5 You are an audit manager in Dedza, a firm of Chartered Certified Accountants.

5 You are an audit manager in Dedza, a firm of Chartered Certified Accountants. Recently, you have been assigned

specific responsibility for undertaking annual reviews of existing clients. The following situations have arisen in

connection with three client companies:

(a) Dedza was appointed auditor and tax advisor to Kora Co, a limited liability company, last year and has recently

issued an unmodified opinion on the financial statements for the year ended 30 June 2005. To your surprise,

the tax authority has just launched an investigation into the affairs of Kora on suspicion of underdeclaring income.

(7 marks)

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what

action, if any, Dedza should now take.

NOTE: The mark allocation is shown against each of the three situations.

5 DEDZA CO(a) Tax investigation■ Kora is a relatively new client. Before accepting the assignment(s) Dedza should have carried out customer duediligence (CDD). Dedza should therefore have a sufficient knowledge and understanding of Kora to be aware of any