Course : Auditing Course Code: ACC 491 Semester : 8th Department BBA ,(Accounting Discipline) Assignment On Padma Oil Company Limited Annual Report June 2019 – June 2020 1 Prepared By Team: Data-Track Name ID Topic Tasnuva Farin 16034101019110 Engagement Letter, Internal Control System, Audit Notebook, Auditor’s Report & Opinion, (Spoke-Person) Field Visit Making of word file , PPT file, Mathematical part editing ,Typing & Overall Editing & preparing Mohiuddin Hasan 1603410109116 Slide: At a glance , Core Value, Typing ,Field Visit Md. Echa 1603410109068 Doc file: Balance sheet, statement of equity, Typing Sadmin Sultana Rime 1603410109024 Doc File: Income Statement, Cash Flow Statement, Typing Halimatus Sadia 1603410109013 Slide: Strategic priority, Mission , Vision , Typing Zinan Masud 1603410109002 Slide: Risk Factors, Mitigation Policy, Future Planning Doc File: Helping in preparing, Typing, Field Visit Farhaz Bin Salam 1603410108963 Slide: Internal Audit Committee, Functions of Internal Audit Committee , Typing Sajjadul Alam Shaown 1603410108952 Slide: External Audit Committee , Audit Plan Field Visit, Typing Gias Uddin Bablu 1603410108858 Slide: Performance at a glance, word fie: Comparative analysis of financial Performance, Typing 2 Contents Page Audit Engagement Letter………………………………………………………4-7 Comparative analysis of financial Performance………………………………..8 Financial Statement of Padma Oil Company Limited……………………...9-22 Components: Balance Sheet of June 2019- June 2020 Income Statement June 2019- June 2020 Statements of Changes in Equity June 2019- June 2020 Cash flow Statement June 2019- June 2020 Notes to the Financial Statement Report & opinion……………………………………………………………..23-26 3 AUDIT ENGAGEMENT LETTER DATE : 15.02.2021 Audit Firm’s Information Name of Audit Firm : Data Track Accounting Firm Address: Nasirabad Housing Society, Chattogram Contact : 01798597229 Mail: datatrack.acc.official.229@gmail.com Client’s Information Padma Oil Company Limited. Padma Bhaban , Strand Road Sadarghat, Chattogram, Bangladesh Dear Sir We are pleased to confirm our acceptance & understanding of the services we are to provide you with under this engagement. Audit Scope. We will conduct our audit in accordance with Bangladesh Standards on Auditing(BSA). We will submit the audit report of the company along with the financial statement of 20…. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management. as well as evaluating the overall financial statement presentation. 4 Audit Objectives. The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in conformity with (GAAP) Generally Accepted accounting principles, the objective also includes reporting on: o Financial Statement of June 2019-June 2020 Components: Balance Sheet Income Statement Statements of Changes in Equity Cash flow Statement o Internal control System related to the financial statements and compliance with laws, regulations, and the provisions of contracts and grant agreements, noncompliance with which could have a material effect on the financial statements, in accordance with Government Auditing Standards. o Risk Assessment Techniques: How company Deal with all the risk factors. If our opinions on the financial statements & Audi Report or the Single Audit compliance opinions are other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or to issue a report as a result of this engagement. Should such situation arise, we will notify you. We will provide judgment in determining the standards that apply to the work to be conducted. If this engagement will not satisfy the requirements of all audit report users, laws, and regulations, we will notify you as soon as this comes to our attention. Management’s Responsibilities :We remind you that the responsibility for the preparation of financial statements including adequate disclosure is that of management of the company. This includes the maintenance of adequate accounting records and internal controls, and the safeguarding of the assets of the company. 5 Audit Procedures: An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, Our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. Because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements may remain undiscovered. In addition to our report on the financial statement, we expect to provide you with a separate letter concerning any material weaknesses in accounting and internal control systems which come to our notice. Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. An audit is not designed to provide assurance on internal control or to identify significant deficiencies Audit Administration, Fees, and Other Immediately upon completion of the engagement, the auditor shall send a copy of the reporting package to (Auditee’s Name). This is to inform you that all our payment policy are fixed & one time basis The reporting package will consist of: An opinion as to whether the financial statements are presented fairly in all material respects in conformity with Generally Accepted Accounting Principles , when applicable, an opinion as to whether the schedule of expenditures is presented fairly in all material respects in relation to the financial statements taken as a whole. We look forward at full cooperation with your staff and we trust that they will make available to us whatever records, documentation and other information are requested in connection with our audit. This letter will be effective for future years unless it is terminated, amended or superseded. 6 We expect to begin our audit on approximately (Date) and to issue our reports no later than (date). (Name of Engagement Partner) is the engagement partner and is responsible for supervising the engagement and signing the report. Approval. We appreciate the opportunity to be of service to you, and believe this letter accurately summarizes the significant terms of our engagement. If these comments and arrangements meet with your approval, please sign below and return the agreement to us. We look forward to a pleasant association and the opportunity to provide the services included in this engagement. If you have any questions, please let us know. Very truly yours, Data Track Accounting Firm Nasirabad Housing Society Date:15.02,2021 Acknowledged on behalf of Padma Oil Company by Signature: 7 Comparative analysis of financial Performance Key financial data of immediately preceding five years is shown detailed in Annexure-3 of the Directors' Report. For comparison, financial results and financial position of the Company for the financial year 2019-20 with immediately preceding five years are given below: Amount in Crore Taka 2019-2020 Financial & Operational results 2018-2019 2016-2017 2015-2016 2014-2015 2017-2018 sales (MT in Lakh) 19.63 22.61 23.66 20.08 17.83 17.89 Net Earnings on petroleum products 218.46 288.57 301.32 244.59 186.91 180.97 Operating expenses 230.41 235.20 226.42 197.06 147.21 133.05 Total operating profit 72.59 134.04 148.97 106.71 113.67 113.01 Profit after tax 272.96 285.55 335.80 203.13 187.36 192.80 EPS (taka) 27.79 29.07 34.18 20.68 19.07 19.63 Net Asset Value per share (Taka) 157.64 142.85 126.78 103.60 92.92 83.85 (52.29) (36.37) 116.42 80.22 (87.90) 1025 1042 1042 1145 1172 Net operating cash flow per share (Taka) Number of employees 80.91 1009 8 Financial Statements o Padma Oil Company Limited June2019-June 2020 9 Padma Oil Company Limited 1.Statement of Financial Position(Balance Sheet) As at 30 June 2020 ASSETS Non-current assets Taka in' 000 Note Property, plant and equipment Capital work-in-progress Investment - Depreciation Fund (FDR) 6 Current assets Inventories Accounts receivable Due from affiliated companies Advances, deposits and pre-payments Cash and cash equivalents 7 8 9 10 TOTAL ASSETS SHAREHOLDERS EQUITY Share capital Depreciation Fund Reserve (Accumulated Surplus) Retained earnings Total equity LIABILITES Non-current liabilities: Deferred tax liabilities Long Term Loan 10 30-Jun-20 30-Jun-19 1,784,043 536,933 1 379885 3,700,861 18,998,231 18,311,082 12,390,920 146.957 39.429,162 89 276 352 1,764.04 613,669 2 377707 18,765,63 18.049.875 95.318.951 358.265 31.337.390 163,830,111 92 977 213 166 207 81 14 15 982.327 982.327 36.628 14466415 15485 370 13 050 432 14032 759 212.928 183463 197.393 183463 Current liabilities Accounts payable Supplies and expenses payable Our. to affiliated companies Other liabilities Dividend payable Income tax payable 16 18 19 Total Liabilities TOTAL EQUITY AND LIABILITIES Net Asset Value (NAV) per share The annexed notes from 11 396 391 380 856 10919.82 3,965.85 57.468.474 4.279.866 167,836 293613 77.095,452 77,491,843 92,977,21 Tk. 157.64 21.137.557 10.794,730 116,982,402 2,488.48 149.879 241 160 151,794,203 152,175,059 166207 818 Tk. 142.85 2.Padma Oil Company Limited Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2020 Taka in' 000 01 July 2019 to 2020 Notes 30-Jun-20 Gross earnings on Petroleum Products Direct cost on Petroleum Products: Packing Charges Harding Charges 23 Net Operational (Loss and Gain) Net earnings on petroleum products Operating expenses: Administrative selling and distribution expense 24 Financial expenses Operating Profit Petroleum Other operating income -petroleum trade Operating (loss)\ Agro-chemical trading Total Operating Profit Non-operating Income Profit before WPPF Contribution to Workers' *profit Participation and We fare Fund 30-Jun-19 2158057 -18.819 -6,380 2,132,858 51787 2,184,645 2,852,038 -20.415 -7,346 2,824,277 61434 2885711 -2083.04 -221,040 -2,091.52 -260.431 -119,434 874.128 533,760 849006 -28.761 725.933 3.103.658 3,829.59 -191.48 -42.382 1,340,384 2.670461 4010845 -200,542 Net Profit before income tax Provision or Income tax: 3,638,111 Current tax -892.939 Deferred tax 14 -15.535 Net Profit after tax 2,729,637 Surplus from Investment trt1Sbr b Depreciations Fold Reserve Other comprehensive income -36,628 Total comprehensive income for the year 2693009 per Share (EPS • basic) TK. 27.79 The annexed notes from 1 to 48 form an integral part of these financial statements. 12 01 July 2018 to 2019 3,810,303 -949.646 -5.138 2,855,519 2 855519 Tk. 29.07 3.Padma Oil company Statement of Changes in Equity For te year ended 30th June 2020 balance as on 01 July 2019 Share capital Retained earning 982327 11471939 12454266 (1277026) 1277026 2855519 2855519 Cash dividend declared for the year 2017-1018 Depreciation fund reserve Total equity Transferred from depreciation fund Total comprehensive income for the year Balance as at 30 June 2019 982327 13050432 14032759 Balance as at 01 June 2019 982327 13050432 14032759 (1277026) (1277026) Cash dividend declared for the year 2018-2019 36628 Transferred from Depreciation Fund 2693009 Total comprehensive income of the year Balance as at 30 June 2020 982327 14466415 13 36628 2693009 36628 15485370 4.Padma Oil company Statement of Cash Flows For the year ended 30 June 2020 A. Cash flows from operating activities: 30 June 2020 30 June 2019 Receipts from customers and others 236303881 176960945 Paid to suppliers against petroleum and Agro product and others (227515501) (1810078391) Income tax paid (840485) (1089,155) Net cash (used /generate from operating activities 7947895 (5136601) B. Cash flows from investing activities: 30 June 2020 30 June 2019 Capital expenditure (188236) 338079 Investment In depreciation fund FDRs Interest received from FDS/SND Proceeds from disposal of property, plant and equipment Net cash generated from investing Activities (1379885) 4225910 2824897 2679596 146171 280 1402946 6567707 14 C. Cash flows from Financing activities 30 June 2020 30 June 2019 Dividend paid (1259069) (12060014) Net cash used in financing Activities TOTAL (A+B+C) (1259069) (12060014) 8091772 171092 Opening cash and cash equivalents Closing cash and cash Equivalents Total 31337390 31166298 39429162 31337390 8091772 171092 Operating Cash inflows/(outflows) per share (note-40) TK. 80.91 TK. (52.29) 15 NOTES TO THE FINANCIAL STATEMENTS 6.00 investment - Depreciation Fund (FDR) Janata Bank Limited BASIC Bank Limned Bangladesh Krishi Bank limited First security Islamic bank National Bank limited Union Bank Limited NRB Global Bank Total 352290 275911 60000 209741 104640 156052 1379885 13,79,885 - • Investment- Depreciation fund (FDR) has been categorized the non-current assets as per management decision because the fund won't be encashed in near future 7.00 Inventories A. Stock-in-Trade (Petroleum products) Major products 17565780 Minor product 713266 Freight 155962 Total 184,35,013 B. Agro-chemical products Finished products Raw material IN TRANSIT Total C. Stores IN stock In transit Total D. packing materials Total (A+ B+C+D) 310354 2023 260 312637 79444 2995 82439 17128392 7117505 138563 17978660 504467 2023 426 506916 80861 11397 92258 168143 18998231 16 187796 18765630 8.00 Accounts Receivable 30 June 2020 Account receivable – petroleum products 17,734,877 Account receivable - Argo chemical products 81,794 17816671 Other receivable 629308 18445979 30 June 2019 175513778 84577 17598355 586417 18184772 Less: provision for bad debts against trade account receivable (134897) TOTAL 18,311,082 (137897) 18,049,875 •Receivable against Agro-& chemical trade is secured by Bank Guarantee Sanchaya Patras 9.00 Due from Affiliated Entities /Companies Bangladesh petroleum corporation Eastern Refinery Limited Eastern Lubricant Blenders Limited Standard Asiatic Oil Company LTD Liquified Petroleum Gas Limited Meghna petroleum limited Jamuna Oil Company Limited 10,869522 93,313,842 10,405 9,491 53,487 5,000 82,059 150,787 6,189 6, 144 683907 700,465 685,351 133,222 Total 12390920 95318951 10.00 Advances, Deposits and Pre-payments Advance to employees 90,540 Advance against expenses 28,682 86,416 32,710 Total 119,222 Total 9,526 28,682 8,701 9,448 32,710 221,203 4,101 14,933 4,590 46,443 Deposits Long term deposits Short Term deposits Prepayments Insurance premium Rent, rates and taxes 17 119,126 ALL Total 146,957 358,265 14.00 deferred tax liabilities Deferred tax liability has been calculated below at the applicable tax rate on the difference between the carrying value of fixed assets and their respective tax bases. Opening balance 197,393 Add Provided (adjusted) for the year Closing balance 15.535 Closing Balance 212,928 Reconciliation of Deferred tax liabilities/assets Carrying amount on the date of statement of financial position Tax base 192,255 5.138 197,393 Taka in '000 Taxable? Taka Taka Taka (a) As at 30 June 2020 Property, plant and equipment Deferred tax Liability(Tax Rate-25%) 1,784,041 932,331 851,710 212,928 (b) As at 30 June 2019 Property. plant and equipment Deferred tax liability(Tax Rate - 25%) 1764,038 974,468 789,570 197,393 15.00 Long Term Loan Loan Account - Storage Tank at GDL Equity Account - Storage Tank at GDL TOTAL 110,078 110,078 73,385 73,385 183,463 183,463 16.00 Accounts payable Other supplies Other charges 10,667,274 252,542 Total 10,919,816 18 20,840,780 296,777 21,137,55 18.00 Due to affiliated entities / companies Bangladesh Petroleum Corporation (BPC) 57.315.086 116,808,622 Jamuna Oil company limited 118,199 113592 Eastern lubricant Blenders limited - 24,350 liquified petroleum Gas Limited 35,189 35,838 1,426,369 1,587,140 Advance against sales from Customers and Agent 1,426,369 1,587,140 Employees• pension fund 488,034 155526 Employees' fund-others 59,479 52,962 Security deposits 163,927 162,240 Tax deducted at source 37 Empbyees' personal account 50,021 40,575 liabilities for Capital Expenditure 67,212 43602 Workers' Profit Particpation and welfare Funds 191,480 200,542 Others 1,833,307 245,888 Total 4279,866 2488475 19.00 Other Liabilities • Amounts due to managers and officers of the company • Others included. amount received from Eastern Refinery Limited for lease of land Tk. 1580,193,014. 19 19.01 Employees' Pension Fund Opening balance 155,26 172,388 Provision made during the year according to actuarial valuation 739.465 514.017 Total 894,991 686,405 Payment to pension fund made during the year (406957) (530879) Closing balance 488,034 155.526 20 Taka ‘000 23.0 01 June 2019 to 01 June 2019 to 30 June 2020 30 June 2020 Gross earnings on Petroleum Product Turnover (Note 23.02) 152,089,96 5 174,181,7 50 Less : Cost of goods sold (Note 23.02) 149,931,90 8 171,329,7 12 Gross Earnings 2,158,057 2,852,038 Taka ‘000 24.00 01 June 2019 to 01 June 2018 to 30 June 2020 30 June 2019 Salaries, wages and benefits (Note- 24.01) 1,466,259 1,472,780 Depreciation (Note- 4.00) 203,654 192,455 Fuel and power 55,780 56,971 Stores and spares 34,344 58,279 Repairs and maintenance (Note- 24.02) 42,435 42,901 Rent 41,828 32,930 Travelling and conveyance 17,569 20,494 Aviation Service fees paid to Shell (Note- 34.00) 19,002 18,500 Administrative, Selling and Distribution Expenses 21 Printing and stationery 9,014 11,697 Insurance 7,905 7,376 Legal and professional fees 1,824 2,586 Rates and taxes 6,789 6,178 Advertisement 5,629 7,564 Communication expenses 3,868 4,188 Entertainment 4,118 3,653 Directors fees and expenses (Note- 31) 1,700 1,979 BPC service charges 700 700 Audit fees 180 180 Other charges (Note- 24.03) 160,941 150,609 2,083,539 2,092,020 (500) (500) 2,083,039 2,091,520 Recoveries of Service charges from ELBL 22 Auditor’s Report & Opinion DATE : 31.03.2021 Client’s Information Padma Oil Company Limited. Padma Bhaban , Strand Road Sadarghat, Chattogram, Bangladesh Annual Report of Padma Oil Company Limited prepared by Data-track Accounting Firm for the financial year June 2019-June 2020. We are glad to be part of Padma Oil Company Limited, We gather some practical knowledge regarding What is Audit ? How to Audit ? What is the practical scenario behind an auditing session. Auditor faces & so on. We Data-track team members audited the annual report of financial year June 2019-June2020 & verified related documents & accounts so that we ca give our reasonable opinion & evidence to support those reasonable statement. Here are the reports that we have verified & reached to an opinion: Management’s Responsibility: Top Management is responsible for the preparation & fair presentation of these financial statements in accordance with International Financial Reporting Standards(IFRS). Whenever misstatement or ambiguous data found , the external auditor immediately call for meetings. They inquire all the issues till they are satisfied. We data-track team also tried to make sure all the data are fair & trustable enough. We talked to Management team when we found any misstatements & we figured out some lacking (Discussed in Auditor’s opinion section) . Auditor’s Responsibility: 23 Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement , including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Auditor’s Opinion Regarding Financial Statement: In our opinion, the financial statements present fairly, in all material respects, financial position of Padma Oil Company Limited as at June 2020, financial performance, Profit & Loss Account, and its cash flows , Statement of equity, for the year then ended in accordance with International Financial Reporting Standards Notes to financial statements are also prepared in accordance with International Financial Reporting Standards .All these reports Give a true & Fair view of the financial position of the company The Results of their financial performance & cash flows for the year then ended and comply with the Companies Act 1994, The Securities & Exchange Rules 1987& other applicable laws & regulations. 24 Regarding Other Reporting Responsibilities : We also report that we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; in our opinion, proper books of account as required by law have been kept by the Company the Company's balance sheet and profit and loss account dealt with by the report are in agreement with the books of account; and the expenditure incurred was for the purposes of the Company's business. Disagreements : There are some points we figured out that we aren’t agreeing with the company, Those are listed below: They are not so clear about their internal control policy. We figured out some good points which are mentioned in Slide, but we couldn’t find any evidence regarding proper internal control policy. i.e. Employees aren’t so much aware about maintaining punctuality. They are not also clear about fraudulent act & punishment thereof, they are very much aware about not to disclose any kind of fraudulent acts that generally occur Company has huge amounts of unclaimed dividend Outstanding from the year 2007 to 2019 Also the final decision of annual report regarding Padma Oil company always taken by Bangladesh Petroleum Corporation.(BPC) , for this reason Padma Oil Company’s audit session can’t be verified Independenty 25 Lastly. Due to pandemic around the world , we couldn’t visit the field again & again & due to company policy they (Padma Company Limited) are not allowed to open up all the confidential matters (i.e. Fraudulent matters) We reach to an opinion, that all the financial report & overall audit report prepared are based on company’s statement & the evidence they provide us. Thus, we are not giving absolute assurance but reasonable opinion that, all the data & information are fair enough to support the trustworthiness of the annual report of padma company limited we prepared. Dated:Chattogram March 31st , 2021 Data Track Accounting Firm Address: Nasirabad Housing Society, Chattogram Contact : 01798597229 Mail: datatrack.acc.official.229@gmail.com 26