You are a manager working in the public sector audit department of Fern & Co. You are responsible for the audit of Moosewood Hospital, for the year ended 31 March 2017. You have recently visited the audit team, who are currently on site performing the fieldwork, to review the work performed to date and to discuss their progress. During your visit the audit senior informed you of the following matter:

During a review of the valuation of medical inventories, including medicines used in a variety of treatments at the hospital, it was noted that a number of items had passed their recommended use by dates. These were recorded on an inventory spreadsheet maintained by the financial controller and were easy to spot because they were highlighted in red. One of the audit team inspected a sample of the inventories in question and confirmed that their use by dates had expired. When asked about this, the financial controller stated that the audit team must be mistaken. The audit team requested to look at the spreadsheet again but he refused. The next day the finance director confronted the audit team accusing them of extending their investigations ‘beyond their remit’. He also threatened to remove them from the premises if they continued to ask questions which were not relevant to the audit of the hospital’s financial statements. Since then the audit team have been unable to complete their audit of medical inventories. They have also noted that the room where the inventories were previously kept has been emptied.

Required:
(a) Identify and explain the ethical and professional issues raised and recommend any actions which should be taken in respect of the matter described by the audit senior. (10 marks)