Page 169 - Interloop Annual Report 2018-2019

INDEPENDENT AUDITOR’S INDEPENDENT AUDITOR’S

REPORT TO THE MEMBERS OF REPORT TO THE MEMBERS OF

INTERLOOP LIMITED INTERLOOP LIMITED

REPORT ON THE AUDIT OF CONSOLIDATED REPORT ON THE AUDIT OF CONSOLIDATED

FINANCIAL STATEMENTS FINANCIAL STATEMENTS

How the Matter was addressed in How the Matter was addressed in
S. No Key Audit Matter(s) S. No Key Audit Matter(s)
audit audit

We considered this as key audit matter due to . • Inspecting supporting documents for the date of
the significant amounts involved and significant capitalization when project was ready for its intended
judgments made by management regarding the use to assess whether depreciation commenced and
matter. further capitalization of costs ceased from that date
and assessing the useful life assigned by management
Listing on Pakistan Stock Exchange (PSX) including testing the calculation of related depreciation.
3. (Refer note 1.1.2 and 47 to the consolidated financial statements)

During the year, the Company gets itself listed Our audit procedures in relation to listing of Company is
on Pakistan Stock Exchange (PSX) and issued Pakistan Stock Exchange (PSX) included the following: 5. Inventories
109 million ordinary shares of Rs. 10 each.
• Reviewed the management working of utilization of The company has significant levels of inventories Our audit focused on whether the valuation of year-end
We considered this as key audit matter due to proceeds from IPO. amounting to Rs. 7,188.38 million as at the inventory was in line with IAS 2. This included challenging
the significant amount involved, requirements reporting date, being 18% of the total assets of judgments taken regarding obsolescence and net
to disclose utilization of proceeds from IPO and • Reviewing the adequacy of disclosure as required the company. realizable value provisions. We obtained assurance over the
disclosure requirements of 4th Schedule of the under applicable financial reporting framework and appropriateness of management’s assumptions applied in
Companies Act, 2017. requirements of the Companies Act, 2017. There is a risk in estimating the eventual NRV calculating the value of inventories by:
of items held, as well as assessing which items
may be slow-moving or obsolete. • Attending the year end stock take to gain comfort over
the existence and condition of inventories and internal
4. Property, plant and equipment The Company’s principal accounting policy controls designed by the company.
on stores and spares and stock in trade are
disclosed in notes – 6.6 and 6.7 to the financial • Obtaining the final valuation sheets of the inventories and
The Company has made significant expenditure Our audit procedures in relation to capitalization of property, statements tracing quantities from working papers of observation of
on expansion of manufacturing facilities and new plant and equipment, amongst others included the following: physical stock taking.
projects. The significance of the balance coupled with
• Understanding the design and implementation of the judgments and estimates involved on their • Obtaining understanding of internal controls designed
During the year, the Company has also management controls over capitalization and performing valuation has resulted in the inventories being by the company over recording of purchases and
reclassified some categories of its operating tests of control over authorization of capital expenditure considered as a key audit matter. valuation of the inventories, and testing their operating
fixed assets and resultantly comparative figures and accuracy of its recording in the system. effectiveness on sample basis.
of those categories of assets are also reclassified
to reflect better presentation. • Testing, on sample basis, the costs incurred on projects • Assessing historical costs recorded in the inventory
with supporting documents and contracts. valuation by performing test of details on purchases.
We identified capitalization of property, plant and Evaluating that the valuation basis used are appropriate
equipment as a key audit matter because there • Assessing the nature of costs incurred for capital and consistent, including analysis of costing of different
is a risk that amounts being capitalized may projects through testing, on sample basis, of amounts items on sample basis.
not meet the capitalization criteria with related recorded and considering whether the expenditure
implications on depreciation charge for the year meets the criteria for capitalization as per the accounting • Assessing the management’s determination of the net
and reclassification of categories of assets. policy and applicable accounting standards. realizable values and intended use of the inventories
including performing tests on the sales prices fetched
• Checked the reasonableness of management’s by the company before and after year end.
assessment of categories of assets and working
of reclassification in categories of assets including • Performing analytical and other relevant audit 2018 - 19
procedures.
impact of reclassification on both cost of assets and
Interloop Limited accumulated depreciation in each category. • Considering the adequacy of the company‘s disclosures Annual Report
in respect of inventories.

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