Burwood Assurance Partners (BAP) is a small accounting firm based in Melbourne. BAP's audit clients are mainly small and medium scale businesses. After working for BAP for 6 years, you have been appointed as the audit manager in 2020. One of your responsibilities is to review ethical matters which have occurred in different audit engagements. You found the following issues in your recent investigations.

(a) BlueSky Ltd (BlueSky) is a medium size construction firm located in Melbourne. BlueSky has been BAP's audit client for the last 5 years. Furthermore, the same audit team has been allocated to audit BlueSky's financial reports for the last 5 years. Peter, who is the audit partner for the past 5 years, had developed a good relationship with BlueSky's CEO Jack. Peter and Jack frequently socialise with each another, and their families go on holiday together. BlueSky had a solid financial performance for the last 5 years. However, in 2020, due to the influence of COVID-19 pandemic, BlueSky is suffering poor cash flows. Final audit work for the year ended 30 June 2020 has been done but BlueSky is unable to pay for the audit fee due. Jack requested to pay for the due audit fee in July 2021 because he believes that BlueSky can recover from such financial distress in 2021. Peter agreed with Jack's optimistic assessment, but you still have concerns about the situation.

Required

1. Identify and discuss the ethical and other professional issues found in above three cases.

2. Recommend the actions that should be taken in relation to each of the issues identified in the above three cases.