126-131 132-133 134 135 136 137 138-201 68-73 204-210 74-75 211-214 76 215 77 217 78 79 80-123 ANNUAL REPORT 2019 NOTES 66 ANNUAL REPORT 2019 INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITORS’ REPORT To the members of Pakistan Telecommunication Company Limited To the members of Pakistan Telecommunication Company Limited Key Audit Matters Report on the Audit of the Financial Statements Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Opinion financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have audited the annexed separate financial statements of Pakistan Telecommunication Company Limited (the Company), which comprise the statement of financial position as at December 31, 2019, and the statement of profit or Following are the key audit matters: loss, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and we state that we have obtained all the information and explanations which, to the best of S. No. Key audit matters How the matter was addressed in our audit our knowledge and belief, were necessary for the purposes of the audit. 1 Revenue recognition In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, statement of profit or loss, the statement of comprehensive income, the statement of changes in equity and the Refer notes 5.20 and 28 to the financial state- Our audit procedures to assess the recognition of statement of cash flows together with the notes forming part thereof conform with the accounting and reporting ments. revenue, amongst others, included the following: standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at December 31, The Company has reported revenue amount- • Obtaining an understanding of the process relating 2019 and of the profit, the comprehensive income, the changes in equity and its cash flows for the year then ended. ing to Rs 71,548,302 thousand for the year to recognition of revenue and testing the design, ended December 31, 2019. The Company implementation and operating effectiveness of key Basis for opinion provides telecommunication services in internal controls over recording of revenue including which there is an inherent risk around the involving our internal specialists to test key automat- We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our accuracy of revenue recorded by the IT ed application and general information technology responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial billing systems given the complexity of the controls; Statements section of our report. We are independent of the Company in accordance with the International Ethics systems and the significance of volumes of Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered data processed by the systems. • Comparing a sample of transactions comprising of Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. various revenue streams recorded during the year We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We identified recognition of revenue as a key with relevant underlying supporting documents and audit matter because revenue is one of the cash receipts; Emphasis of Matter key performance indicator of the Company and gives rise to an inherent risk that revenue • Assessing the appropriateness of accounting We draw attention to note 13.7 to the financial statements, which describes that the matters relating to certain could be subject to misstatement to meet policies for revenue recognition and relevant employees’ rights under the PTCL pension scheme are pending with various courts. No provision for any effects on the expectations or targets. contract assets and liabilities for compliance with Company that may result has been made in the financial statements. Our opinion is not modified in respect of this matter. applicable financial reporting framework including their correct application to the amounts recognized during the year; • Inspecting manual journal entries relating to revenue recognized during the year and the corresponding underlying documentation for those journal entries which were considered to be material or met certain specified risk-based criteria; and • Considering the appropriateness of disclosures in the financial statements. 2 Income tax recoverable Refer notes 5.24 and 23 to the financial Our audit procedures in relation to the matter included: statements. 68 69 ANNUAL REPORT 2019 INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITORS’ REPORT To the members of Pakistan Telecommunication Company Limited To the members of Pakistan Telecommunication Company Limited S. S. No. Key audit matters How the matter was addressed in our audit No. Key audit matters How the matter was addressed in our audit As at December 31, 2019, income tax recov- • Consulting our tax specialist to assess the reasona- assets or expenses involves subjective operating fixed assets with supporting documenta- erable is stated at Rs 17,756,175 thousand. bleness of the Company’s conclusions on recovera- judgments or uncertainties. tion including completion certificates, where The Company has a significant amount of bility of income tax refundable; relevant, and comparing the date of capitalization income tax refundable arising mainly from with supporting documentation; and payments of income tax in excess of income • Reviewing the status of significant pending tax tax liabilities and a number of tax assess- matters, including the Company’s assessment of the • Assessing whether the depreciation has been ments are pending at different appellate potential liabilities; correctly computed from the date of capitalization. forums. • Comparing refund applications filed for refund of tax 4 Recoverability of trade debts Because of the likelihood and potential relating to preceding years with the amounts record- magnitude of misstatements to the complete- ed in the financial statements; Refer notes 5.17.4 and 21 to the financial Our audit procedures to assess the valuation of trade ness and accuracy of the tax expense and statements. debts included the following: the current tax liability, this requires special • Inspecting correspondence with tax authorities to audit consideration. identify any pending taxation matters relating to the As at December 31, 2019, the Company’s • Obtaining an understanding of and testing the years to which the refund relates; gross trade debtors were Rs 27,911,795 design and implementation of management’s key thousand against which allowances for internal controls relating to credit control, debt • Testing computation of current income tax provisions expected credit losses of Rs 7,653,221 collection and making allowances for doubtful debts; and appropriateness of adjustments recognized in thousand were recognized. the financial statements in accordance with the • Agreeing, on a sample basis, the balances used in accounting policy for group taxation adopted by the We identified the recoverability of trade debt- management’s estimate of expected credit loss with Company; ors as a key audit matter because it involves the books of account of the Company; significant management judgment and • Testing, on a sample basis, whether advance tax estimates in determining the allowance of • Testing the assumptions and estimates made by paid is in accordance with the Income Tax expected credit loss. management for the allowances for doubtful debts; Ordinance, 2001 and amounts recorded in the books and of account are supported by underlying documenta- tions; • Evaluating that the allowance for doubtful debt is in accordance with the requirements of applicable • Assessing adequacy of disclosures in the financial financial reporting framework. statements. 3 Cost capitalisation for property, plant and equipment Refer notes 5.11 (a) and 14 to the financial Our audit procedures in relation to the matter, amongst Information Other than the Financial Statements and Auditors’ Report Thereon statements. others, included the following: Management is responsible for the other information. Other information comprises the information included in the annual The Company has recorded additions to � • Assessing the design, implementation and operating report for the year ended December 31, 2019, but does not include the financial statements and our auditors’ report property, plant and equipment amounting to effectiveness of key internal controls over capitaliza- thereon. Rs 25,911,825 thousand during the current tion of property, plant and equipment including trans- year. The Company continues to incur capital fers from capital work in progress to operating fixed Our opinion on the financial statements does not cover