You are an audit manager in Cauliflower & Co, supervising the audit engagement of Carrot Co, a large corporation that provides information technology services as their main business. The finance director of Carrot Co, Jose Pivot, contacted you today and this is his statement:

'I was being informed a day ago to a suspected fraud in our sales & marketing department. It appears that several sales representatives have been claiming reimbursement for fictitious travel and entertainment expenses and overstating the expenses incurred. In particular, it has been reported that the sales representatives have claimed on expenses for items such as gifts for business customers and office supplies which were never actually occurred, claimed for business-class airline tickets but in reality had purchased economy tickets, claimed for non-existent business mileage and used the company credit card to purchase items for personal use.

I am very worried about the scale of this fraud, as travel and client entertainment is one of our biggest expenses. All of the alleged fraudsters have been suspended pending an investigation, which I would like your firm to conduct. We will prosecute these employees to attempt to recoup our losses if evidence shows that a fraud has indeed occurred, so your firm would need to provide an expert witness in the event of a court case.

Can we meet tomorrow to discuss this potential assignment?

Carrot Co has a small internal audit department and in previous years, the evidence obtained by Cauliflower & Co as part of the external audit has indicated that the control environment of the company is generally good. The audit opinion on the financial statements for the year ended 31 March 2019 was unmodified.

Required:

a)Assess the ethical and professional issues raised by the request for your firm to investigate the alleged fraudulent activity.

b)Evaluate the arguments for and against the prohibition of auditors providing non-audit services to audit clients.