You are an audit manager at James & Co LLP, a firm of Chartered Certified Accountants. You have been recently assigned to the audit of Bradford Leisure Products plc (BLP) for the year ended 31 December 2023. The CEO of BLP plc, is Andrew Bradford. BLP plc is one of James & Co LLP's five main clients.

The following two exhibits provide information relevant to performing the audit of BLP Plc:

Exhibit 1 Recent local newspaper article

The CEO of BLP plc, Andrew Bradford, has recently got engaged to Lollie James, the daughter of Arthur James who is a senior partner of James & Co LLP, a firm of Chartered Certified Accountants.

Andrew Bradford is currently involved in a court case because, six months ago, a whistle blower had been fired by Andrew Bradford for bringing to light several instances of intimidation and bullying of BLP plc employees by the CEO.

Exhibit 2 Taxation

The audit engagement letter and the working papers of the taxation section of the audit file, indicate that James & Co LLP performed the tax computation for BLP plc and provided the company with advice on tax planning. All the taxation services have been invoiced to BLP Plc as part of the total fee for the audit and other professional services.

Furthermore, BLP plc are in dispute with HMRC over a tax bill from the year ended 31 December 2022. The CEO, Mr. Andrew Bradford, requires James & Co LLP's help to negotiate a settlement of that tax bill with HMRC.

a.Based on the information in Exhibit 1, identify the behavioural issue(s) involved regarding the CEO and comment on the possible threat to the behavioural standard(s) mentioned in the IESBA Code of Conduct in respect of this audit.

b.Based on the information in Exhibit 2, identify the behavioural issue(s) involved regarding taxation and comment on the possible threat to the behavioural standard(s) in respect of this audit.

c.In respect of the behavioural issues and threats identified under a) and b) above, what course of action would you take, and why?

d.Upon auditing BLP plc's financial statements, the audit manager concluded that misstatements exist in BLP plc's financial statements. These misstatements are material but not pervasive to the financial statements. What should be the basis for the auditor's conclusion, and which type of audit opinion should be given in the audit report?