(b) The chief executive of Xalam Co, an exporter of specialist equipment, has as

(b) The chief executive of Xalam Co, an exporter of specialist equipment, has asked for advice on the accounting

treatment and disclosure of payments made for security consultancy services. The payments, which aim to

ensure that consignments are not impounded in the destination country of a major customer, may be material to

the financial statements for the year ending 30 June 2006. Xalam does not treat these payments as tax

deductible. (4 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.

(b) Advice on payments■ As compared with (a) there is no obvious tax issue. Xalam is not overstating expenditure for tax purposes.■ The payments being made for security consultancy services amount to a bribe. Corruption and bribery (and extortion)are desi