Expert Necessity For Audit: Issues With DIPL

Issues encountered by the firm DIPL

Expert necessity whilst undertaking auditing

Obsolescence of inventory

Heenetigala et al. (2016) asserts that the subsistence of payment for mainly inventory obsolescence largely for estimated reduction in value is mainly due to storage weakness. In addition, analysis of business case on the functions of the corporation DIPL reflects that there subsists prevalence for inventory obsolescence allowance for principally inventory. For itself, this is mainly by reason of storage vulnerability that can again influence and this sequentially can lead to accepted lessening in value. Examination of business report also reflects that outlays for inventory are undertaken at applicable currency of country. In addition to this, board also demonstrated that provision for inventory obsolescence has the requirement to be necessarily written back (Cohen et al. 2014). Accordingly, the corporation DIPL has the necessity for specialist service for estimation of value of obsolescence.

Depreciation of particularly fixed assets

The procedure of making use of straight line method was predominantly for the purpose of allowance of cost over estimated useful lives of definite assets (Duncan and Whittington 2014). For itself, for calculation of specific impairment of assets in conjunction with depreciation, professional service can be utilized by the company DIPL while carrying out auditing.

For averting issues associated to appropriate monitoring of the work of audit

Proficient assessor can help in averting issues associated to monitoring audit:

· Approximation of services related to gas as well as oil reserves

· Estimation of environmental liabilities together with costs of clean-up of location.

· Examination of atypical tax or else intricate compliance concerns (Mio 2013)

· Estimation of the complex financial instruments, property, plant as well as equipment, antiques, artistic work,  assets as well as liabilities acquired considered under business combination, enumerated impairment of both assets including intangible assets

Actuarial computation of firm’s liabilities that are related to the insurance agreements or else the advantage plans of the members of staff (Chong 2015)

Recognized Factors

Significance of the identified factors

Depiction of the way the acknowledged factors

Fraud Risk influencing  materiality of financial pronouncements  

Fraud risk can be regarded to be a very crucial facet that can unfavourably influence the materiality of financial information. Based on the findings of the business study, it can be mentioned that there subsists intense pressure from mainly the board of the company DIPL (Houghton et al. 2013). Therefore, because of this, the complete IT segment of the company DIPL someway handled to institute a new arrangement of accounting. Fundamentally, this procedure also exposed the entire firm DIPL to diverse risks associated to fraudulent acts.

As correctly mentioned by Yao et al. (2015), mistakes stem while acquiring or processing data using financial pronouncements are developed. Irrational accounting estimation also exists from failure to notice and misapprehension of different pieces of evidence (Heenetigala et al.  2016). Moreover, deceptive actions can be regarded to be an extensive notion related to falsified activities that again be the reason of misstatements of financial pronouncements. The comprehension of the auditor as regards the company’s internal control of a company might magnify and alleviate the business concern concerning the material risk of misstatement. Again, the fraudulent activities due to massive pressure on workers and course of execution of new accounting system have the potential to shape entire monetary information (Duncan and Whittington 2014).

The operating manager in the department of Information Technology (IT) was not pleased with the course of setting up of company’s machines. Over and above this, enormous pressure was on workers of DIPL for reconciling and investigating the innovative system properly (Heenetigala et al.  2016). Nevertheless, the upshots of the test revealed the fact that a small number of transactions of the company that were mainly carried out during the closing period were not rightfully allotted

Accounting strategies  influencing  materiality of financial information

Process of valuation of raw materials applying the average cost mechanism was essentially not suitable. Thorough evaluation of the business case on DIPL reveals that inventory estimation process of the raw material particularly at the average cots was not suitable since the present cost of paper considerably enhanced from the currently applied method of average cost (Mio 2013).

 The accounting measures that are adopted by the administration of the firm DIPL for appraisal of raw materials can be considered to be a related factor that can influence the materiality. This is primarily owing to the fact that accounting procedure assists in assessment of raw materials. This in turn can facilitate users to comprehend the fitting state of different accounting items (Ball et al. 2015). In addition to this, the administration of DIPL necessarily lacks both integrity and objectivity. Subsequently, this exerts an impact on the status of the business concern in the long term. Furthermore, mistakes also crop up in the course of executing particular accounting principle associated to quantity, categorization, way of arrangement as well as revelations. Moreover, misrepresentation of company’s pecuniary declarations also creates inherent risk since this improperly the financial information to distinct users of the monetary assertions for example stakeholders, creditors, prospective investors in addition to debtors (Pilcher 2014). 

Process of valuation of inventory of the raw material predominantly at the average cots was not appropriate. In addition to this, the inapt assumptions and mechanisms of valuation exert influence on the substantive processes of accounting systems (Pilcher 2014). Nevertheless, this might have an effect on the substantiation of the assessor together with the audit policy decisions.

Different environmental factors influencing materiality:

There are numerous business deals that are not considered while developing financial assertions. This omission might have been carried out intentionally or by mistake by the company’s management (Pilcher 2014). This in turn might have possibly necessarily led to irregularity in the procedure of effective planning specially in the process of marketing as well as sales activities (Ball et al. 2015). Again, DIPL also failed to achieve targeted level of profit as compared to the figure of sales. Again, this is primarily due to failure of the management of DIPL to recognize definite items of accounting. Based on thorough evaluation of the case study, it can be hereby asserted that corporation failed to investigate diverse micro and macro objectives that should have been considered under socio-political as well as economic facets (Mio 2013).

Incapability to integrate the environmental facets by the administration might affect materiality of DIPL’s pecuniary statement. In effect, this might affect the financial outcomes and consequently the opinion of audit.

Incapability of the administration to consider different micro with macro factors and exclusion of different economic transactions also show the way to distortion in the financial announcement. Also, users of this information also fail to attain a fair view of statements that consecutively can have an effect on the course of planning and carrying out audit, evaluating the influence of recognized misstatements (Pilcher 2014).

Process of appointment of CEO affecting materiality

The procedure of appointment of company’s CEO in DIPL can be regarded to be very complicated. Normally, the procedure of appointment of CEO, transition process of prior chief executive officer Ms Rebecca Styles and actions carried out by Mr. William Jackson engaged diverse risks as the specific processes were not in compliance with necessary directives (Chong 2015). In actual fact, the actions were initiated late and inappropriate appointment by the CEO in the procedures and leaving of workers might also expose the business to different kinds of risks (Houghton et al. 2013). As a result, this subsequently can have an effect on the materiality of process of audit of DIPL. 

Complexity of the course of selection and engagement of the CEO in DIPL also exerts immense effect on intelligibility. Thus, this makes the judgement makers’ vision obscure (Mentz 2014). Hence, this can be considered to be a crucial factor that influences materiality.

The process of selecting and engaging the chief executive officer (CEO) in DIPL can be considered to be very complicated. Essentially, there is requirement for official, systematic as well as transparent process for the scheduled engagement (Yao et al.  2015).

Specific factors associated to novel system of recording accounts

Materiality gets affected by the process of records maintenance of cash receipts by accountants (Sutherland 2017). Outlays are mainly undertaken by means of electronic payment system. The procedure of maintaining copy of firm’s receipt after downloading the mail and undertaking reconciliation of the entire batch can be done by accountants. This statement of reconciliation developed by accounts professionals of DIPL has the need to be reviewed from time to time and not only during the end of the month. Besides, the revenue acquired by DIPL through marketing of different e-book, reprint of text books might perhaps unfavourably have an effect on materiality (Duncan and Whittington 2014).

The important factors that exert impact on materiality is basically the process of accounting that can be used by the firm DIPL for approximating and registering items   of accounting that is to say raw materials (Cohen et al. 2014). Systematic analysis of raw materials acquires support from accounting processes and this consequently can further help in comprehending suitable usage.

Outlays undertaken by means of electronic payment system exerts effect on overall process of maintenance of details of receipt and arrangement of statement of reconciliation. In essence, incapability of firm to record receipts of cash and arrange reconciliation statement can show the way to failure of the administration (Heenetigala et al. 2016). The management of DIPL might fail to comprehend significance business transaction and discrepancies. This subsequently can have an effect on the overall process of arrangement of financial announcements. Accordingly, the auditor of DIPL might also fail to put across their opinion concerning financial announcement particularly from the standpoint of materiality (Christensen et al. 2012).