Peter and Peter LLP $($PP$)$ have been the auditors of Optical Limited $($OL$)$ for many years. OL is a manufacturing company in its mature stage and is very stable, reporting consistent or slightly increasing revenues and profits annually. During the most recent year however, the competitive climate in which the company operates changed. The local market for the company$$s products is saturated and this year, a foreign, low cost, high volume competitor entered the market and captured a large percentage of customers $$ many from OL$.$ In addition, one of OL$$s major customers is on the verge of bankruptcy. These changes have come at a particularly bad time for OL since they had been planning an expansion into foreign markets. They had already approached the bank for additional financing and have been tentatively approved pending a review of the most recent annual financial statements.

Required: Adopt the role of PP and identify the impact that these events might have on the upcoming year end audit. Specifically, discuss the procedures PP should take to deal with their responsibility to consider fraud and error.