Page 136 - Pakistan Oilfield Limited - Annual Report 2022

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PAKISTAN OILFIELDS LIMITED

S.No. Key Audit Matters How the matter was addressed in our audit
We considered this as key audit matter due to the • Where pricing is provisional / sales agreement not
significance of the amounts requiring significant finalised, (a) inspected correspondence with the
time and resource to audit due to magnitude, customers and relevant government authorities
inherent risk of material misstatement and revenue during the year and held discussions with the
being a key economic indicator of the Company. 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.
(iv) Litigation with respect to conversion of TAL
Block petroleum concession to Petroleum Policy
2012

(Refer note 22.1 to the financial statements)
The Ministry of Energy (Petroleum Division) issued a
notification dated December 27, 2017 (SRO) which Our audit procedures in relation to the matter, amongst
others, included the following:
required that the Supplemental Agreement already
executed in respect of TAL block for conversion of • Inspected Petroleum Concession Agreement (PCA)
petroleum concession from Petroleum Exploration and Supplemental Agreements signed with the
and Production Policy 1997 to Petroleum Government of Pakistan;
Exploration and Production Policy 2012 shall be
amended (within 90 days) to include Windfall Levy • Checked SRO issued by the Ministry of Energy;
on Oil and Condensate (WLO), failing which the • Checked relevant clauses of Petroleum Exploration
working interest owners will not remain eligible for & Production Policy 2012 for applicability of WLO;
gas price incentive as per Petroleum Policy 2012.
The impugned notification was issued after the • Discussed the matter with directors, management
approval of Council of Common Interest (CCI) dated and internal legal department of the Company;
November 24, 2017. • Obtained confirmation from the Company’s
external legal advisor and checked legal opinion
The Company challenged the said notification obtained by the Company and the order issued by
in the Islamabad High Court and the matter is the Islamabad High Court;
pending before the Court in principle on the
ground that an already executed arrangement • Evaluated technical ability of the internal and
cannot be retrospectively altered unilaterally. The external legal advisors used by the Company;
Honourable Court has restrained the Government • Assessed the matter under applicable accounting
for any action under the impugned notification and frame work; and
to maintain status quo. Company’s contention is
duly supported by the legal advice on the matter. • Assessed the appropriateness of disclosures made
in the financial statements in respect of this matter.