Page 117 - Pakistan Oilfields Limited - Annual Report 2020

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115
PAKISTANOILFIELDS LIMITED
S.No.
Key Audit Matters
How the matter was addressed in our audit
(iii)
Recognition of Revenue
(Refer note 4.24 and 25 to the financial
statements)
The Company is engaged in the production
and sale of oil and gas resources.
The Company recognised net sales during the
year from the sale of crude oil, natural gas and
POLGAS – Refill of cylinders amounting to Rs
17,264 million, Rs 14,136 million and Rs 6,567
million respectively.
Revenue is recognised when control of the
products has transferred, being when the
products are delivered to the customer,
and there is no unfulfilled obligation that
could affect the customer’s acceptance of
the product. Revenue is measured at the
fair value of the consideration to which the
Company expects to be entitled in exchange
for transferring good/ services. Effect of
adjustments, if any, arising from revision in sale
prices is reflected as and when the prices are
finalised with the customers and / or approved
by Government of Pakistan.
We considered this as key audit matter due
to the significance of the amounts requiring
significant time and resource to audit due
to magnitude, inherent risk of material
misstatement and revenue being a key
economic indicator of the Company.
Our audit procedures in relation to the matter,
amongst others, included the following:
Assessed the design, implementation and
operating effectiveness of the relevant key
internal controls over revenue recognition
from the sale of products;
Performed test of details on sample
basis for sales transactions by inspecting
respective invoices, delivery challans and
acknowledgement of customers;
Checked on sample basis, notifications of
OGRA for natural gas and POLGAS prices.
For POLGAS, also checked on sample basis
Company’s mechanism for the calculation of
pricebasedonOGRA’s notification. Performed,
on a sample basis, recalculation of crude oil
and natural gas prices in accordance with
applicable petroleum policies / agreements/
decision
of
Economic
Coordination
Committee of the Cabinet;
·
Where pricing is provisional / sales agreement
not finalised, (a) reviewed correspondence
with the customers and relevant government
authorities during the year and held
discussions with the Company; (b) inspected
term sheets etc; and (c) checked price
recorded is in line with applicable petroleum
policy / agreed with the customers;
·
Assessed sales transactions on either side of
the statement of financial position date to
assess whether they are recorded in relevant
accounting period;
·
Performed analytical procedures to analyse
variation in the price and quantity sold during
the year;
·
Tested journal entries related to revenue
recognized during the year based on
identified risk criteria; and
·
Assessed the appropriateness of disclosures
made in the financial statements.