Dell Software Ltd is a small company which develops specialist software for the insurance and banking sector. Its finance director, Michael Jordan, has recently been on a training course called 'Reducing the Stress of an Audit'. He has returned to the office with a number of concerns which he had not previously known existed.
As a result, he has written to you as audit partner for clarification on the following issues.
1. Is it appropriate for your firm to continue as auditors when it also provides other services (most notably preparation of the company's corporation tax computation and dealing with the tax affairs of the directors)?
2. I have invited you to attend our regular board meetings but recognize that this may influence your audit opinion.
3. We have often sought your advice on legal and accounting issues, and I assume that it is in order for us to extend this to the preparation of submissions to the bank for additional finance.
4. The last point has particular significance as the finance director's letter also indicates that Dell Software Ltd has been very successful, and intends to improve its status by buying a larger ailing computer company.
REQUIRED
(i) Write a letter to the finance director which addresses the ethical issues arising from his concerns. The letter should be brief and deal with the major items only, as the intention is not to swamp the client with detail. [9 marks]
(ii) Describe the ethical repercussions arising from the potential change in size of Dell Software Ltd in relation to your firm. [6 marks]

(b) You are a sole accountancy practitioner. The following situations have arisen:

1. At the request of Accenture Ltd (an audit client) you have agreed to provide advice on the preparation of a tender for a very large contract. Subsequently, client Blossom & Co (a partnership for whom you prepare accounts and provide a wide range of advice) also asks for your assistance in preparing a tender for the same contract.
2. Whilst carrying out the final audit of the accounts of Gymkana Club Ltd (deadline one month after the reporting date), you discover a substantial trading debt due from another client, Diadem Ltd. Although it has not been made public, you are aware that Diadem Ltd is in serious financial difficulties and the bank is considering appointing a receiver. The directors of Gymkana Club Ltd have made no allowances for irrecoverable or doubtful receivables against the amount due from Diadem Ltd.

REQUIRED
Explain the action you would take in each of the above circumstances.