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

Question

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.

Robert · Accepted Answer

Ratio Explanation Audit Impact
Current Ratio 
2013: 
1.42 
2014 
1.47 
2015: 
1.5
According to the current assets, 
cash has decreased year by year 
at the same time accounts 
receivable and Inventory 
increased year by year.  
According to the current 
liabilities, accounts payable, 
deferred revenue, provisions, 
accruals has increase at the same 
time interest-bearing liabilities 
has decreasing year by year. 
Cash has decreased due to 
increased of expenses. 
Accounts receivable has 
increased due to the company 
shown to do the credit sale as a 
result account receivable. 
increases. 
Inventory price value increased 
due to increase of  transportation 
cost, tax cost, shipment cost, etc., 
or  inappropriate  method of 
valuing.  
Accounts payable has increased 
due to company shown interest in 
the credit purchase. 
Provisions have  increased  due to 
increase  of credit sales, company 
made provisions to meet its future 
liability against credit sales. 
Accruals increase company wants 
to safe guard its cash, not to 
decrease while paying its expense 
by cash to increase working  
capital.
Inventory control:   
 Maintenance records for 
inventory in  warehouse for  
numbers of  goods in and out 
movement, and needs to focus 
on returns also, company needs 
to use other ending inventory 
valuation method such as LIFO, 
FIFO to reduce the inventory 
value in higher or to show high 
level of net income 
Loan: 
Company’s prior years current 
ratio has not  reached above 1.5,

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...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment