You are a senior manager at Cobra & Co, a firm of Chartered Certified Accountants. You are responsible for reviewing quality control and ethical matters which arise with the firm’s portfolio of clients. During recent investigations you identified the following matters:

Asp Co
Asp Co currently qualifies as a small company in the jurisdiction in which it operates, with turnover of $7·5 million (2016 – $5·3 million), and as such is not required by law to have an audit. Until recently, your firm has provided a range of non-audit services to Asp Co including bookkeeping, payroll and tax computation and advice. The company recently obtained an offer for a significant amount of finance to help the company grow. The management of Asp Co has ambitious plans for growth which they believe will result in revenue doubling within one year and then continuing to grow at a similar rate for at least the next five years. In order to secure the funding, the directors have decided to have the financial statements audited and have asked if Cobra & Co will become the company’s auditors, as well as continuing to provide the existing services. This will include auditing the financial statements for the year ended 31 July 2017 at the request of the new financers.

Required:
Comment on the ethical and other professional issues raised, and recommend any actions which should be taken in respect of:
(a) Asp Co; (7 marks)