The National Financial Reporting Authority (NFRA), an independent audit regulator, has published a Financial Reporting Quality Review (FRQRR) report on KIOCL Ltd for the fiscal year 2019-2020.
The FRQRR is one component of the NFRA inspection program, and the other is the Audit Quality Review Report (AQRR).
This is his first FRQRR for KIOCL Ltd, according to an official statement. The report focuses on those who prepare financial statements and reports according to specific accounting standards. It evaluates the CFO and the rest of management, the audit committee and the board of directors in their preparation of financial statements that show a true and fair view, as required by the Companies Act and accounting standards.
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The purpose of the FRQRR is to highlight the inadequacies of the financial statements and to identify non-conformities with accounting standards. It should therefore not be treated as a scoring tool.
The findings and / or recommendations of the NFRA were classified as having a “high” and “moderate” impact. Some of the high impact non-compliances he reported are (a) KIOCL’s accounting policy for forward exchange contracts (fx) is in error and does not comply with the classification and measurement requirements of the Indian accounting standard. (Ind AS) 109, Financial instruments; (b) The accounting policy for a material item i.e. income (with the corresponding impact on related assets such as trade receivables, inventories, etc.) in its statement of significant accounting policies is erroneous, which raises questions about the accuracy of financial statements; and (c) adequate evidence, such as appraisal reports, if applicable, has not been provided by KIOCL in accordance with Ind AS 36, Impairment of assets, for the non-operational blast furnace unit. In addition, there is nothing to indicate that the impairment calculations have been taken into account and / or examined and / or presented to the audit committee and the board of directors (Board of Directors) of the company.
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Many other errors were found in the information provided in the “notes to the financial statements”. This information is irrelevant and may obscure important information contained in the financial statements.
The NFRA recommended that KIOCL consider whether it is necessary to prepare and publish restated financial statements in accordance with Ind AS 8 and section 131 of the Companies Act 2013, the statement added.