‘This erroneous accounting policy raises questions over the reliability and accuracy of the financial statements of the company. It resulted in fraud.’
The National Financial Reporting Authority (NFRA) has found errors in the financial statements of Kudremukh Iron Ore Company Ltd for the 2019-20 fiscal and has flagged that the company’s accounting policy for foreign exchange forward contracts was “erroneous”.
The regulator has also recommended that KIOCL examine if it is necessary to prepare and publish restated financial statements. It was as per Ind AS 8 and Section 131 of the Companies Act, 2013.
“The accounting policy for a material element i.e. Revenue as stated in its statement of significant accounting policies is erroneous.
“This erroneous accounting policy raises questions over the reliability and accuracy of the financial statements of the company,”
Further, NFRA pointed out that the company’s accounting policy for foreign exchange forward contracts is erroneous. It is non-compliant with the classification and measurement requirements of Ind AS 109, Financial Instruments (Ind AS 109).
Ind AS refers to Indian Accounting Standards. According to the watchdog, adequate evidence, such as valuation reports, if any, have not been provided by KIOCL. That in respect of application of Ind AS 36, Impairment of Assets. It is in the case of the blast furnace unit that was non-operational.
NFRA Statements
“Also, there is no evidence that impairment loss computations were considered/ presented to the Audit Committee and the Board of Directors (BoD) of the company, in fraud” the release said.
NFRA has also found many other errors in disclosures in the notes to financial statements. These disclosures are either not relevant or useful to the users of financial statements, and have the potential to obscure the material information in the financial statements, it added.
FRQRR and Audit Quality Review Report (AQRR) are the two components of NFRA’s inspection programme.
FRQRR focuses on the role of preparer, those responsible for the preparation of financial statements and reports in accordance with the applicable accounting standards.
Therefore, the FRQRR evaluates how well the Chief Financial Officer, rest of the management, Audit Committee and the Board of Directors have performed in preparing financial statements.
