Ron and Jessica (husband and wife) have been running their business as a partnership formore than twenty years. Both of them are near retirement age but they feel so attached with their business that they would not like to sell it. On the other hand the demand for their 
products is rising significantly that they have to expand their production department and recruit more staff. More over the expansion also requires more financial investment in the business.

At a partner's meeting they decide to transfer a major part of their shares to their children.They have two daughters and one son. Their son (Robert) is an air conditioning engineer whereas one of the daughters (Chan) is a medical practitioner. The youngest daughter holds a 
degree in management.The children are excited by this move, but the youngest one (Tara) tells her parents that before doing any transfer, it is necessary to convert the partnership into a company. It is agreed and the company is incorporated under the name of R & J Co. Ltd. The shares are distributed as follows:

                           % shareholding

Jessica 10

Ron 10

Robert 20

Chand 20

Tara 40

The reason for giving Tara a larger share than the other two children is because she will be involvedin the day-to-day management of the company. During the first meeting of the company, Tarainforms all the shareholders that the business is no longer governed by Partnership law, but the Corporations Act and the requirements of the Corporations Act are different from that of the Partnership Act. Tara makes it very clear that the company, given its size, needs to have itsfinancial statements audited every year. The other shareholders agree with the proposal but arguethat they need to understand:

1. What the audit would involve?

2. Who could be the auditor?

3. Would it be wise to allow a third party (the auditor) access to their confidential business information?

4. What if they do not have the accounts audited?

5. Can Tara do the audit herself?

Finally the board agreed that the company issue an invitation to tender for the audit of the company's financial statements.You are manager in one of the audit firms in the city and the audit partner has decided to bid for thetender. He has asked you to prepare a report for him to include in the tender document. Your report should address the points raised by the shareholders but you are also required to 
include any otherpoints that they might have missed.