Here are some reasons why knowledge of ratios can prove to be useful in IFRS application:

1. Financial Statement Analysis: Ratios are useful tools for analyzing financial statements and assessing a company's financial performance. This is important when applying IFRS, as the standard requires companies to provide detailed and accurate financial information.
2. Compliance: IFRS requires companies to comply with a range of financial reporting requirements, including the use of specific financial ratios. Understanding these ratios is essential for ensuring compliance with IFRS.
3. Valuation: Ratios are commonly used in the valuation of companies, and are important when applying IFRS as they provide insights into the company's financial health and performance.
4. Comparability: Ratios can be used to compare a company's financial performance against industry benchmarks and competitors. This is important when applying IFRS, as it allows for greater comparability and consistency in financial reporting.
5. Decision-Making: Ratios are useful tools for decision-making, as they provide insights into a company's financial position and performance. This is important when applying IFRS, as it allows for informed decision-making based on accurate and reliable financial information.

For example, an auditor may use ratios such as the debt-to-equity ratio or the current ratio to assess a company's financial health and compliance with IFRS. These ratios provide insights into a company's liquidity, solvency, and financial stability, which are important considerations when applying IFRS. By understanding and analyzing these ratios, auditors can make informed decisions and provide accurate and reliable financial information to stakeholders.

Let's take the example of the debt-to-equity ratio, which is a common financial ratio used to assess a company's financial health and performance. This ratio is calculated by dividing a company's total debt by its total equity.

Suppose an auditor is reviewing the financial statements of Company XYZ, which operates in the manufacturing industry. The auditor notices that the company's debt-to-equity ratio has increased significantly over the past year, from 1.5 to 2.5. This may indicate that the company has taken on more debt in order to finance its operations, which could potentially impact its financial stability and compliance with IFRS.

The auditor may then use this information to perform a more detailed analysis of the company's financial statements, including its cash flow, liquidity, and solvency. This may involve reviewing the company's financial disclosures and notes to the financial statements, as well as conducting additional tests and analyses to ensure compliance with IFRS.

By understanding and analyzing the debt-to-equity ratio, the auditor is able to gain valuable insights into Company XYZ's financial health and compliance with IFRS, and provide accurate and reliable financial information to stakeholders.