1. Pamela has been running a florist shop for thirty years. Last year she decided to retire and put her shop up for sale. Pamela was approached by Peter, a biology undergraduate student at Nottingham Trent University and a keen enthusiast of the flower business, who had just inherited a large sum of money from his uncle and was looking to open his own business.

In June Pamela told Peter that the approximate annual net profit of her business was 15,000. She invited Peter to check her records, but Peter did not want to incur extra cost on an accounting service.

Moreover, Pamela indicated that she expected to achieve a greater profit this year as she had secured a contract for the supply of a rare type of tulip from Holland, which was not grown anywhere in England, and thus, in her opinion, would be in high demand by customers.

Peter purchased the shop in September. He immediately discovered that the tulips supplied from Holland were not of a rare form and were of the same type as grown elsewhere in England. Peter had to sell these tulips on a promotional basis in order to avoid severe losses.

Furthermore, when Peter referred to a professional accountant for assistance with a report at the end of fiscal year in April, it was discovered that Pamela hadoverestimated her current year's net profit by more than 25% due to carelessfinancial bookkeeping.

Advise Peter.