TO THE MEMBERS OF
KIRLOSKAR OIL ENGINES LIMITED
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Kirloskar OilEngines Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2016 and the Statement of Profit and Loss and Cash Flow Statement for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsreferred to in section 133 of the Companies Act 2013 read with Rule 7 of the Companies(Accounts) Rules 2014. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(1 0) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:
(a) in the case of the Balance Sheet of the state of affairs of the Company as atMarch 31 2016;
(b) in the case of the Statement of Profit and Loss of the Profit for the yearended on that date; and
(c) in the case of the Cash Flow Statement of the cash flows for the year ended onthat date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of sub section (11) of section 143 of theCompanies Act 2013 we give in the Annexure a statement on the matters specified in theOrder.
2. As required by section 143(3)of the Act we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c. The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account;
d. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under section 133 of the Companies Act 2013 read withRule 7 of Companies (Accounts) Rules 2014;
e. On the basis of written representations received from the directors as on March312016 and taken on record by the Board of Directors none of the directors isdisqualified as on March 312016 from being appointed as a director in terms of section164(2) of the Companies Act 2013.
f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A".
g. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements. Refer Note 31 (2.1) to the financial statements.
ii. The company did not have any long term contract including derivative contracthaving any material foreseeable losses for which provision was required to be made underthe applicable law or accounting standard.
iii. There are no amounts required to be transferred to the Investor Education andProtection Fund by the Company.
FOR M/5 P. G. BHAGWAT
Firm Registration Number: 101118W
Nachiket Deo Partner
Membership No.: 117695
Date: 181h May 2016
Referred to in paragraph 1 of our "Report on Other Legal and RegulatoryRequirements" on even date
(i) (a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management according to thephased programme of three years which is reasonable with regard to size of the company andnature of its assets. Pursuant to the programme a portion of the fixed assets has beenphysically verified by the management during the year and no significant materialdiscrepancies between the book records and such physical verification have been noticed.
(c) According to records of the company examined by us the title deeds of immovableproperties are held in the name of the company.
(ii) The management has conducted physical verification of inventory (excluding stockwith third parties) at reasonable Intervals. In respect of inventory lying with thirdparties these have substantially been confirmed by them. In our opinion the frequency ofverification is reasonable. As informed to us the discrepancies noticed on verificationbetween physical stock and book records were not material.
(iii) As informed to us the company has not granted secured or unsecured loan to othercompanies firms or other parties covered in the register maintained under Section 189 ofthe Companies Act 2013. Accordingly the provisions of clause 3 (iii) (a) (b) and (c) arenot applicable to the company.
(iv) The Company has not entered into any transaction which attracts the provisions ofsection 185 and 186 of the Companies Act 2013.
(v) In our opinion and according to information and explanation given to us theCompany has not accepted public deposits hence the directive issued by the Reserve Bankof India and the provisions of sections 73 to 76 or any other relevant provisions of theCompanies Act and the rules framed there under are not applicable to it. According toinformation and explanation given to us no order has been passed against the company byCompany Law Board or National Company Law Tribunal or Reserve Bank of India or any courtor any other tribunal.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersub-section (I) of section 148 of the Companies Act 2013 and we are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. We havehowever not made a detailed examination of records with a view to determine whether theyare accurate and complete.
(vii) (a) According to information and explanation given to us and the records of thecompany examined by us the company is generally regular in depositing with appropriateauthorities undisputed statutory dues including income tax service tax and other materialstatutory dues applicable to it.
According to the information and explanation given to us no undisputed amounts payablein respect of statutory dues were in arrears as at 31st March 2016 fora period more thansix months from the date they became payable except services tax of~. 0.06 Crs (SincePaid)
(b) According to the information and explanations given to us the particulars of duesof income tax sales tax wealth tax service tax custom duty excise duty and cess as at31st March 2016 which has not been deposited on account of disputes are as follows:
|Name of the statute ||Nature of dispute due ||Amount under dispute not deposited ||Period to which the amount related ||Forum where the dispute pending |
| || ||(Rs in Crs) || || |
|Sales Tax Laws ||Demand for entry tax ||0.07 ||2008-2010 ||Supreme Court |
| ||Sales tax and penalty for pump sets ||1.85 ||1990-1997 2004-2005 ||High Court |
| ||Demand for non- receipt of forms entry tax dispute and disallowance of claims ||0.58 ||2006-2008 ||Tribunal |
| || || ||2015-2016 || |
| ||Non receipt of Forms disallowance of claims ||7.72 ||2004-2006 & 2008-2011 ||Appellate authority |
| || || ||2012-2013 ||Up to Commissioner level |
|Service Tax Laws ||Disallowance of credit ||0.03 ||2007-2010 ||High Court |
| || ||0.51 ||2005-2012 ||Tribunal |
| || ||0.68 ||2001-2008 2011-2014 ||Appellate authority Up to Commissioner level |
|Central Excise Laws ||Valuation disputes and Disallowance of Cenvat Credit ||5.45 ||1996-1997 1999-2002 2004-2013 ||Tribunal |
| ||Disallowance of Cenvat credit ||0.65 ||1996-1997 2005-2008 2011-2013 ||Appellate authority Up to Commissioner level |
|Custom Laws ||Dispute related to exemption and other matters ||0.86 ||1994-1997 2011-2012 ||Appellate authority Up to Commissioner Level |
|Octroi ||Demand of differential Octroi ||3.66 ||2002-2008 ||Civil Court |
(viii) In our opinion and according to information and explanations given to us thecompany has not taken any loan or borrowing from a financial institution bank governmentand also not issued debentures. Accordingly the Provisions of clause 3(viii) of theCompanies (Auditor's Report) Order 2016 are not applicable to the company.
(ix) According to the information and explanation given to us the company has notraised money by way of initial public offer or further public offer (including debtinstrument) and not availed term loan during the year. Accordingly the Provisions ofclause 3(ix) of the Companies (Auditor's Report) Order 2016 are not applicable to thecompany.
(x) During the course of our examination of the books & records of the companycarried out in accordance with the generally accepted auditing Practices in India andaccording to the information and explanation given to us we have neither come across anyinstances of fraud on or by the company noticed or reported during the year nor have webeen informed of such case by Management.
(xi) According to the information and explanation given to us the company has paidmanagerial remuneration within the limit prescribed under section 197 of the CompaniesAct 2013. Accordingly no requisite approval is required to be sought.
(xii) In our opinion the company is not a Nidhi company. Accordingly the provisionsspecified in Paragraph 3(xii) of Companies (Auditor's Report) order 2016 are notapplicable to the company.
(xiii) According to the information and explanation given to us and in our opiniontransactions with the related parties are in compliance with section 177 and 188 of theCompanies Act 2013 and requiste details have been disclosed in the Financial statementsas required by the applicable accounting standards.
(xiv) According to the information and explanation given to us the company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures for raising funds during the year. Accordingly the provisions ofclause 3 (xiv) of the Companies (Auditor's Report) Order 2016 are not applicable to thecompany.
(xv) According to the information and explanation given to us the company has notentered into a non-cash transaction with any of the directors or persons connected withdirectors. Accordingly the provisions of clause 3 (xv) of the Companies (Auditor'sReport) Order 2016 are not applicable to the company.
(xvi) In our opinion the company is not required to be registered under section 45-Aof the Reserve Bank of India Act 1934 Accordingly the provisions in Paragraph 3(xvi)of Companies (Auditor's Report) order 2016 are not applicable.
FOR M/S P. G. BHAGWAT
Firm Registration Number: 101118W
Nachiket Deo Partner
Membership No.: 117695
Annexure A to the Independent Auditor's Report of even date on the Standalone FinancialStatements of Kirloskar Oil Engines Limited.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the CompaniesAct2013
We have audited the internal financial controls over financial reporting of KirloskarOil Engines Limited ("the Company") as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing deemed to be prescribedunder Section 143(1 0) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2)provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial Control system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
FOR M/S P. G. BHAGWAT
Firm Registration Number: 101118W
Nachiket Deo Partner
Membership No.: 117695