover, this evaluation of profitability enables the financial experts and accountants to gain an understanding of the overall organisational expenses. Besides this, it has enabled the accountants and financial experts to obtain an overview of the efficiency of the organisational budget coupled with the need for diversification of the organisation (Gist et al. 2015). Thus, it could be evaluated that the evaluation of ratios is a primary tool for the auditors of DIPL. The desirable and undesirable modifications associated with the financial performance and ratios of DIPL enable the auditors to gain an insight about the present financial condition of the organisation. In this context, the instance of solvency evaluation of DIPL has been taken into account. It has been found that the solvency ratio of DIPL has been 0.62, 0.44 and 0.21 in the years 2013, 2014 and 2015 respectively. Such evaluation is valuable for determining the favourable or unfavourable movement of the organisational performance in the upcoming years. The contrast of ratios has its importance in ascertaining the cash flows of the organisations and its adequacy in determining its short-term as well as long-term obligations. In a better fashion, it could be stated that the contrast and evaluation of financial performance and ratios provides the financial analysts and accountants with an opportunity in ascertaining the current financial condition of the organisation over three-year period. Thus, with the help of this analysis, they could ascertain the feasibility of the existing financial position of the organisation. If the financial position of DIPL is not feasible, the management of the firm is required to adopt corrective actions for reinstating its financial position. Due to all such causes, the analytical method associated with the procedure of financial information has considerable significance (Glover,S.M., Prawitt and Messier 2016). Certain factors of risk could be accumulated from the overall business operations of DIPL. In accordance with the provided case, it could be observed that the management or accounts of the organisation have failed to make entry of several business transactions of the organisation. This procedure has direct association with the inconsistencies associated with planning of different sales and marketing tasks of the organisation. Based on the assessment of the different financial statements and reports of the organisation, it could be observed that the organisation has failed to accomplish the targeted level of profit from net revenues. The fundamental reasons include the inappropriateness and inconsistency of the management of the organisation in its business operations. Therefore, it could be stated that the organisation has been unable in measuring the influence of certain macro and micro-economic factors on the overall business functioning of the organisation such as political, social and economic factors. Hence, the declining revenue and profit level of the organisation has resulted in inherent risk for the organisation (Houghton and Campbell 2013). Along with this, the staffs of DIPL have increased rapidly, which has resulted in increased level of inherent risk. Such enhanced level of risk is due to the lack in professionalism and experienced proficiency of the staffs. As commented by Ihendinihu and Robert (2014), the performance of the staffs is a crucial factor for assuring the future growth of an organisation. Thus, the lack of experience and ineffectiveness of the workforce could lead to serious work mistakes resulting in increase in inherent risk. Based on the provided case of DIPL, the issues could be observed in the method of succession of CEO of the firm. Due to this, this procedure results in rise in inherent risks in the context of DIPL. The primary inherent risks could be viewed in effective procedure of choosing the CEO succession of the organisation. Along with this, it could be viewed that the organisation has shortage of employees for managing its entire business operations. This cause results in enhanced level o f inherent risk in the business operations of the organisation. Hence, in accordance with the above evaluation, these are the primary causes of the rise in inherent risks in DIPL (Kend, Houghton and Jubb 2014). It could be observed that the employees of DIPL have huge amount of workload in carrying out their day-to-day tasks. Such additional burden results in accurate records of the organisation and it results in several issues related to cash flow, ineffective operating profit, solvency position and inadequate liquidity position of the organisation. Besides this, the error risk could be viewed in the financial reports because of lack of effective evaluation. Therefore, it is of utmost significance for the management of DIPL in playing a significant role to deal with such issues. These primary issues include lack of accountability and integrity and due to this reason, they have been suffering from the fear of losing reputation in the business community. The greater structure of incentive for management generates additional pressure on management and it results in material misstatement in financial reports and statements (Kilgore 2014). In business organisations, fraud risks are considered as one of the primary risks for the same. Because of the occurrence of fraud risks, the business organisations often experience heavy losses in its overall asset base (Knechel and Salterio 2016). Most of the time in organisations, primary dissatisfaction could be viewed between the workforce and such dissatisfaction often leads them to engage in various types of frauds in organisations. Another fundamental reason of fraud is the expectations related to the various investors of the organisation. As the management of an organisation is often involved in promising a particular level of financial performance, the chance of risk level is increased (Peters and Romi 2014). Types of risk Identification Fraud risk For the business operations of DIPL, the primary risk that could arise from business operations comprises of the involvement of the workers in various kinds of fraudulent activities. This could occur due to the dissatisfaction level of the staffs. Based on the provided case of DIPL, it could be observed that there is enormous pressure from the board of DIPL in order to adopt an effective system of accounting. The adoption of this system develops heavy pressure on the staffs of the organisation and this leads to increased fraud risk (Sanderson 2013). Hence, it could be remarked that for coping up with the reconciliation pressure, the staffs might adopt the path of fraud and they might handle the overall process in an incorrect manner, which would result in material misstatements. From this specific case study, it could be viewed that the procedure of inappropriate handling of the implementation of new information technology results in incorrect recording of few accounting and financia l transactions at the end of a period. This overall procedure might result in loss of material misstatements and financial information (Schmidt, Wood and Grabski 2016). Financial reporting method Except the fraud risk, another primary risk confronting the business operations of DIPL is the financial reporting method. Greater risk of inappropriate financial declarations could be observed in situations of additional financial expectations from different stakeholders for declaring the financial announcements. This is applicable in case of the announcement on the part of the management of the organisation in meeting certain target of performance and goals in order to acquire certain debts (Seow, Lim and Suwardy 2014). The financial reports of DIPL state that the sales of the organisation have increased over the years. In addition, there is rise in gross income and net income of the organisation. The issue has been witnessed in case of current assets and overall asset base of the organisation. According to the case study, it has been observed that the organisation has accumulated a loan of $7.5 million from BDO Finance in 2015. In addition, according to the agreement of loan, DIPL needs to hold a current ratio of 1.5 and debt-to-equity ratio of below 1. The requirement of this particular need might be to develop pressure on the organisation in repaying the loan according to the agreed timeline. Such requirements could result in fraudulent activities, since the management of the organisation could manipulate the financial statements for false depiction of the financial condition of the organisation. If the desired benchmark is not maintained, DIPL might lose its eligibility in acquiring loan from BD O Finance (Vasarhelyi et al. 2014). In accordance with the provided case, it could be witnessed that the process of valuation associated with the raw materials of the organisation based on average cost is ineffective and unsuitable. This is because the average cost is smaller than the present paper cost. The primary risk in the tracking of fraudulent activities of the staffs to implement new system of information technology could be detected through continual review of the tasks in various job phrases. Besides this risk, the risk pertaining to financial reporting could be detected through assessment of the different financial reports and statements of the organisations on the part of the accountants and financial analysts by using control and analytical tools. This monitoring method is required to be made in a timely fashion (William Jr, Glover and Prawitt 2016). References: Chou, D.C., 2015. Cloud computing risk and audit issues.Computer Standards Interfaces,42, pp.137-142. Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda.Auditing: A Journal of Practice Theory,34(1), pp.59-74. Duncan, B. and Whittington, M., 2014, September. Compliance with standards, assurance and audit: Does this equal security?. 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