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Aaron Industries Ltd.

BSE: 535103 Sector: Engineering
NSE: AARON ISIN Code: INE721Z01010
BSE 05:30 | 01 Jan Aaron Industries Ltd
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Aaron Industries Ltd. (AARON) - Auditors Report

Company auditors report

To the Members of Aaron Industries Limited Report on the Audit of the StandaloneFinancial Statements Opinion

We have audited the financial statements of Aaron Industries Limited which comprisethe balance sheet as at 31st March 2020 and the statement of profit and loss statementof cash flows for the year then ended and notes to the financial statements including asummary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2020 and its profit/loss and its cash flows for the year ended onthat date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters (‘KAM') are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.

The key audit matters How the matter was addressed in our audit
Accuracy of recognition and measurement of inventory as on Year End
As per established procedure for verification of inventory as on year End i.e. 31st March company carries out physical verification of inventory and auditor normally remains present during physical count of the inventory conducted by a company to satisfy himself about company's procedure of verification and related controls about condition quantity and other aspects of the inventory. However this year i.e. FY 2019-20 as informed to us due to lock down imposed in Surat from last week of the March 2020 company could not take inventory of elevator division on 31st March 2020 year end. We are informed that company took physical inventory during May 2020. And inventory verification also took a longer due to staff constraint. We as auditor we could not remain present during the inventory count at inventory locations due to inadequate relaxation from the lock down. We assessed the company's normal process of determination of inventory at the year end. We also evaluated the related internal controls for determination of quantity and measurement of various items of inventory and related management review and approvals for the same. We also interacted with the appropriate management personnel connected with taking inventory about the how the actual procedure was carried out.
We identified the verification of inventory as KAM because Though we checked the inventory at a later date to assess the accuracy and reasonableness of verification done by management we adopted the rollback procedure for a number of items to evaluate management's working of the inventory at the year end. We tried to corroborate the managements working of issue of raw materials and production in the intervening period with the records and internal controls and the assumptions used therein. We discussed with the management the assumptions and estimates used in the calculation and their reasonableness.
This year due to lockdown imposed in the city due to covid epidemic normal procedure of physical verification of inventory at year-end could not be followed by the company and auditor could not remain represent during inventory verification done by management a later date. Looking to a large no of items running into thousands and its nature and limitation on carrying out physical verification of bulky items like metal sheets and fabricated items measurement and evaluation of condition of items of inventory has been complex and requires some judgments and assumptions.
There is an inherent risk about the accuracy of the estimates and assumptions used in carrying out rollback procedures to determine the quantity of inventory at the year end. The rollback procedures involved considerable efforts and also involved relying on records and internal controls for ascertaining movement of goods during intervening period. The whole verification involved some estimates and uncertainties due to a lapse of time.
We find that the matter of verification of inventory is a matter involving significant auditor attention and therefore we have identified it as a key audit matter for the audit for financial year 2019-20.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report CorporateGovernance but does not include the standalone financial statements and our auditor'sreport thereon.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the FinancialStatements

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 financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the accounting Standards specified undersection 133 of the Act. 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.

In preparing the financial statements the Board of Directors is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control. Obtain anunderstanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls. Evaluate the appropriateness of accounting policies usedand the reasonableness of accounting estimates and related disclosures made by management.Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern. Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards. From the matters communicated withthose charged with governance we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the keyaudit matters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (“the Order”)issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the “Annexure B” a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.

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 purposes of our audit. (b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books. (c) The Balance Sheet the Statement ofProfit and Loss and the Cash Flow Statement dealt with by this Report are in agreementwith the books of account. (d) In our opinion the aforesaid financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014. (e) On the basis of the written representationsreceived from the directors as on 31st March 2020 taken on record by the Board ofDirectors none of the directors is disqualified as on 31st March 2020 from beingappointed as a director in terms of Section 164(2) of the Act. (f) With respect to theadequacy of the internal financial controls over financial reporting of the Company andthe operating effectiveness of such controls refer to our separate 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. TheCompany does not have any pending litigations which would impact its financial position.ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses. iii. There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company.

For P. J. Desai & Co
Chartered Accountants
(Firm's Registration No.- 102330W)
Pallav J Desai
Partner
(Membership No.-039868)
UDIN: 20039868AAAAAQ4762
Surat June 30 2020

Annexure - A to the Independent Auditors' Report

(Referred to in paragraph 2(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Aaron Industries Limited of evendate)

Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSubsection 3 of Section 143 of the Companies Act 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of AaronIndustries Limited (“the Company”) as of 31stMarch 2020 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'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate 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 judgment 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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31st March 2020 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For P. J. Desai & Co
Chartered Accountants
(Firm's Registration No.- 102330W)
Pallav J Desai
Partner
(Membership No.-039868)
UDIN: 20039868AAAAAQ4762
Surat June 30 2020

Annexure - B to the Independent Auditors' Report

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Aaron Industries Limited of evendate)

The Annexure B referred to in Independent Auditors' Report to the members of theCompany on the standalone financial statements for the year ended 31st March 2020 wereport that:

(i) (a) The company has maintained proper records showing full particulars includingquantitative details and location of the fixed asset.

(b) As explained to us the company has verified a few groups of fixed assets duringthe year. No material discrepancies were notified on such physical verification of fixedassets.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the company has a factory building at Kosambaon a piece of land at Block No. 251-B Royal Industrial Park Village Moti Pardi Taluka-Mangrol for which title deeds are held in the name of company as at the balance sheetdate. The company has constructed factory building at Udhna on a land belonging toassociate concerns for which the rent agreement has been entered upon.

(ii) The company has conducted the physical verification of inventory at reasonableintervals during the year. As per information and explanations furnished to us company hasnot kept adequate records of items of inventory hence we are unable to comment whethermaterial discrepancies if any were noticed on such verification.

(iii) The Company has not granted any loans (secured or unsecured) to companies LLP'sor other parties covered in the register maintained under section 189 of the CompaniesAct 2013. Accordingly the provisions of clause 3(iii)(a) to (c) of the Order are notapplicable to the company and hence not commented upon it.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans and investments made during the year.

(v) The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank Of India and the provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of Deposit) Rules 2015 withregard to the deposits accepted from the public are not applicable.

(vi) As per the information and explanations given to us The Central Government has notprescribed the maintenance of cost records under section 148(1) of the Act for any of theactivities carried on by the Company.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund income-tax dutyof customs cess employees state insurance and GST have been generally regularlydeposited during the year by the Company with the appropriate authorities. According tothe information and explanations given to us no undisputed amounts payable in respect ofapplicable statutory dues were in arrears as at 31st March 2020 for a period ofmore than six months from the date they became payable except as stated below:

Statement of Arrears of Statutory Dues Outstanding for More than Six Months:

Name of the Statute Nature of the Dues Amount (Rs.) Period to which the amount relates (FY)
Income Tax Act 1971 TDS demand 10 2018-19 24Q4
Income Tax Act 1971 Interest IT return 200 2013-14
TOTAL 210

(b) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no disputed dues of income tax orsales tax or service tax or duty of customs or duty of excise or value added tax which arenot deposited by the company.

(viii) The company has not defaulted in repayment of loans or borrowing to bank. Thecompany has not availed any loan or borrowing from financial institution (other thanbank) Government and has not issued any debentures hence comments are not required tobe offered for loans or borrowings from such entities.

(ix) The company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans during the year and hence reporting underclause

(ix) of the Order is not applicable.

(x) According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit. (xi) The managerial remuneration has been paid in accordance withthe requisite approvals mandated by the provisions of sec 197 read with Schedule V to theCompanies act.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company as defined in Section 406(1) of the Companies Act 2013.Accordingly paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

(xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made private placement ofshares during the year and requirement of Sec 42 is not to be complied with.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 and accordingly the provisions of Clause 3(xvi) of the order arenot applicable to the company.

For P. J. Desai & Co
Chartered Accountants
(Firm's Registration No.- 102330W)
Pallav J Desai
Partner
(Membership No.-039868)
UDIN: 20039868AAAAAQ4762
Surat June 30 2020

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