Page 166 - Tata_Chemicals_yearly-reports-2019-20

Description of Key Audit Matter
Revenue recognition (refer notes 2.14 and 25 to the Standalone Financial Statements)
The Key Audit Matter (KAM) How the matter was addressed in our audit
Revenue is recognised when the control over the underlying Our audit procedures included:
products has been transferred to the customer.
• Focusing on the Company’s revenue recognition for
Due to the Company’s sales under various contractual terms and compliance with Ind AS;
across the country, delivery to customers in different regions
might take different time periods and may result in undelivered • Testing the design, implementation and operating
goods at the period end. We consider a risk of misstatement of the effectiveness of the Company’s manual and automated
Financial Statements related to transactions occurring close to the (Information Technology - IT) controls on recording revenue.
year end, as these transactions could be recorded in the incorrect We involved our IT specialists for IT testing. We focused on
financial period (cut-off). controls around the timely and accurate recording of sales
transactions;
There is also a risk of revenue being overstated due to fraud
resulting from pressure on the Company to achieve performance • Performing testing on selected statistical samples of revenue
targets at the reporting period end. Accordingly, fraud and cut-off transactions recorded during the year. We verified contractual
risks in revenue recognition are considered as a key audit matter. terms of invoices, acknowledged delivery receipts and
tested the transit time to deliver the goods. Our tests of
detail focused on cut-off samples to verify that only revenue
pertaining to current year is recognised based on terms and
conditions set out in sales contracts and delivery documents.
• Assessing high risk manual journals posted to revenue to
identify any unusual items.

Demerger of Consumer Products Business (refer note 34 to the Standalone Financial Statements)
The Key Audit Matter How the matter was addressed in our audit
The Company has demerged its Consumer Products Business Our audit procedures included:
(CPB) division to Tata Consumer Products Limited (“TCPL”)
(‘the Demerger’) pursuant to a Scheme of Arrangement (‘the • Obtaining and evaluating the Scheme for identification of
Scheme’). The Scheme was approved by the National Company the assets and liabilities to be transferred;
Law Tribunal (NCLT) with an Appointed date of April 1, 2019. • Evaluating the accounting treatment of the Demerger for
Refer note 34 to the Standalone Financial Statements for details compliance with the applicable accounting standards and
of the Scheme.
applicable tax and other statutes;
The demerger of the CPB division has significant measurement • Assessing and testing the accounting entries recorded in
and disclosure impacts on the Company’s Standalone Financial
the books by the Company in respect of the Demerger for
Statements. This involves identification of assets and liabilities to
compliance with the accounting treatment assessed above;
be transferred which is subject to the provisions of the Scheme
and is accordingly considered a key audit matter. • Assessing and testing the adequacy of the Company’s
disclosures in respect of the Demerger for compliance with
applicable accounting standards.

164 I INTEGRATED ANNuAL REPORT 2019-20