i. Unicorn Co – Tax Investigation

Ethical Issues:

• Independence and Objectivity: Nnamdi & Co faces potential challenges regarding independence. As both the auditor and tax advisor for Unicorn Co, the firm’s objectivity might be questioned, especially if the tax authority suspects income under-declaration. There could be a conflict between the firm’s duty to remain impartial as auditors and its role in advising on tax matters.
• Integrity: There is a risk that the firm could be seen as failing to detect fraudulent activity or under-declared income, especially if this issue was present at the time the audit was conducted. The ethical duty to report any suspicions of wrongdoing may also come into play.

Action Nnamdi & Co Should Take:

• Review the Audit: Nnamdi & Co should perform a detailed review of the work performed on Unicorn Co, especially in areas related to income recognition and tax reporting. The firm needs to assess whether the income under-declaration was material and whether it was appropriately disclosed in the financial statements.
• Engage with Authorities: Nnamdi & Co should cooperate with the tax authorities, provide full disclosure of any findings, and, if necessary, adjust their audit procedures or reports. The firm should also evaluate whether it is appropriate to continue both the audit and tax advisory services, considering the potential impact on independence.

ii. Hassan Co – Security Consultancy Payments

Ethical Issues:

• Professional Judgment and Transparency: The consultancy payments made by Hassan Co may have material financial implications. The fact that these payments are not being treated as tax-deductible raises concerns about transparency and compliance with tax regulations. Additionally, the purpose of the payments, aimed at preventing consignments from being impounded, may not align with proper business expenses.
• Conflict of Interest: If Nnamdi & Co is involved in advising on these payments, there could be ethical concerns about the firm’s role in advising on potential “questionable” payments that may involve facilitating irregular practices.

Action Nnamdi & Co Should Take:

• Provide Clear Advice: Nnamdi & Co should offer clear guidance on the correct accounting treatment of these payments, referencing relevant accounting standards (e.g., IAS 12 on taxes) and discussing their implications in terms of tax-deductibility and financial statement disclosures.
• Assess Legality and Ethical Standing: The firm should ensure the payments are in compliance with legal and regulatory requirements. If the payments are found to be improper, the firm should advise the client on correcting the accounting treatment and any potential reporting adjustments required.

iii. Adetunji Family – Verni’s Government Position

Ethical Issues:

• Conflict of Interest and Objectivity: Verni’s new role as a senior government official raises concerns about the firm’s independence and potential conflicts of interest. The Adetunji family’s long-term relationship with the firm could create bias in the firm’s work or influence the professional judgment of the auditors and advisors.
• Compliance with Anti-Corruption Laws: Verni’s position may expose the firm to risks related to bribery and corruption, especially if the firm continues to carry out transactions on behalf of the family. This could implicate the firm in activities that violate anti-corruption laws and codes of professional conduct.

Action Nnamdi & Co Should Take:

• Assess Independence: Nnamdi & Co should review its relationship with the Adetunji family to ensure there are no conflicts of interest. The firm should consider whether it is appropriate to continue advising the family, particularly if the firm’s objectivity is compromised due to Verni’s new position.
• Adopt Safeguards: The firm should implement safeguards, such as separating the family’s affairs from other clients, to ensure that no undue influence or bias arises from Verni’s new role.
• Evaluate Anti-Corruption Policies: Nnamdi & Co should ensure that its procedures comply with anti-bribery and corruption laws, particularly with respect to government officials. This may involve conducting further due diligence and ensuring that any transactions or advice related to the Adetunji family are transparent and lawful.