Case study: Expenses A tax audit was conducted on XYZ investment for the financial period ending 31 December 2015. The following expenses were selected for testing by auditors and below are the explanations from the taxpayer and evidence obtained. 1. Donations The taxpayer made a donation to the tune of E100,000.00 to a local orphanage for a X-mas party. The Director's wife of XYZ runs the orphanage. 2. Repairs and Maintenance During the year, there was a cost to the tune E1,500,000.00 for repairs and maintenance. Further interrogation revealed this was an expense incurred for the replacement of an engine of a production machine that would increase the useful life of the asset, improve productivity by 20%. 3. Existence of expense There was an expense to the tune E150,000,000 under the line item ancillary expenses. Auditors enquired and requested documentation to understand the nature of this expense and the taxpayer was not in a position to furnish the requested documentation because their key Accountant left and it is suspected there was mismanagement in the filing system. EXPLAIN WHETHER YOU ALLOW OR DISALLOW THIS EXPENSES AND WHY FOR TAX PURPOSES