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PAKISTAN OILFIELDS LIMITED
S.No. Key Audit Matters
How the matter was addressed in our audit
(iii) Recognition of Revenue
(Refer note 4.25 and 27 to the consolidated
financial statements)
The Group is engaged in the production and
sale of oil and gas resources.
The Group recognised net sales during the
year from the sale of crude oil, natural gas
and POLGAS/CAPGAS – Refill of cylinders
amounting to Rs 17,264 million, Rs 14,136
million and Rs 7,478 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
Group 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 Group.
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/CAPGAS
prices. For POLGAS/CAPGAS, also checked
on sample basis Group’s mechanism for
the calculation of price based on OGRA’s
notification. Performed, on a sample basis,
recalculationof crudeoil andnatural 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 Group; (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
recognizedduring the year basedon identified
risk criteria; and
•
Assessed the appropriateness of disclosures
made in the financial statements.