You are responsible for preparing an audit plan in the following three independent situations:

1. Your audit plan for sales of your client Bolt Ltd places substantial reliance on the system of inter and the use of analytical procedures. Your testing of internal control system for sales has found number of instances where customer's credit rating has not been checked and approval has not be obtained when abnormally large discounts have been given. The sales manager states that these occurrences are the result of difficulties in maintaining past sales level.
2. Since your last audit, your client Rainbow I Lid has introduced a new computer system for inventory.

Management has indicated that the main advantage of the new system over the old one is that it is capable of providing information on the inventory levels and gross margins for both product line and geographical area.

c) Your client MEL has significant loans from its bank. The bank has indicated that it is concerned about MEl's ability to meet specific loan covenants, particularly the return on total assets (net profit/total assets).

Required

1. Discuss how the information provided in Part (a) would affect your audit strategy. (5 marks)
2. Discuss how the information provided in Part (b) would affect your audit strategy. (5 marks)
3. Discuss how the matter in Part (c) is a fraud audit risk factor in relation to MEL's financial report. (5 marks)
4. Discuss how the matter in Part (c) would affect your assessment of going concern. (5 marks)