TO THE MEMBERS OF BKM INDUSTRIES LIMITED
Report on the audit of standalone financial statements
We have audited the accompanying Standalone Financial Statements of BKM IndustriesLimited ("the Company") which comprise the Balance Sheet as at March 31 2020the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "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 Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
BASIS FOR OPINION
We conducted our audit of the Standalone Financial Statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the Standalone Financial Statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the Standalone Financial Statements.
EMPHASIS OF MATTERS
We draw attention to the following notes of the Standalone Financial Statements. Ouropinion is not modified in respect of these matters
1. Note No 48 to the Standalone Financial Statements which indicate that with effectiveApril 1 2019 the Company adopted Ind AS 116 "Leases" using the ModifiedRetrospective Approach which is applied to leases that were within the scope of thisstandard as of April 1 2019 and has taken the cumulative adjustment to retained earningsin the Standalone Financial Statements as on April 1 2019. As a result an amount of INR127.73 lakhs as fair value of leased asset recognized as lease-hold building in theProperty Plant and Equipments (Refer Note No 5 to the Standalone Financial Statements)and also recognized an equivalent amount as fair value of leased liability included inthe Other non-current liabilities (Refer Note No 21 to the Standalone FinancialStatements) as at March 31 2020.
2. Note 7 "Trade Receivables-Impairment loss/ (gain) on financial assets" tothe Standalone Financial Statements which indicate that as at the reporting date themanagement has reviewed the recoverability of trade receivables. Based on which the entityhas provided for expected credit loss of INR 1558 lakhs to the extent ofnon-recoverability of trade receivables in accordance with Ind AS -109 "FinancialInstruments: recognition & measurement" during the year ended 31st March 2020.This is included in Note No 30 "Other Expenses-Impairment (loss)/gain on financialassets" in the Standalone Financial Statements for the year ended March 31 2020.
3. Note 17 "Borrowings" to the Standalone Financial Statements which indicatethat Due to irregularity in payment of Borrowings as at 31st March 2020 the Company'sloan accounts in the Banks and Other Financial Institutions have got NPA due to overdue ofInterest and Principal amounting to INR 10503 lakhs. Further these Bank and OtherFinancial Institutions have already initiated notice under section 13(2) of the SRFAESIAct 2002 against which the Company has responded accordingly.
4. Note 58 to the Standalone Financial Statements which indicates that the Company outof 8 manufacturing facilities (facilities') the company has already discontinuedits operations at 3 facilities till 31st March 2020 and communicated to the stock exchangeon its intent to suspend the operation at 3 facilities from now onwards. However themanagement is exploring options to revive the operations and cash flows in near future soas to maintain the going concern status of the entity. These events or conditions indicatethat a material uncertainty exists that may cast significant doubt on the entity's abilityto continue as a going concern.
5. Note 59 to the Standalone Financial Statements which indicates that the Company hassold lease hold land and discontinued its manufacturing operations of one of its plantlocated at Bhopal district in the state of Madhya Pradesh. Accordingly net profit/ (Loss)from such manufacturing operation of an amounting to INR (23) lakhs disclosed separatelyin the Statement of Profit and Loss of the Company for the year ended March 31
2020 as a separate item in accordance with Ind AS 105 "Non-current Assets Held forSale and Discontinued Operations". Furthermore the Property Plant and Equipment(Refer Note No 5 to the Standalone Financial Statements) of an amounting to INR 67 lakhswith respect to this plant classified in accordance with Ind AS 105 "Non-currentAssets Held for Sale and Discontinued Operations" and disclosed under"Non-current assets held for disposal" in the Balance Sheet as at 31st March2020.
KEY AUDIT MATTERS
Key audit matters are those matters that in our professional judgment were of mostsignificance 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 FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sl. No. Key Audit Matter ||Principal Audit Procedures |
|1. As at the reporting date the carrying amount of the net assets of the entity is more than its market capitalization on standalone basis. This provides an indication for occurrence of Impairment Loss in accordance with Ind-AS 36 "Impairment loss". However based on the formal estimates by the management the recoverable value will exceed the carrying amount of the net assets of the company. Hence no impairment loss recognized in the Standalone Financial Statements for the period ended March 31 2020. ||We have discussed with the Management and Audit Committee backed by detailed workings on future projections and sustainability plans. |
|2. Contingent Liabilities pending starting from financial year 2011- 12 Non-payment of tax liability of INR 135 lakhs & Non-filing of Income Tax Returns for the financial year 2017-18 & recoverability of deposits made against Appeals with Government Authorities. ||We have involved our internal experts to review the nature of the amounts recoverable and payables the sustainability and the likelihood of recoverability upon final resolution. |
|3 Allowance for Credit Losses: The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the Company deals with and the countries where it operates. In calculating expected credit loss the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19. We identified allowance for credit losses as a key audit matter because the Company exercises significant judgment in calculating the expected credit losses. ||Our audit procedures related to the allowance for credit losses for trade receivables and unbilled revenue included the following among others: We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses including consideration of the current and estimated future economic conditions (2) completeness and accuracy of information used in the estimation of probability of default and (3) computation of the allowance for credit losses. For a sample of customers: We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information. We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Company. |
INFORMATION OTHER THAN THE STANDALONE 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 BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the Standalone Financial Statements and our auditor's report 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.
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 Act with respect to the preparation of these Standalone Financial Statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other 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 the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the Standalone Financial Statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the Standalone 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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the StandaloneFinancial 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 Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
i. Identify and assess the risks of material misstatement of the Standalone FinancialStatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
ii. Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act 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.
iii. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
iv. 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 Standalone Financial Statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
v. Evaluate the overall presentation structure and content of the Standalone FinancialStatements including the disclosures and whether the Standalone Financial Statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in
(i) planning the scope of our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the financialstatements.
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 Financial Statementsfor the financial year ended March 31 2020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 A'; a statement on the mattersspecified in the paragraph 3 and 4 of the said 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 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 Standalone Balance Sheet Statement of Profit and Loss the Statement of CashFlows and the Statement of Changes in Equity dealt with by this Report are in agreementwith the books of account;
(d) in our opinion the aforesaid Standalone Financial Statements comply with theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read withrelevant rule issued thereunder as amended;
(e) on the basis of the written representations received from the Directors as on 31stMarch 2019 taken on record by the Board of Directors none of the Directors isdisqualified as on 31st March 2020 from being appointed as a Director in terms of section164 (2) of the Act;
(f) with respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these Standalone Financial Statements and theoperating effectiveness of such controls refer to our separate Report in AnnexureB' to this report; and
(g) in our opinion the managerial remuneration for the year ended March 31 2020 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 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the pending litigations in its financial statements;
ii. The Company did not have any long- term contracts including derivative contracts.Accordingly no provisions for material foreseeable losses have been made; and
iii. There were no amounts which are required to be transferred to the investoreducation & protection fund by the Company.
TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 1 under Report on Other Legal & RegulatoryRequirements' section of our report of even date)
The Annexure referred to in Independent Auditors' Report to the members of BKMIndustries Limited ("the Company") on the Standalone Financial Statements forthe year ended 31st March 2020 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assetsby which all fixed assets are verified in a phased manner over a period of two years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the company and the nature of its assets. Pursuant to such program none of thefixed asset has been physically verified by the management during the period.
(c) According to information and explanations given by the management the titledeeds/lease deeds of immovable properties included in property plant and equipment areheld in the name of the Company except the title deeds/lease deeds pending for mutation ofimmovable properties are given bellow:
|Particulars ||Locations ||Title Owner ||Amount (Rs. in INR) |
|Free Hold Land ||Hyderabad ||Manaksia Crowns Pvt. Ltd. ||88633.00 |
|Free Hold Land ||Hyderabad ||Manaksia Crowns Pvt. Ltd. ||118089.00 |
|Factory Land ||Belur ||Hindustan Seals Limited ||201056.00 |
|Free Hold Land ||Silvasa ||Manaksia Crowns Pvt. Ltd. ||534247.00 |
|Land ||Liluah ||Manaksia Containers Ltd. ||855415.00 |
(ii) (a) The inventory has been physically verified by the management during the year.In our opinion the frequency of such verification is reasonable.
(b) The discrepancies noticed on the aforesaid verification between the physical stocksand book records were properly dealt in the books of accounts.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company and hence not commented upon.
(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 in respect ofgrant of loans making investments and providing guarantees and securities as applicable.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from public and accordingly clause (v) of paragraph3 of the Order is not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records undersub-section (1) of section 148 of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the records.
(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 employees' stateinsurance income-tax sales tax service tax duty of customs duty of excise CGSTSGST IGST UTGST Value Added Tax Cess and other material statutory dues have beengenerally regularly deposited during the year by the Company with the appropriateauthorities except the following
|Nature of Statutory Dues ||Outstanding Since ||Amount (INR in Lakhs) |
|Goods and Services Tax (GST) ||May 2018 ||46.99 |
|Tax Deducted at Source (TDS) ||July 2018 ||152.95 |
|Income Tax Liability for the financial year 2017-18 ||Nov 2018 ||135.00 |
|Total || ||334.94 |
(b) According to the information and explanations given to us the following dues ofExcise Duty Service Tax Entry Tax and Other Dues have not been deposited by the Companyon account of disputes:
|Name of the Statute ||Nature of the Dues ||Amount involved (Rs. in INR) ||Period to which the amount relates ||Forum where Disputes is pending |
|Central Excise & CGST Act ||Excise Duty & Penalty ||9591956.00 ||2017-18 ||Commissionerate Audit-II Kolkata |
|Central Excise & CGST Act ||Excise Duty & Penalty ||64779.00 ||2017-18 ||Asst. Commissionerate of CGST & C. Ex Bankura Division |
|Central Excise Act 1944 ||Excise Duty & Penalty ||3502788.00 ||1991-99 ||Superintendent of Central Excise Range-9 |
|Central Excise Act 1944 ||Excise Duty & Penalty ||1604645.00 ||2012-13 ||Addl. Commissioner Hyderabad |
|Central Excise Act 1944 ||Excise Duty & Penalty ||1729833.00 ||2014-15 ||Jt. Commissioner Hyderabad |
|Central Excise Act 1944 ||Excise Duty & Penalty ||29504533.00 ||2010-11 ||Commissioner of C.Ex. Hyderabad I |
|Central Excise Act 1944 ||Excise Duty & Penalty ||2558384.00 ||1991-92 ||Commissioner of Central Excise Kolkata |
|Central Excise Act 1944 ||Excise Duty & Penalty ||2856822.00 ||1990-94 ||Collectorate of C.Ex Cal II |
|Central Excise Act 1944 ||Excise Duty & Penalty ||4966246.00 ||1991-94 ||Superintendent C.EX of HND |
|Central Excise Act 1944 ||Excise Duty & Penalty ||1072447.00 ||1992-15 ||A.C C.Ex. CGR-I |
|Central Excise Act 1944 ||Excise Duty & Penalty ||568850.00 ||2007-11 ||A.C. C.E.DGP |
|Central Excise Act 1944 ||Excise Duty & Penalty ||1424775.00 ||2007-08 ||Jt.Commr Bolpur |
|Central Excise Act 1944 ||Excise Duty & Penalty ||835713.00 ||1998-99 ||Additional Commissioner Cal-IV |
|Central Excise Act 1944 ||Excise Duty & Penalty ||1728620.00 ||1993-04 ||Additional Commissioner C.Ex of Cal-II |
|Central Excise Act 1944 ||Excise Duty & Penalty ||117147.00 ||2013-14 ||Asstt. Commissioner C.Ex HND-II |
|Central Excise Act 1944 ||Excise Duty & Penalty ||266145.00 ||2011-12 ||D.C. C.E DGP |
|Central Excise Act 1944 ||Excise Duty & Penalty ||954876.00 ||1995-97 ||Dy. Commissioner C.Ex of Cal-II |
|Central Excise Act 1944 ||Excise Duty & Penalty ||31262.00 ||2000-12 ||Joint Commissioner C.Ex Cal-IV |
|Central Excise Act 1944 ||Excise Duty & Penalty ||23555830.00 ||2015-16 ||Central Excise Commissionerate kol-IV |
|Central Excise Act 1944 ||Excise Duty & Penalty ||46425.00 ||2016-17 ||Asst. Commissioner of C.E-Bankura Division |
|Central Excise & CGST Act ||Service Tax ||269000.00 ||2017-18 ||Asst. Commissioner of CGST & Central Excise Durgapur Audit |
|Central Excise Act1944 ||Service Tax ||3169656.00 ||2009-10 ||Asst Commissioner CE & ST Haldia- Div.I |
|MP Industrial Relation Act 1960 ||Others ||213259.00 ||2014-15 ||Labour Court Bhopal |
|The WB Entry Tax Act ||Entry Tax ||7066085.00 ||2011-17 ||High Court Kolkata |
(viii) In our opinion and according to the information and explanations given to usthe Company has defaulted in repayment of dues to any financial institutions bankers andgovernment or debenture holders during the year
| || || ||Amount Overdue as at |
|Name of the Bank ||Nature of Account ||Date of Overdue Started ||31st March 2020 |
| || || ||(INR in Lakhs) |
|State Bank of India ||Cash Credit ||20.09.2018 ||3277.00 |
|ICICI Bank Limited ||Term Loan ||22.09.2018 ||1056.00 |
|ICICI Bank Limited ||Cash Credit ||31.10.2018 ||196.00 |
|IDBI Bank Limited ||Cash Credit ||23.10.2018 ||1103.00 |
|Allahabad Bank ||Cash Credit ||30.09.2018 ||2307.00 |
|Bank of Baroda ||Cash Credit ||01.07.2019 ||618.00 |
|Indiabulls Housing Finance ||Term Loan ||01.04.2019 ||1946.00 |
|Total || || ||10503.00 |
(ix) In our opinion and according to the information and explanations given to us theterm loans taken by the Company have been applied for the purpose for which they wereraised. The Company has not raised any moneys by way of initial public offer or furtherpublic offer (including debt instruments) during the year.
(x) According to the information and explanations given to us no fraud by the Companyor on by its officers or employees has been noticed or reported during the course of ouraudit.
(xi) According to the information and explanations given to us managerial remunerationhas been paid or provided in accordance with the requisite approvals mandated by theprovisions of section 197 read with schedule V to the Companies Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly clause (xii) of paragraph 3 of the Order isnot 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 section 177 & 188 of the Act where applicable and the details of suchtransactions have been disclosed in the Standalone Financial Statements of the Company asrequired by the applicable accounting standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Therefore the provision of clause 3(xiv) of paragraph 3 of the Order is notapplicable to the Company.
(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 them. Accordingly clause (xv) ofparagraph 3 of the Order is not applicable.
(xvi) According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.Accordingly clause (xvi) of paragraph 3 of the Order is not applicable.
TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2(f) under Report on Other Legal & RegulatoryRequirements' section of our report of even date)
REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE OF SUB_SECTION 3 OF SECTION 143OF THE COMPANIES ACT 2013 "THE ACT"
We have audited the internal financial controls over financial reporting of BKMIndustries Limited ("the Company") as of March 31 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.
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 auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the Standalone 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 with reference to these Standalone Financial Statements.
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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2020 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.