Tickett & Run have recently been appointed auditors to Massive Holdings PLC, a group of ten companies based in the North of England. Massive has subsidiary companies, all of which are wholly owned, which trade in various activities from machinery importers to car dealerships.

One of the auditors, whilst looking for biscuits one night whilst the auditors were working overtime, stumbles accidentally across the minutes of a directors’ meeting which is not in the minute book.

One of the minutes refers to a partnership called Dragon which Massive appears to have lent money to, although there is no record of this in the books. In turn Dragon appears to have granted Massive a very lucrative machinery importing contract on which Massive has reported a substantial profit. The other partners in Dragon appear to be the directors of Massive.

Massive has transferred shares into a company called Bluebottle Ltd. Bluebottle appears to be a joint venture between Massive and a company called Dragon 2, about which nothing is known, for a time share development in Spain.

The wife of the CEO is reported to own 15 per cent of one of the company’s major suppliers of office equipment.

Massive appears to have made a loss on a contract to supply agricultural machinery to a company based in Africa which hasn't paid. The loss appears to have been covered by a transaction with a partnership called Massive 1. The auditors have checked the transaction in the books of Massive and to all intents and purposes the African contract made a profit and the debt was cleared by discounted bills of exchange. It is unclear how this transaction has been funded by Massive 1 but there is reference to a loan from an unknown bank to Massive 1 secured by Massive itself. This does not appear in the books of Massive.

Required:

(i) Explain what actions the auditors should take in respect of these revelations.
(ii) How are they likely to affect the future conduct of the audit?