Your elder brother Kazim has been hired as CFO in Sohar Power Company SAOG. Sohar Power company SAOG owns and operates the largest power generation and water desalination plant in the Sultanate. Sohar Power is incorporated in 2004. Since then, the company has built and owns the 585 MW electricity generation and 33 MIGD seawater desalination plant. Sohar Power has a history of research and development in the field of power generation and water purification. It has a long established policy for the treatment of expenditure on research and development, on which it spends huge amount annually.

Recently, Kazim becomes aware that an investment of OMR 100,000 which was made last year for research and development programme, has not been properly evaluated. Although in aggregate OMR 1 million has been spent, but Kazim thinks that the criteria for the investment was not fair and clear. The director for the research committee did not assess properly and the output of the investment was poor. Kazim enquires Mr. Abid, the director of research committee to justify the investment. Abid replies by saying that they will satisfy the auditors in any way. However, the financial year end is only two months away and OMR 1 million in write-off at this late stage in the financial year would cause Kazim and his team in difficulties. The company has to finalize the year-end report. Kazim called the meeting of directors and discussed the issue.

During the meeting they have serious reservations on research committee. One of the directors suggested that this amount will be considered as an asset and it will be presented on the financial statement for this year and it would be write off in the next financial year.

a. In your opinion, what decisions will be taken by Kazim to satisfy the auditors and board of directors of the company? How this transaction would be reflected on financial statement of Sohar Power? (5 Marks)

b. Abid, working on a high position in a company thinks that auditors can be satisfied in an unethical manner. How could such an unethical behavior be a learning experience for the rest of the employees? In your opinion, who is to be blamed for this incident in Sohar Power and why? (5 Marks)

Your answer should be around 400 words for each question.