You are a senior manager with Stewart and Kathy and you have been approached to undertake the audit...

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You are a senior manager with Stewart and Kathy and you have been approached to undertake the audit of Double Ink Printers Ltd (DIPL). For the year ended 2015, taking over from the small audit firm of Jay and Associates. DIPL print books, magazines and advertising materials for the publishing, educational and advertising industries on a print-on-demand basis. Printing on demand means that publishers can print the exact quantities ordered by retail outlets, rather than estimating in advance how many books are required and often printing too few or too many. The average printing turnaround time for DIPL is two business days for small orders and five to ten business days for large orders. In addition, five years ago, DIPL further expanded its earnings base by having publisher’s titles available as searchable ‘ebooks’ that could be downloaded directly by readers from DIPL’s website.
	
Document Preview: HI6026 Audit, Assurance and Compliance 
TRIMESTER 2, 2017 
INDIVIDUAL ASSIGNMENT 1

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1Case Study on Double Ink Printers Ltd (DIPL) 
Background Information 
You are a senior manager with Stewart and Kathy and you have been approached to 
undertake the audit of Double Ink Printers Ltd (DIPL). For the year ended 2015, taking over 
from the small audit firm of Jay and Associates. DIPL print books, magazines and advertising 
materials for the publishing, educational and advertising industries on a print-on-demand 
basis. Printing on demand means that publishers can print the exact quantities ordered by 
retail outlets, rather than estimating in advance how many books are required and often 
printing too few or too many. The average printing turnaround time for DIPL is two business 
days for small orders and five to ten business days for large orders. In addition, five years ago, 
DIPL further expanded its earnings base by having publisher’s titles available as searchable ‘e-
books’ that could be downloaded directly by readers from DIPL’s website.  
Purchase and Inventory 
DIPL purchases 50% of its inventory requirements of paper, ink and binding materials from 
Australian sources and 50% from Asian countries. When inventory received at DIPL’s...

Robert · Accepted Answer

1
Question 1 
Planning is first and foremost step before start executing a task. The same is the case with audit. 
Before proceeding towards audit of financial statements of the company one needs to clearly 
draft the audit plan. This plan should include nature and scope of audit to be conducted. For 
drafting audit plan of the company auditor should have adequate knowledge of business of the 
client. 
After planning is complete, auditor defines the risk in the company. On the basis of risk 
involved, audit procedures to be adopted are decided. Audit procedures may be Substantive audit 
procedures or Analytical audit procedures.  
Analytical procedures are procedures adopted by an auditor to understand the nature of clients 
business as well change therefore. In addition to this, these procedures help to identify the areas 
of potential risk. Analytical procedures try to analyze the relationship between various financial 
information within the head and over the years. Comparison of data over the year can be made 
with the budgets and forecast and relationships can be established within the items of financial 
profitability and position. For example ratio of gross profit to sales, comparison of fluctuations in 
accounts receivable and payable balances over the year. 
Analytical procedures also try to find out material misstatements like unusual fluctuations, 
change in accounting policies etc. After report on analytical procedures has been prepared, 
auditor identifies which are the grey areas and requires in depth examination of books of 
accounts so that true and fair view on the financial statements can be expressed in audit report. 
 (Christensen, et.al., 2012) 
In the given case, in order to find out material misstatement or error or fraud an auditor is 
required to apply analytical procedures. On the basis of financial data of 3 years, an auditor is 
required to plan the audit technique to be adopted after applying analytical procedures to the 
same. 
2
Given below is the following is the analysis of financial items represented in the financial 
statements. 
1. EBook Storage Fees: It can be noticed from the income statement that storage fees has 
been substantially increased from the year 2013 to the year 2015. The increasing trend in 
the storage fees should be analyzed carefully and the reason should be obtained for the 
same. Sudden increase in revenue must be supported by valid documents and reasons. 
Thus, documentation of storage fees so collected can be manually verified through fees 
vouchers so issued so as to check the authenticity of transactions. The Receipt against the 
amount so collected as fees must be authenticated by proper authority and it should be 
pre numbered any missing serial number should be attached in original marked as 
cancelled. If this is not the case, validity of transaction should be checked. 
2. Bad debts: - Aging analysis in the case of debtors classified as bad is must. How old 
debtors are and from how many days the amount is outstanding should be checked in 
order to classify any debt as bad. For the same it is necessary to obtain credit terms and 
limit if any sanctioned party wise. As we can check from the financial statements, bad 
debts also show an increasing trend therefore, reason for the same is to be obtained. It 
may be due to the reason that increase in storage fees as mentioned above is on credit. If 
all the services are provided on credit without gaining information about the credit 
worthiness of customers then, there is a high risk that amount due from them, may turn as 
bad.

You are a senior manager with Stewart and Kathy and you have been approached to undertake the audit of Double Ink Printers Ltd (DIPL). For the year ended 2015, taking over from the small audit firm of...

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