Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS Financial Statements of BeardsellLimited (the Company) which comprise the Balance sheet as at March 312019the Statement of Profit and Loss including the statement of Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the Financial Statements including a summary of significant accountingpolicies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS Financial Statements give the informationrequired by the Companies Act 2013 as amended (the Act) in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019its loss including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS Financial Statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour 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 ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the Standalone Ind AS Financial Statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Ind AS Financial Statements for the financialyear ended March 31 2019. These matters were addressed in the context of our audit of theStandalone Ind AS Financial Statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Ind AS Financial Statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the Standalone Ind AS Financial Statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying Standalone Ind AS FinancialStatements.
INDEPENDENT AUDITOR'S REPORT
To the Members of Beardsell Limited
|Key audit matters ||How our audit addressed the key audit matter |
|Appropriateness of timing of Revenue recognition (as described in Note 2.2.i of the Standalone Ind AS financial statements) || |
|The Company has several streams of revenue from multiple locations geographically spread across India and it currently has a decentralized accounting system. Revenue from each stream is recognized based on the accounting policies disclosed in the note 2.2.i to the Ind AS financial statements. ||In order to address the risk of misstatement related to timing of revenue recognition our audit response included: |
| || We have read and assessed that the accounting policy for recognition of revenue from each stream is in compliance with Ind AS 115 |
|As part of our overall response to the risk of fraud when identifying and assessing the risks of material misstatement due to fraud we evaluate the revenue transactions that might give rise to potential fraud risks. In this Company Bonus payouts are often determined based on the metrices of each location which gives an incentive for the management at each location to inflate the revenue for the year. Hence we consider there to be a risk of misstatement of the financial statements related to transactions occurring close to the year end as such transactions could be advanced by management. || We performed walkthroughs of all significant revenue process across all segments in each location to gain an understanding of revenue recognition process (including revenue recognition requirements under Ind AS 115) which included controls in the process addressing the relevant risks. |
| || We have assessed the design and operating effectiveness of these controls implemented by management in the revenue process through test of key controls during the audit year. |
|In view of the above discussed matters appropriateness of timing of revenue recognition has been considered as a key audit matter. || We have tested a sample of contracts with customers across the segments throughout the audit period to evaluate compliance with the requirements of Ind AS 115 by way of identification of timing of revenue recognition for such contracts. |
| || We performed sample tests of individual sales transactions and traced to supporting documents including sales invoices or sales contracts and purchase orders issued by customers (as applicable) to determine the point of revenue recognition for different shipment arrangements and agreements with customers. |
| || We performed analytical reviews of disaggregated data of revenue transactions during the audit period to identify any unusual trends warranting additional audit procedures. |
| || We performed location wise testing for sales made near the reporting date to assess timing of revenue recognition by testing shipping records sales invoices etc. for sample transactions. |
| || We read confirmations from key customers whichever received and compared the receivable balance in books of accounts to receivable balance as given in the confirmation. We obtained and tested the reconciliation of balances as per books and confirmation of balances provided by such customers. |
|Existence of Inventories (as described in Note 2.2.h of the Standalone Ind AS financial statements) || |
|Total Inventory of Rs.999.94 lakhs represents 8.80% of total assets of the Company as at March 31 2019. Inventory is held across 6 factories and 9 branches as at the reporting date. Considering the number of locations and the level of inventory held across its factories and branches as well as the physical verification of inventory at these locations on different dates the risk of existence of such inventory and the identification of non-moving obsolete / damaged inventory is a significant area of audit importance. Accordingly the above issue has been considered as a key audit matter. ||Our audit response consisted of audit procedures including: |
| || Testing the relevant internal controls including in specific the testing of the inventory physical verification process that is performed monthly by management at various locations. |
| || We have observed the physical verification of Inventory conducted by management in certain significant locations selected by us. Our procedures in this regard included |
| ||- Observing compliance of stock count instructions by management personnel; observing steps taken by management to ascertain the existence of inventory on the date of the count (including identification of non-moving obsolete / damaged inventory) |
| ||- perform independent inventory counts on sample basis and reconciled the same to the management counts (wherever applicable) and |
| ||- tested the reconciliation of the differences in inventory quantity between the physical count and the books of accounts. |
| || We performed analytical reviews of disaggregated data of purchases and inventory during the audit period to identify any unusual trends warranting additional audit procedures. |
| || We tested sample of purchase and sales transactions for timing of purchases and sales made near the reporting date to assess whether transactions are recorded in the correct period by testing shipping records sales / purchase invoices etc. for sample transactions. |
| || We tested whether the adjustments to bring down the cost of inventory items to their net realisable value and allowance for slow moving or non-moving inventory and obsolescence at the reporting date is appropriate by assessing the methodology and assumptions adopted by management in this regard including the related adjustments by testing a sample of inventory items as at the reporting date. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe Standalone Ind AS financial statements and our auditor's report thereon. The annualreport is expected to be made available to us after the date of this auditor's report.
Our opinion on the Standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Ind AS financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether such other information is materially inconsistent withthe Standalone Ind AS financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated. When we read the other information if weconclude that there is a material misstatement therein we are required to communicate thematter to those charged with governance.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Standalone Ind AS FinancialStatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone Ind AS FinancialStatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Standalone Ind AS Financial Statements management 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 unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic 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 Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Ind ASFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Ind AS 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 Standalone Ind ASFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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 Standalone IndAS Financial Statements including the disclosures and whether the Standalone Ind ASFinancial Statements represent the underlying transactions and events in a manner thatachieves 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 with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Ind AS FinancialStatements for the financial year ended March 31 2019and are therefore the key auditmatters. 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 Act we give in the Annexure 1a statement on the matters specified inparagraphs 3 and 4 of the Order.
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 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 the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these Standalone Ind AS Financial Statementsand the operating effectiveness of such controls refer to our separate Report inAnnexure 2 to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofSection 197 read with Schedule V to the Act;
(h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS Financial Statements Refer Note 45(c) to the StandaloneInd AS Financial Statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
Annexure 1 referred to under paragraph 1 of the Report on Other Legal and RegulatoryRequirements of the Auditors' Report
Re: Beardsell Limited ('the Company')
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) All property plant and equipment have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are pledged withthe bank and not available with the Company. The same has been independently confirmed bythe bank.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) (a) According to the information and explanations given to us the Company hasnot granted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) In respect of deposits accepted in our opinion and according to the informationand explanations given to us directives issued by the Reserve Bank of India and theprovisions of section 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed there under to the extent applicable have been complied withexcept for delay in filing return of public deposits with registrar as required under rule16 of the Companies (Acceptance of Deposits) Rules 2014 (as amended). We are informed bythe management that no order has been passed by the Company Law Board National CompanyLaw Tribunal Reserve Bank of India or any Court or 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 undersection 148(1) of the Companies Act 2013 related to the manufacture of Plastics andPolymers and are of the opinion that prima facie the specified accounts and records havebeen made and maintained. We have not however made a detailed examination of the same.
(vii) (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insuranceincome-tax cess and other statutory dues although there have been slight delay in fewcases in respect of employees' state insurance and income-tax. With respect to theundisputed goods and services tax the dues have not been regularly deposited and therehave been serious delays in large number of cases.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax goods andservices tax cess and other statutory dues were outstanding at the year end for aperiod of more than six months from the date they became payable.
(c) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax and cess on account of any disputeare as follows:
|Name of the Statute ||Nature of Dues ||Amount (Rs. in lakhs)* ||Period to which the amount relates ||Forum where Dispute is pending |
|Sales Tax Acts of various ||Sales Tax - Local ||1.05 ||1995-96 ||Deputy Commissioner |
| || || ||2000-01 ||Assistant Commissioner and other appellate authorities |
|States || || ||2001-02 || |
| || || ||2003-04. || |
|Central Sales ||Central ||686.31 ||1995-96 2003-04 ||High Court Deputy Commissioner and Commercial Tax |
|Tax Act 1956 ||Sales Tax || ||2005-06 2006-07 || |
| || || ||2007-08 2008-09 || |
| || || ||2009-10 2010-11 ||Officer of various states |
| || || ||2011-12 2012-13 || |
| || || ||2013-14 2014-15 || |
| || || ||2016-17 || |
* Net of Rs.0.74 Lakhs sales tax and Rs.56.15 lakhs central sales tax paid underprotest.
(viii) In our opinion and according to information and explanations given by themanagement the Company has not defaulted in repayment of dues to a bank during the year.The Company has not made any borrowings from the government and financial institution andhas not issued any debentures during the year.
(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer / further public offer / debtinstruments and term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no material fraud by the company or on the companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe company and not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
Annexure 2 to the independent auditor's report of even date on the Standalone Ind ASFinancial Statements
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of BeardsellLimited (the Company) as of March 31 2019 in conjunction with our audit ofthe standalone Ind AS financial statements of the Company for the year ended on that date.
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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the 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 with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the GuidanceNote) and the Standards on Auditing as specified under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements was established and maintained and if such controls operated effectively in allmaterial respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting with reference to thesestandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these standaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the standalone Ind AS financialstatements 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 internal financial controls over financialreporting with reference to these standalone Ind AS financial statements.
Meaning of Internal Financial Controls Over Financial Reporting with reference to theseStandalone Ind AS Financial Statements
A company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation ofstandalone Ind AS financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting with reference to these standalone Ind AS financial statements includes thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of standalone Ind AS financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the standalone Ind AS financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting withreference to these Standalone Ind AS Financial Statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting with reference to these standalone IndAS financial statements and such internal financial controls over financial reporting withreference to these standalone Ind AS financial statements were operating effectively as atMarch 31 2019 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.
For S.R. Batliboi& Associates LLP
ICAI Firm Registration Number: 101049W/E300004
per Bharath NS
Membership Number: 210934
Place of Signature: Chennai
Date: May 24 2019