Riyaz is a public listed company with a reporting date of 30 November 2016. It owns...

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Riyaz is a public listed company with a reporting date of 30 November 2016. It owns and operates various online businesses. Its customers order goods through Riyaz's websites, and these goods are delivered by third party couriers. At 30 November 2016, the finance director owns 15% of Riyaz's ordinary shares and the operations director owns 10%. The rest of the shares are owned by numerous other shareholders. All ordinary shares carry equal voting rights. At the most recent annual general meeting, some of the shareholders expressed dis- satisfaction with the financial performance of Riyaz. They also complained that the directors were overpaid and were not demonstrating effective stewardship of the company's assets The accountant of Riyaz started her employment during the year ended 30 November 2016 and has encountered a number of issues. On 1 December 2015, a share-based payment scheme was introduced for Riyaz's six directors. The directors are entitled to 600,000 share options each if they remain employed by the company until 30 November 20X8. The fair value of each share option was K4 at 1 December 2015 and K5 at 30 November 2016. At 1 December 2015 it was estimated that none of the directors would leave before the end of three years but, as at 30 November 2016, the estimated number of leavers was revised to one. The finance director has told the accountant that no entries or disclosures are required for this scheme in the current year's financial statements because it has not yet vested. The wife of the finance director is the sales director of Riyaz. Their son is undertaking an internship with Riyaz and receives a salary of K30, 000 per annum, which is in line with market rates. The finance director has ordered the accountant to omit any reference to his son's salary from the financial statements. At the start of the current year, Riyaz purchased the trade and assets of a fashion retail chain that operates a number of shops in large towns and cities. The chain did not sell its products online. The press were critical of Riyaz's decision, accusing them of over-paying for the chain and of expanding into a sector in which they lack experience and expertise. The performance of the shops, which is monitored internally by Riyaz's chief operating decision makers, has been poor. When reviewing the operating segment disclosure note prepared by the finance director the accountant noticed that the new retail business has been aggregated with the rest of Riyaz's trading operations and disclosed as a single reportable segment. The gross profit margins made from the retail outlets are much lower than those made from Riyaz's online operations. From overhearing conversations, the accountant is aware that Riyaz's finance director is a good friend of the former owner of the retail chain. Required: Discuss the accounting and ethical implications of the above from the perspective of the accountant. (18 marks) Professional marks will be awarded in this question for the application of ethical principles. (2 marks) Riyaz is a public listed company with a reporting date of 30 November 2016. It owns and operates various online businesses. Its customers order goods through Riyaz's websites, and these goods are delivered by third party couriers. At 30 November 2016, the finance director owns 15% of Riyaz's ordinary shares and the operations director owns 10%. The rest of the shares are owned by numerous other shareholders. All ordinary shares carry equal voting rights. At the most recent annual general meeting, some of the shareholders expressed dis- satisfaction with the financial performance of Riyaz. They also complained that the directors were overpaid and were not demonstrating effective stewardship of the company's assets The accountant of Riyaz started her employment during the year ended 30 November 2016 and has encountered a number of issues. On 1 December 2015, a share-based payment scheme was introduced for Riyaz's six directors. The directors are entitled to 600,000 share options each if they remain employed by the company until 30 November 20X8. The fair value of each share option was K4 at 1 December 2015 and K5 at 30 November 2016. At 1 December 2015 it was estimated that none of the directors would leave before the end of three years but, as at 30 November 2016, the estimated number of leavers was revised to one. The finance director has told the accountant that no entries or disclosures are required for this scheme in the current year's financial statements because it has not yet vested. The wife of the finance director is the sales director of Riyaz. Their son is undertaking an internship with Riyaz and receives a salary of K30, 000 per annum, which is in line with market rates. The finance director has ordered the accountant to omit any reference to his son's salary from the financial statements. At the start of the current year, Riyaz purchased the trade and assets of a fashion retail chain that operates a number of shops in large towns and cities. The chain did not sell its products online. The press were critical of Riyaz's decision, accusing them of over-paying for the chain and of expanding into a sector in which they lack experience and expertise. The performance of the shops, which is monitored internally by Riyaz's chief operating decision makers, has been poor. When reviewing the operating segment disclosure note prepared by the finance director the accountant noticed that the new retail business has been aggregated with the rest of Riyaz's trading operations and disclosed as a single reportable segment. The gross profit margins made from the retail outlets are much lower than those made from Riyaz's online operations. From overhearing conversations, the accountant is aware that Riyaz's finance director is a good friend of the former owner of the retail chain. Required: Discuss the accounting and ethical implications of the above from the perspective of the accountant. (18 marks) Professional marks will be awarded in this question for the application of ethical principles. (2 marks)

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