To the members of Andrew Yule & Company Limited
Report on the Audit of the Standalone Ind AS Financial Statements Qualified
1. We have audited the standalone Ind AS financial statements of Andrew Yule & Company Limited (the Company) which comprise the Balance Sheet as at 31st March 2019 and the Statement of Profit and Loss (including other comprehensive income) the Statement of Changes in Equity and Statement of Cash Flows for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us subject to the qualifications mentioned hereinafter in this report the aforesaid standalone Ind AS financial statements give the information required by the act in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 profit and other comprehensive income changes in equity and its cash flows for the year the ended on that date.
Basis for Qualified Opinion
a. In the absence of Balance Confirmation Certificates no opinion can be formed about the correctness of the balances of Sundry Debtors and Creditors. Also recoverability of Sundry Debtors and actual obligations to Sundry Creditors are not ascertainable.
b. Non provision of doubtful IGST Refund of Rs.12.52 lakhs (as against Note no. 56 to the financial statements) resulted into overstatement of Company's profit by the equivalent amount.
We have conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act 2013. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act 2013 and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion Key Audit Matters
2. Key audit matters are those matters that in our professional judgement were of most significant in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole and in forming our opinion thereon. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key Audit Matters||Auditor's Response|
|i. Balance Confirmation:|
|(a) Balance Confirmation Certificate from Sundry Debtors as on 31.03.2019 has not been obtained even in a single case. The total amount of sundry debtors as on 31.03.2019 is Rs.6612.24 lakhs.||(a) We are unable to form any opinion about the correctness of the balances of sundry debtors as on 31.03.2019 and their recoverability.|
|(b) Balance Confirmation Certificate from Sundry Creditors as on 31.03.2019 has not been obtained. Sundry creditors as on 31.03.2019 is Rs.5671.50 lakhs.||(b) We are unable to form any opinion about the correctness of the balances of sundry creditors and the Company's liabilities/obligations thereon.|
|Both the issues have been dealt with by way of `qualification' in the Independent Auditor's Report.|
|ii. Differences in payments of P.F. with the Govt. as against the current accounting records:|
|There are persisting differences between the payments actually made by the units and their relevant accounting records. There is no adequate effort on the part of the management of the Company for reconciling such differences in spite of the exist- ence of the strict rules and regulations of the P.F. Department of the Govt. of India.||This appears to be an irregularity and the Company should take immediate steps to reconcile the differences between payments actually made by the units and their relevant accounting records and sort out the differences of each unit by introducing a regu- lar system of reconciliation to avoid serious legal consequences in future.The above issue has been dealt with under `Emphasis of Matter' in the Independent Auditor's Report.|
|iii. Non Contribution to Gratuity Fund by Mayurbhanj Unit:||.|
|An accumulated amount of Rs.1023.23 lakhs has not been contributed by Mayurbhanj Unit to Company's Consolidated Gratuity Fund till 31.03.2019.||Mayurbhanj Unit to Company's Gratuity Fund results into lesser accumulation in Gratuity Fund which is utilized for payment of gratuity to the employees on retirement.The issue has been dealt with under `Emphasis of Matter' in the Independent Auditor's Report.|
|iv. Internal Audit:As per Company's present practice internal audit is carried out twice (half yearly) in every financial year. Internal Audit so conducted is not guided by necessary audit plan approved by the ACB.||The Company does not have Risk-based Audit Plan prioritizing high and medium areas of audit which have to be approved by ACB. This should have been the guiding factor for conducting of Internal Audit in the Company with respect to its size and complexity of operations and implication of financial control in each unit of operations.|
|The issue has been dealt with under `Emphasis of Matter' in the Independent Auditor's Report.|
|v IT Systems Audit Data Integrity scope of Manual|
|Intervention and Disaster Management System:|
|(a) The Company has no system of carrying out any IT system Audit since the day of inception of computerized system for recording accounting and operational data.Presently the company is operating in-house developed IT Systems. Data at Divisional level are not integrated with the Head Office Accounts through the system. Due to manual intervention at various levels of data transfer. `Data Integrity' is not reasonably assured.||(a) Absence of Data Integrity increases the audit risk for audit of financial statements of the Company for the year ended 31.03.2019.|
|(b) The existence of `Security of Accounting/Operational Data' and data recovery mechanism through IT Disaster Management System on the occurrence of unforeseen events are absent.||(b) )We have not come across any documentary evidence as to the necessary directions given by the Audit Committee of the Board (ACB) in any of its meetings held on 30.05.18 13.08.18 26.09.18 09.11.18 & 11.02.19 to weed out these shortcomings.The above issues have been dealt with under `Emphasis of Matter' in the Independent Auditor's Report.|
|vi. Evaluation of uncertain tax positions:||Obtained details of completed tax assessment and demand from the management for the year ended 31.03.2019 underlying assumption which led to non-provision of tax. Adjustment of refunds totalling to Rs.272.47 lakhs for the AY 2015-16 and 2016-17 couldn't be given effect to the accounts pending Tribunal cases for AY 2010-11.|
|The Company has material uncertain tax positions including matters under dispute which involves significant judgement to determine the possible outcome of these disputes.|
|vii. Reporting on Internal Financial Controls(IFC) by the Auditor:||Comments of the ACB undermines the concept of necessity of Internal Financial Control on which the edifice of Governance of the Company is built|
|Reporting on IFC by the Auditor has been made mandatory u/s 143(3)(i) by the Companies Act 2013 since the inception of the said act. ACB in its meeting dated 11.02.2019 noted inter-alia the Statutory Audit Report till financial year 2017-18 was inclusive of a report on Internal Financial Control (IFC) as a part of assignment of Statutory Audit. As understood review of IFC was a requirement as insisted upon by ICAI and it was not specified in CAG Appointment.|
|viii Separate meetings of Independent Directors:||We have not come across any documentary evidence as to the necessary directions or observations given by the Independent|
|As per requirement of Section 149(8) Regulation VII of Schedule IV of the Companies Act 2013 and Regulation 25 of the SEBI (LODR) Regulations 2015;||Directors in form of any minutes of the meeting in their 3rd Meeting held on 11.02.2019 ( also in their earlier 2nd Meeting held on 12.02.2018).|
|1. the Independent Directors of the Company shall hold at least one meeting in a year without the attendance of Non- independent Directors and members of the management.||Absence of any recorded minutes of the meetings of the Independent Directors so held is tantamount to dereliction of duties on the part of the Independent Directors involving Governance of the Company and its management as per requirement of rules framed under the Companies Act. This irregularity enhance the audit risk.|
|2. the said meeting should :|
|a. review the performance of Non-independent Directors and the Board as a whole|
|b. review the performance of the Chairperson of the Company taking into account the views of Executive Directors and Non-executive Directors and||Besides the Company has not provided any Secretarial Report u/s 204 of the Companies Act 2013.|
|c. assess the quality quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.|
Emphasis of Matters
3. Without qualifying our opinion we draw attention to the following:
a) Internal Audit System is not guided by any ACB approved Risk-based Audit plan prioritising high/medium risk areas with respect to Company's size and complexity of operations and implications of financial control in its units.
b) Absence of IT System Audit Security of accounting/operational data Recovery of data through IT Disaster Management System and Manual intervention at crucial levels of data transfer resulted into high audit risk.
c) Absence of reconciliation of differences in deposit of PF and accounting records reduces the reliability on the financial data and increases the audit risk.
d) In the absence of exercise of adequate control in the process of maintaining records of Company's Lease deeds and Title deeds enhances the audit risk
e) Non funding of accumulated amount of Rs.1023.23 lakhs by Mayurbhanj Unit to Company's Gratuity Fund results into lesser accumulation in Gratuity Fund which is utilized for payment of gratuity to the employees on retirement.
f) Issue of non provision of PF of Rs.42.97 lakhs (ref. Note no.61 of the financial statements) pending as recoverable over 10 years from PF Deptt. of Govt. of India is to be resolved by the Company as soon as possible.
g) Lease agreements of three Tea Gardens and Brentford Unit (of Electrical Division Kolkata) have not been renewed since long.
h) Issue arising out of non provision of outstanding lease rent totalling to Rs.228.93 lakhs provided by the Company as contingent liability should be resolved immediately as it disputes the Company's ownership on the tea gardens under its operation.
i) Opening WIP of seven jobs in Engineering Division has been shown as `Nil' after net of provision instead of showing value of opening WIP and related provision(s) thereof separately in the accounts.
Information other than the Standalone Ind AS Financial Statements and Auditor's Report thereon
4. The Company's Board of Directors is responsible for the information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including in the Management Discussion and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information but does not include the standalone financial statements and our auditor's report thereon. The report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to read the other information identified above when it becomes available and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Management's Responsibility for the Standalone Ind AS Financial Statements
5. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act 2013 (the Act) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position financial performance changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the financial statement that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matter related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
6. Our objectives are to obtain responsible assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
7. The Standalone Ind AS financial statements of the Company for the year ended March 31 2018 were audited by another firm of Chartered Accountants under Companies Act 2013 who vide their report dated May 30 2018 expressed a modified opinion on those financial statements. The Company has properly dealt with the same matter while preparing the Ind AS financial statement for the year ended March 31 2019.
Report on Other Legal and Regulatory Requirements
8. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued by the Central Government of India in terms of subsection (11) of section 143 of the Companies Act 2013 we give in the Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
9. 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 best of our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
e) Section 164(2) of the Companies Act 2013 regarding disqualification of the Director is not applicable to the Company being a Government Company vide notification no. G.S.R. 463[E] dated 5th June 2015
f) With respect to the adequacy of internal financial controls over financial reporting of the Company and the 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 in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and 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 financial position in its financial statements - Refer Note 36 to the financial statements.
ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
10. As required by section 143(5) of the Act the directions and sub-directions issued by the Comptroller & Auditor General of India we give our comments in the standalone Ind AS financial statements in Annexure-C annexed herewith.
|For S Ghose & Co LLP|
|CA Ranjan Kumar Paul|
|Place : Kolkata||Partner|
|Date : 30.05.2019||M.No.060084|
Annexure - A to the Independent Auditor's Report
Referred to in paragraph 9(f) of the Independent Auditor's Report of even date to the members of Andrew Yule & Company Limited on the Ind AS Financial Statements for the year ended March 31 2019.
Report on the Internal Financial Controls over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (`the Act)
1) We have audited the internal financial controls with reference over Financial Reporting of Andrew Yule & Company Limited as of 31st March 2019 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
2) The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (`ICAI') and section 134(5)(e) of Companies Act 2013. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to companies' policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.
3) Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the Guidance Note) and the Standards on Auditing issued by ICAI and the Standard on Auditing prescribed under section 143(10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls. Those Standards and Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company.
Meaning of Internal Financial Controls over Financial reporting.
4) A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and Directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company's assets that could have a material effect on the financial statements.
Inherent limitations of Internal Financial Controls over Financial reporting.
5) Because of the inherent limitations of internal financial controls over financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
6) Based on our audit as well as discussions we are of the opinion that:
a) The flow of financial data from divisions and units are not seamlessly integrated with head office accounts. It involves manual interventions at various stages of accounting.
b) Absence of Guidelines as to IT General Controls and Segregation of Duties does not give reasonable assurance regarding;
i) fair maintenance and accurate reflection of records with reasonable details for transactions and disposition of assets of the Company
ii) the receipts and expenditure are being made without any documentation of creation and confirmation concept as should have been approved by the appropriate authority.
c) Since the inception of computerization IT Systems audit has been neither carried out nor included in the annual audit plan.
d) IT Disaster Recovery plan has not been defined.
In view of above observations Internal Financial Controls in the Company as on 31st March 2019 is inadequate with respect to its size diversity and complexity of operations based on the internal control over financial reporting criteria as stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the ICAI.
|For S Ghose & Co LLP|
|CA Ranjan Kumar Paul|
|Place : Kolkata||Partner|
|Date : 30.05.2019||M.No.060084|
Annexure - B to the Independent Auditor's Report
(Referred to in our report of even date attached)
Referred to in paragraph 8 under the heading `Report on Other Legal & Regulatory Requirement' of our report of even date :
(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) According to the information and explanations given to us Fixed Assets have been physically verified by the management at reasonable intervals and no material discrepancies have been noticed on such verification.
(c) According to the information and explanations given to us and the records examined by us the title deeds of immovable properties are held in the name of the company. However title Deeds of three properties located in Kolkata were lost. FIR was lodged only for two title deeds with Burrabazaar P.S. on 25.05.2017 and no further information was available with the Company about the lost title deeds till the date. Further two lease deeds in respect of two tea gardens are reportedly lying with the bank against loan raised by the Company. The bank could not issue any certificate confirming possession of those lease deeds by them.
(ii) According to the information and explanations given to us the inventories have been physically verified at reasonable intervals by the management. Discrepancies noticed on verification between physical inventories and book records were not material in relation to the operation of the Company and the same has been properly dealt with in the books of account.
(iii) According to the information and explanations given to us the Company has not granted any loans secured or unsecured to company firms limited liability partnership or other parties covered in the Register maintained under section 189 of the Companies Act 2013 except loans given to its subsidiaries Yule Electrical Ltd. Rs.3.68 lakhs Yule Engineering Ltd. Rs.1.98 lakhs and Hooghly Printing Co. Ltd. Rs.157.71 lakhs.
(iv) According to the information and explanations given to us the Company has not given loans guarantees made investments and/ or purchased securities in respect of which provisions of section 185 and 186 of the Companies Act 2013 are applicable except loans given to its subsidiaries Yule Electrical Ltd. Rs.3.68 lakhs Yule Engineering Ltd. Rs.1.98 lakhs and Hooghly Printing Co. Ltd. Rs.157.71 lakhs.
(v) According to the information and explanations given to us the Company has not accepted any deposits from the public within the meaning of Sect ions 73 to 76 or any other relevant provisions of the Act and rules framed thereunder.
(vi) According to the information and explanations given to us the Cost Records are maintained by the Company for all the products as per requirements of the relevant act and rules framed thereunder.
(vii) (a) According to the information and explanations given to us and the basis of our examination of the books of account and records the Company has been regular in depositing undisputed statutory dues including Provident Fund Employees' State Insurance Income Tax GST and any other statutory dues with the appropriate authorities except non-reconciliation of deposit of PF as indicated in serial no. (ii) of KAM to the appropriate authority. According to the information and explanations given to us no disputed amount payable which were outstanding at the year end was for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us the Company has not deposited the following dues on account of disputes with the appropriate authorizes.
|Name of the Statute||Nature of Dues||Amount (Rs. lakhs)||Period to which amount relates||Forum where the amount is pending|
|Income Tax Act 1961||Penalty||4.65||2004-05||CIT (Appeal) (20)|
|Income Tax||1929.53||2010-11 Rs.1873.94 lacs||NCLT|
|2013-14 Rs.23.07 lacs|
|2014-15 Rs.32.52 lacs||CIT (Appeal)|
|Assam Sales Tax & VAT||Assam Gardens||152.93||1996-97 to 1998-99||Appellate Authority Revenue Board|
|Orissa Sales Tax & VAT||Orissa Sales Tax||106.24||1999-2000||Appellate Authority Tribunal Cuttack|
|5.64||2001-02||2nd Appellate Authority Berhampore|
|Karnataka Sales Tax & VAT||Karnataka Sales Tax||17.69||2017-18||Appellate Authority Karnataka|
|Central Excise||Central Excise||334.65||1996-97 1998-99 1992-93 1993-94 1990-91 2001 to 2003 & 2009-10||Appeal at CESTAT|
|2012-13 & 2013-14|
|181.61||2012-13 & 2013-14||Commissioner of Central Excise|
|Service Tax||Service Tax||34.44||2006-07||Appeal at Commissioner of Central|
|2007-08 2009-10 & 2010-11 to 2015-16||Excise|
|1.45||2006-07 & 2007-08||AppealsAppeal at CESTAT|
(viii) According to the information and explanations given to us and based on the examination of the books and records of the company the Company has not defaulted in the repayment of dues to banks and financial institution.
(ix) Based upon the information and explanations given by the management the company has not raised moneys by way of initial public offer or further public offer including debt instruments and term Loans. Accordingly the provisions of clause 3 (ix) of CARO are not applicable to the Company.
(x) Based upon the audit procedures performed and according to the information and explanations given by the management no fraud on or by the Company or its officers/employees has been committed noticed or reported during the year
(xi) Section 197 of the Companies Act 2013 regarding payment of managerial remuneration is not applicable to the Company being a Government Company vide notification no.G.S.R. 463[E] dated 5th June 2015.
(xii) As per information and explanations given to us the Company is not a Nidhi Company. Therefore the provisions of clause 4 (xii) of the Order are not applicable to the Company.
(xiii As per information and explanations given to us the transactions with the related parties are in compliance with section 177 and 188 of Companies Act 2013 and the details have been disclosed in the Note No.39 of the Standalone Financial Statements as required by the applicable Ind AS.
(xiv) Based upon the audit procedures performed and according to the information and explanations given by the management the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly t he provisions of clause 3 (xiv) of the Order are not applicable to the Company and hence not commented upon.
(xv) Based upon the audit procedures performed and according to the information and explanations given by the management the company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly the provisions of clause 3 (xv) of CARO are not applicable to the Company.
(xvi) In our opinion and according to the information and explanations given to us the company is not required to be registered under section 45 IA of the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi) of the Order are not applicable to the Company.
|For S Ghose & Co LLP|
|CA Ranjan Kumar Paul|
|Place : Kolkata||Partner|
|Date : 30.05.2019||M.No.060084|