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Case Study 3 Ahmed is the Senior Accountant in Tips Manufacturing Company in the Sultanate of Oman For the last ten years, Ahmed is preparing the financial reports, by consolidating all the activities of different branches. Ahmed was also involved in the planning and review process in the company. Considering the experience and expertise, the company has recently promoted Ahmed as the Chief Financial Officer. Being in the management position, Ahmed attended the meeting of the Board of Directors, in which the directors have emphasized five key performance indicators (KPI) of the company. Two of these indicators were: To increase company revenue by 8% per year. To minimize the operating expenses by 5% annually. The Board also informed Ahmed that the once the KPIs are achieved, he will be eligible for a bonus that will be equal to 1% of the net profit of the company. Until last year, Ahmed could able to manage these targets efficiently and is rewarded based on the net profit. The last year was difficult for the Tips Manufacturing Company. Because of a recent crisis, the raw materials from China was not shipped. It forced the company to buy similar raw materials from other countries, which of course were priced higher. This shift has caused severe stress on the profitability of the company. In order to finance the additional requirements, the company has taken a short term working capital loan. Though the loan has to be repaid in the current year, Ahmed didn't pay and reported the loan as a long term loan in Paseo the financial statements, expecting a moratorium from the bank. No interest is paid during the year and the unpaid interest is not reported as well. Subsequent to the reports of raw material shortage, the Board of Directors asked the internal audit department to submit a report on the operations of the company. The internal audit department unearthed the various frauds in recording various expenses, assets and liabilities in the financial statements. They also found that the profit is overstated because of these adjustments. The company has severe liquidity issues and must repay the loans for which the company has no options at present. The value of assets is inflated and the liabilities were quite high Based on this case study answer the following questions. (Maximum word count for Case Study is 400 Words) (4-3-3 -10 Marks) Briefly explain the various hypothesis in the positive accounting theory which are relevant in this case? Identify and explain TWO symptoms of going concern relevant to the case study? 3. Critically evaluate the criticisms against positive accounting theory, based on the relevant facts of the case. 1. Case Study 5 It was during the diploma 1 year, Samuel showed interest in pursuing accounting as his profession. He felt that accounting is a profession which allows him to use his expertise and provides him an option to enter the various professions such as Management Accountant, Financial Accountant and an Auditor. At present, Samuel is working in the KMG Auditing Company. He has successfully completed his training and is currently undertakes an auditing assignment of a public limited company in the regionWhile going through the various accounting statements as part of auditing, he noted down the following points. There are certain expenses of the Board of Directors, which are accounted in the financial statements of the company. For instance, two of the directors went to Malaysia with their family members. Though the purpose of travel was to attend a one- day conference, they stayed there for one weck. During this time, they have visited many places. In the accounting statements, their expenses are included under the head traveling expenses The company has purchased a few assets which are fully written off during the year itself. For instance, the furniture's which the company bought during January of the current year was considered as an operational expense. When Ahmed checked the purchase order and the related invoices, it was mentioned that the supplier is ready to provide services free of cost, for the next three years. IPares Few fixed assets were revalued during the year and was reported at their market price in the financial statements. It was observed that the company prepared separate financial reports for cach subsidiary during the last year. However, the financial statements are prepared in a consolidated manner during the current year. There was no mention about the way fixed assets are valued for the different subsidiary units. Few contracts which the company signed is available in the record. For example, the company has signed a contract to provide 50,000 units of a material every year for the next three years, to an overseas company. The company received the full amount of the 150,000 units as an advance and considered the whole amounts revenue in the current year Based on the case, answer the following questions. (Maximum word count for Case Study is 400 Words) (5+5 = 10 Marks) Briefly explain the various accounting concepts and conventions violated in this case. For each of these accounting concepts and conventions, identify the correct treatment if you are an accountant working in the company. 1. 2

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