Al Arjawan International, a listed company, manufactures and wholesales a wide variety of products including fashion clothes and audio-video equipment. The company is audited by Baabood, a firm of Chartered Certified Accountants, and the audit manager is Abdul Hamid bin Adam. The following matters have arisen during the audit of the groups financial statements for the year to 30 June 2017 which is nearing completion:

(1). During the annual physical count of fashion clothes at the companys principal warehouse, the audit staff attending the count were invited to purchase any items of clothing or equipment at 30% of their recommended retail prices.

(2). The chief executive of Al Arjawan International, Omar Abdulla Mohamed Al Kindi, owns a private jet. Omar invoices the company, on a monthly basis, for that proportion of the operating costs which reflects business use. One of these invoices shows that Abdul Hamid bin Adam was flown to Dubai in September 2016 and flown back two weeks later. Neither Al Arjawan nor Baabood have any offices or associates in Dubai.

(3). Last week Omar announced his engagement to be married to his personal assistant, Abeer Mohammed Al Lamki. Before joining Al Arjawan in March 2017, Abeer had been Baaboods accountant in charge of the audit of Al Arjawan.

REQUIRED

Discuss the ethical issues raised and the actions which might be taken by the auditor in relation to these matters.