products across the country. During the audit planning for the year ended 31 December 2025, the audit team noted that the company has placed increased reliance on automated controls and cloud-based documentation.
In response, the audit manager instructed the team to adopt a risk-based audit approach in accordance with International Standard on Auditing (ISA) 315. The team also established that the company uses an integrated test facility within its accounting software as part of its processing controls. Further, because management is under pressure to meet loan covenants set by a local bank, there is concern that revenue may be susceptible to manipulation.
Required:
(a) With reference to the audit of Afya Supplies Ltd. for the year ended 31 December 2025, describe FOUR procedures the audit team should perform in order to obtain an understanding of the entity and its environment in accordance with ISA 315.
(b) In relation to the computerised accounting environment of Afya Supplies Ltd.:
(i) Explain the term “integrated test facility”.
(ii) Summarise TWO advantages and TWO disadvantages of using integrated test facilities as part of Computer Assisted Audit Techniques (CAATs) in the audit of the company.
(c) Considering the pressure on management of Afya Supplies Ltd. to meet the bank’s loan covenants, discuss THREE indicators of fraudulent financial reporting that the auditor should be alert to during the audit.
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