Sift 3 cups flour twice. In a large bowl, mix flour, baking powder, caster sugar and cocoa. Cream 1 cup butter or margarine; blend into flour mixture. Add 1/3 cup milk, 1 teaspoon vanilla and nuts. Mix thoroughly with hands until well blended. (Dough should be the consistency of pie crust, but not sticky.)
For each cookie, pinch off about 1 teaspoon dough. Roll by hands into balls, each about 2.5cm in diameter. Place on greased baking tins. Do not flatten. Bake about 10 minutes, until lightly browned. Remove from baking tins; cool on racks. When cool, drizzle each generously with chocolate frosting. Sprinkle with candy sprinkles if desired.
To make Chocolate Frosting: Melt the chocolate squares over low heat. Cream with 1 tablespoon of butter or margarine, 1 teaspoon vanilla and 2 cups of icing sugar. Gradually add hot milk, beating until smooth.