(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.