Page 98 - 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 UNCONSOLIDATED REPORT ON THE AUDIT OF UNCONSOLIDATED

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

Listing on Pakistan Stock Exchange (PSX)
3. (Refer note 1.2 and 45 to the unconsolidated financial statements) 5. Inventories

During the year, the Company gets itself listed on Our audit procedures in relation to listing of Company is The company has significant levels of inventories Our audit focused on whether the valuation of year-end
Pakistan Stock Exchange (PSX) and issued 109 Pakistan Stock Exchange (PSX) included the following: amounting to Rs. 7,170.15 million as at the inventory was in line with IAS 2. This included challenging
million ordinary shares of Rs. 10 each. reporting date, being 18% of the total assets of judgments taken regarding obsolescence and net realizable
• Reviewed the management working of utilization of the company. value provisions.
We considered this as key audit matter due to proceeds from IPO.
the significant amount involved, requirements There is a risk in estimating the eventual NRV We obtained assurance over the appropriateness of
to disclose utilization of proceeds from IPO and • Reviewing the adequacy of disclosure as required of items held, as well as assessing which items management’s assumptions applied in calculating the value
disclosure requirements of 4th Schedule of the under applicable financial reporting framework and may be slow-moving or obsolete. of inventories by:
Companies Act, 2017. requirements of the Companies Act, 2017.
The Company’s principal accounting policy • Attending the year end stock take to gain comfort over
on stores and spares and stock in trade the existence and condition of inventories and internal
are disclosed in notes – 5.6 and 5.7 to the controls designed by the company.
4. Property, plant and equipment unconsolidated financial statements
• Obtaining the final valuation sheets of the inventories and
The significance of the balance coupled with tracing quantities from working papers of observation of
The Company has made significant expenditure Our audit procedures in relation to capitalization of property, the judgments and estimates involved on their physical stock taking.
on expansion of manufacturing facilities and new plant and equipment, amongst others included the following: valuation has resulted in the inventories being
projects. considered as a key audit matter. • Obtaining understanding of internal controls designed
• Understanding the design and implementation of by the company over recording of purchases and
During the year, the Company has also management controls over capitalization and performing valuation of the inventories, and testing their operating
reclassified some categories of its operating tests of control over authorization of capital expenditure effectiveness on sample basis.
fixed assets and resultantly comparative figures and accuracy of its recording in the system.
of those categories of assets are also reclassified • Assessing historical costs recorded in the inventory
to reflect better presentation. • Testing, on sample basis, the costs incurred on projects valuation by performing test of details on purchases.
with supporting documents and contracts. Evaluating that the valuation basis used are appropriate
We identified capitalization of property, plant and and consistent, including analysis of costing of different
equipment as a key audit matter because there • Assessing the nature of costs incurred for capital items on sample basis.
is a risk that amounts being capitalized may projects through testing, on sample basis, of amounts
not meet the capitalization criteria with related recorded and considering whether the expenditure • Assessing the management’s determination of the net
implications on depreciation charge for the year meets the criteria for capitalization as per the accounting realizable values and intended use of the inventories
and reclassification of categories of assets. policy and applicable accounting standards.
including performing tests on the sales prices fetched
by the company before and after year end.
• Checked the reasonableness of management’s
assessment of categories of assets and working • Performing analytical and other relevant audit
of reclassification in categories of assets including procedures.
impact of reclassification on both cost of assets and
accumulated depreciation in each category.
• Considering the adequacy of the company‘s disclosures
in respect of inventories.
• Inspecting supporting documents for the date of
capitalization when project was ready for its intended 2018 - 19
use to assess whether depreciation commenced and
Interloop Limited further capitalization of costs ceased from that date Annual Report
and assessing the useful life assigned by management
including testing the calculation of related depreciation.

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