Punjab Communications auditor says loss overstated Rs 138.79 lakh

Punjab Communications Limited’s auditor said unrecorded purchases from earlier periods overstated the loss for the quarter ended 30 September 2026 by Rs 138.79 lakh, and issued a qualified conclusion after identifying inventory valuation departures, a Rs 129.21 lakh work-in-progress adjustment and limitations on physical-verification evidence.

What did Punjab Communications’ auditor conclude on the September 2026 results?

Punjab Communications received a qualified conclusion on its unaudited standalone financial results for the quarter and half year ended 30 September 2026. R. Bansal & Co.’s limited-review report, dated 13 November 2026, identified several matters significant to the interim financial information rather than issuing an unqualified conclusion.

The review was conducted under Standard on Review Engagements 2410, which provides moderate assurance and has a narrower scope than an audit. Punjab Communications’ Board took the unaudited results on record on 13 November 2026, and the company said it operates in telecom and its spares as a single operating segment under Indian Accounting Standard 108.

The central quantified qualification concerned the quarterly loss. The auditor said the cost of stock-in-trade included Rs 20.03 lakh and Rs 1.19 crore of purchases relating to earlier financial years that had not been accounted for in the respective periods, causing the 30 September 2026 quarter’s loss to be overstated by Rs 138.79 lakh.

How did prior-period purchases affect Punjab Communications’ quarterly loss?

Punjab Communications’ reported quarterly loss was overstated by Rs 138.79 lakh because the quarter’s stock-in-trade cost included purchases belonging to prior periods. The auditor identified Rs 20.03 lakh and Rs 1.19 crore of such purchases and said they had not been accounted for in the books in their respective periods.

That finding concerns the timing of expense recognition, rather than a new operating cost disclosed for the September 2026 quarter. Recording earlier-period purchases in current-quarter cost increased the reported loss for the period by Rs 138.79 lakh, according to the auditor’s basis for qualification, while the report did not provide a restated quarterly loss figure.

The balance sheet showed inventories of Rs 5.08 crore at 30 September 2026, compared with Rs 3.49 crore at 31 March 2026. The Rs 1.59 crore increase in the inventory line occurred alongside the auditor’s concerns over both the timing of purchase recognition and the method used to measure inventory.

Which inventory accounting practices did Punjab Communications’ auditor challenge?

Punjab Communications’ auditor said inventory valuation did not follow the company’s stated first-in, first-out, or FIFO, policy and did not comply with Indian Accounting Standard 2, which governs inventories. Instead, the auditor said inventory was valued using the last purchase rate, while the company did not provide FIFO-based inventory valuation for review.

The auditor further said using last-purchase cost for raw materials was not compliant with Ind AS 2. This is separate from the Rs 138.79 lakh prior-period purchase issue: one matter addresses when purchases were recognised, while the other addresses the basis used to measure inventory at 30 September 2026.

Work in progress and finished sub-assemblies presented a further measurement issue. Punjab Communications’ accounting policy states that their cost includes material plus conversion cost, but the auditor said inventory at 30 September 2026 was valued only at material cost, excluding conversion cost in breach of Ind AS 2.

Punjab Communications also reduced work-in-progress cost by Rs 129.21 lakh during the quarter for material that was not in stock. The company’s financial-results note says the adjustment was made in the current period to present a true and fair view, but the auditor said the amount was cumulative and that a period-wise breakup was unavailable.

What verification and liability gaps did the auditor identify at Punjab Communications?

Punjab Communications’ auditor said the company relied on physical verification by internal staff and internal auditors, who reported 100% verification of property, plant and equipment, stock in hand and work in progress with nil discrepancies. However, the auditor said it lacked independent third-party verification and sufficient appropriate evidence to assess the reliability and adequacy of those procedures.

Consequently, the auditor said it could not comment on physical existence, working condition, completeness, possible impairment under Ind AS 36, or resulting adjustments. This uncertainty is relevant to the Rs 129.21 lakh work-in-progress reduction and the Rs 5.08 crore inventory balance reported at 30 September 2026.

A separate issue concerns bank guarantees. Punjab Communications recorded a liability of Rs 30.10 crore for encashment of bank guarantees, but the auditor said no provision had been made for any interest or other financial costs related to that amount. The filing does not quantify potential interest or other costs.

The auditor also said Punjab Communications had no accounting policy to estimate expected credit loss, or ECL, for impairment of trade receivables and other financial assets as required by Ind AS 109. Without an ECL estimate, it said it could not comment on the possible effect, despite trade receivables of Rs 10.77 crore at 30 September 2026.

What unresolved receivable and payable matters remain at Punjab Communications?

Punjab Communications has receivable and payable balances that were mostly outstanding for more than three years as at 30 September 2026, according to the auditor’s emphasis-of-matter section. The auditor drew attention to trade receivables and trade payables, including net adverse balances, but did not modify its conclusion specifically for that matter.

Management hired an external agency to examine these old balances, and its report was still awaited when the limited-review report was dated 13 November 2026. Trade receivables were Rs 10.77 crore at 30 September 2026, down Rs 2.50 crore from Rs 13.27 crore at 31 March 2026.

The auditor additionally said balance confirmation for other bank balances had not been obtained for the quarter ended 30 September 2026. This is distinct from reported cash and cash equivalents of Rs 6.50 crore, up from Rs 6.18 crore at 31 March 2026, because the report specifically refers to confirmations for other balances with banks.

The filing also records an audit-history point. Punjab Communications’ financial statements for the year ended 31 March 2026 and its quarter ended 30 June 2026 were reviewed by predecessor auditors, whose report expressed an adverse opinion, according to the current auditor’s other-matter paragraph.

Conclusion

The September 2026 review identifies linked accounting-control matters at Punjab Communications: Rs 138.79 lakh of earlier-period purchases were charged in the current quarter, inventory was measured using methods the auditor said did not meet Ind AS 2, and work in progress was reduced by Rs 129.21 lakh without a period-wise split. These matters sit alongside unprovided cost exposure associated with a Rs 30.10 crore bank-guarantee liability.

Readers should watch for Punjab Communications’ disclosed corrective action to update inventory variation in compliance with Ind AS 2, as well as the external agency’s still-awaited report on trade balances outstanding for more than three years at 30 September 2026. Subsequent disclosure on FIFO valuation, conversion costs, ECL methodology or bank-guarantee interest would address matters identified in the 13 November 2026 review report.