You are the manager responsible for the audit of Aspersion, a limited liability company, which mainly provides national cargo services with a small fleet of aircraft. The draft accounts for the year ended $30$ September $2001$ show profit before taxation of Kshs$27$ million $(2000$ Kshs$22$ million$)$ and total assets of Kshs$104$ million $(2000$ Kshs$98$ million$).$ The following issues are outstanding and have been left for your attention:

$1)$ The sale of a cargo carrier to Abra, a private limited company, during the year resulted in a loss on disposal of Kshs$400,000.$ The aircraft cost Kshs$12$ million when it was purchased in October $1992$ and was being depreciated on a straight$-$line basis over $20$ years. The minutes of the board meeting at which the sale was approved record that Aspersion$$s finance director, Iain Jolteon, has a $30\%$ equity interest in Abra.

$2)(2)$ As well as cargo carriers, Aspersion owns two light aircraft which were purchased in $1998$ to provide business passenger flights to a small island under a three year service contract. It is now known that the contract will not be renewed when it expires at the end of March $2002.$ The aircraft, which cost Kshs$450,000$ each, are being depreciated over fifteen years.

$3)(3)$ Deferred tax amounting to Kshs$570,000$ as at $30$ September $2001$ has been calculated relating to tangible non$-$current assets at a tax rate of $30\%$ using the full provision method $($IAS $12$ Income Taxes$).$ On $1$ December $2001,$ the government announced an increase in the corporate income tax rate to $34\%.$ The directors are proposing to adjust the draft accounts for the further liability arising.

Required:

For each of the above points:

i$.$ Comment on the matters that you should consider; and

ii$.$ State the audit evidence that you should expect to find, in undertaking your review of the audit working papers and financial statements of Aspersion.