"Case Study on Double Ink Printers LtdAudit, Assurance, & Compliance 1 | P a g e Case Study on Double Ink Printers LtdTable of ContentsIntroduction ..................................................................................................................................... 3Solution 1 ........................................................................................................................................ 3Solution 2 ........................................................................................................................................ 7Solution 3 ........................................................................................................................................ 8Referencing ................................................................................................................................... 10 2 | P a g e Case Study on Double Ink Printers LtdIntroduction The current topic of the assignments surrounds around the audit and assurance activity of thecompany DIPL which is trading out in the business segment of printing of different materials.The company has at present give its audit assignment to a small audit chartered accountancyfirm. During the span of time the company expanded its business while entering into the marketof selling the e-books while having certain publisher titles. Solution 1As a part of general analytical procedures the auditor reviewed the past audited financialstatements and determined the scope of vulnerabilities in the system. The auditor reviewed thefact that whether the collective system of policies, guidelines and various procedures that areapplicable over the company are being followed or not. This is an integrated approach followedup by the management to reduce the overall risk which is affecting the gamut of organisationalstrategic objectives (Messier, 2010). The manager of the audit firm Stewart and Kathy here incase study of DIPL as a part of initial analytical procedures made his analysis over the companywhile creating a relationship between both financial and non- financial data of DIPL. Thecomplete analytical procedures is divided into three segments depicted as follows – Analyticalprocedures inrelation to DIPL AnalyticalPreliminary procedures Final analyticalanalytical review through review substantive route3 | P a g e Case Study on Double Ink Printers LtdIn the preliminary analytical procedures and review the general understanding of the company ismade by the auditor while examining the past year financial data and making a comparativetrend analysis. This will support the business auditor to cover up the next part of analyticalreview on a substantive route. Under this segment the risk of material misstatements areindentified. And finally the core part of the analytical procedure is to conduct the risk assessmentthat will create an understanding of the proceedings of the firm (Brewster, 2011).The auditor inthe present case examined the financial ratio report of the business enterprise to determine whichsegments of the business are needed to be catered with additional caution and care. The belowmentioned table showcase the ratio analysis of DIPL for the last three years and audit analystmade the appropriate comments over that. Ratios Formula 2013 2014 2015Current ratio Current Assets / Current Liabilities 1.42 1.47 1.5 As in general the current ratio of the company DIPL is sufficient to pay out itscurrent liability and is depicting a good figure but auditor while making a detailedexamination of the other factors noticed the fact that the company’s current ratio istrading out at the margin line as per the requirements set up by the BDO financeLTD. to keep the current ratio with minimal of 1.5: 1. Not fulfilling this conditionwill result out in vulnerability of risk of recalling of loan by BDO group. Quick ratio quick assets / current liabilities 0.83 0.94 0.85 As per the general market segment and comparative company analysis the quickratio of the company is satisfactory, though there is decline witnessed from the lastyear figures but there is not much impact. Net Credit Sales / Average Trade 13.8 11.1 9.25Receivable4 | P a g e Case Study on Double Ink Printers LtdDebtorsTurnover In the particular case of DIPL there is particular decline in the receivable ratiosince the last few years. This depicts out the fact that average receivable are takinga longer time to get converted into cash. This shows overall downturn in thefinancial performance of the enterprise. The auditor has to look into the fact thatthis might not be due to impact of existing frauds or errors in the financialmanagement systems of the company. No. Of working days / receivables 26.5 32.9 39.5Days in receivableturnover ratio Due to decline in the receivable turnover will have impact over the performanceand there is delay in the conversion of debtorsInventory Turnover Cost of goods sold / average 12.5 12.8 10.8inventory Net profit before interest and tax / 91.4 65.6 60.5Return on Assettotal assets * 1000 The return on the total asset portion has been substantially declined over the periodof time. Auditor has to carefully examine the key reasons behind the fact andevaluate the information on the issues and other information from the managementof DIPL. Net Profit After Interest And Tax / 25.8 21.3 24.3Return On5 | P a g e Case Study on Double Ink Printers LtdEquity Shareholders Fund * 100 Investment The return available to the business investors did not depict much of deviationstherefore this segment of the financial statement is not of much concern to theAudit firm. Profit Before Interest And Tax / Net 44.8 61.2 7.92Times interestearned InterestTotal Long Term Debt / Total Equity 0 0 0.61Debt equity The company has added debt to its capital portfolio in the recent past. Auditor hasto seek the fact that the Debt – Equity ratio of the company must not cross themandatory requirements of the loan provider company. Currently the ratiorequirement of the loan firm is 1:1 which is maintained by the DIPL.Gross profit Gross Profit / Net Sales * 100 17.6 16.1 15.2 The gross profit of the company DIPL is showcasing a declining trend which is amajor segment to be catered by the auditor. This show that the direct cost related tothe material cost is inclining over the period of time. The Auditor must look intothe fact seriously and check if there is material misstatement existing in thefinancial statements. Net profit Net Profit / Net Sales * 100 6.9 6.08 6.84 The net profit of the company is still consistent over the span of time. The6 | P a g e "