The cashier of ABC plc has recently been driving to work in an expensive car. He has also started to take holidays in exotic resorts. The cashier has been an employee of the company for several years. In the past, he has always seemed to enjoy a much more modest lifestyle.

The directors of ABC plc have been discussing the likelihood of the company being taken over by DEF plc, a multinational conglomerate. The directors of DEF have been gathering information and have been in discussions with some of ABC’s largest shareholders. ABC’s directors do not expect to be retained if the takeover goes ahead.

Assuming that you are the auditor of ABC plc, you are to consider the effect, if any, that each of these pieces of information should have on your approach to the audit.