TO THE MEMBERS OF CHEVIOT COMPANY LIMITED
Report on the Audit of the Financial Statements Opinion
We have audited the financial statements of Cheviot Company Limited ("theCompany") which comprise the balance sheet as at March 31 2020 and the statementof profit and loss (including other comprehensive income) statement of changes in equityand statement of cash flows for the year then ended and notes to the financialstatements including a summary of the significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("Act") in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SA's are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics 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 opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.For each matter below our description of how our audit addressed the matter is providedin 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 financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the financial statements. The results of our audit procedures includingthe procedures performed to address the matters below provide the basis for our auditopinion on the accompanying financial statements.
|The key audit matter ||How our audit addressed the key audit matter |
|A. Valuation of Inventories. || |
|Refer to note 14 to the financial statements. As described in the accounting policies in note 3.1 to the financial statements inventories are carried at the lower of cost and net realisable value. As a result the management applies judgement in determining the appropriate provisions for obsolete stock based upon a detailed analysis of old inventory net realisable value below cost based upon future plans for sale of inventory. ||We obtained assurance over the appropriateness of the management's assumptions applied in calculating the value of the inventories and related provisions by:- |
| ||1. Completing a walkthrough of the inventory valuation process and assessed the design and implementation of the key controls addressing the risk. |
| ||2. Reviewing the document and other record related to physical verification of inventories done by the management during the year and subsequent to year end. |
|The key audit matter ||How our audit addressed the key audit matter |
| ||3. Verifying the effectiveness of key inventory controls operating over inventories; including performing alternate procedures to audit the existence of inventory as per the guidance provided in SA 501 "Audit Evidence - Specific Considerations for Selected Items" to obtain sufficient appropriate audit evidence. |
| ||4. Verifying for a sample of individual products that costs have been correctly recorded. |
| ||5. Comparing the net realisable value to the cost price of inventories to check for completeness of the associated provision. |
| ||6. Reviewing the historical accuracy of inventory provisioning and the level of inventory write-offs during the year. |
| ||7. Recomputing provisions recorded to verify that they are in line with the Company policy. |
| ||Our Observation: |
| ||Based on the audit procedures performed we are satisfied that the valuation of inventories is appropriate. |
|B. Valuation and existence of Non-Current and Current Investments ||Our audit procedures included : |
|Refer note 9 and 15 to the financial statements. ||1. Updating our understanding of the business processes employed by the Company for accounting for and valuing their investment portfolio. |
|The company holds Non-Current and Current Investments amounting to Rs. 19657.77 and Rs. 5903.91 respectively which represents 37.79% of total assets as at March 31 2020. ||2. Obtaining accounts confirmation / demat account holding statement from the mutual funds debenture and bonds government securities preference shares and alternate investment fund and verified that the Company was the recorded owner of all investments. |
|The Investments comprise of mutual funds debenture and bonds government securities preference shares and alternate investment fund and are majorly actively traded with readily available quoted market prices / net assets value. The investments being financial instruments needs to be appropriately designated at fair value through profit or loss fair value through other comprehensive income (not to be recycled) or at amortised cost. Further these financial instruments need to be valued and classified as Level 1 2 or 3 financial instruments as per the fair value hierarchy. This was an area of focus for our audit and the area where significant audit effort was directed. ||3. Our audit procedures over the valuation of the Investments included agreeing the fair valuation of all Investments held at March 31 2020 to the net assets value provided by the respective mutual funds and alternate investment funds market value of quoted equity and preference shares debenture and bonds and government securities. |
| ||Our Observation: |
| ||Based on the audit procedures performed we are satisfied with valuation and existence of non-current and current investment. |
Information Other than the Financial Statements and Auditors' Report Thereon
The Company's management and Board of directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Management's Responsibility for the Financial Statements
The Company's management and Board of directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the state of affairs profit and other comprehensiveincome changes in equity and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under Section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements management and Board of directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements. As part of an audit in accordance with SAs weexercise professional judgement and maintain professional skepticism throughout the audit.We also:
Identify and assess the risks of material misstatement of the 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.
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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually 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 auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements. We communicate with those chargedwith governance regarding among other matters the planned scope and timing of the auditand significant audit findings including any significant deficiencies in internal controlthat 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder 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 balance sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flows dealt with bythis Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act.
e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of directors none of the directors is disqualifiedas on March 31 2020 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 and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
g) In our opinion and according to the information and explanations given to us themanagerial remuneration for the year ended March 31 2020 has been paid / provided by theCompany to its directors in accordance with the provisions of Section 197 read withSchedule V to the Act.
h) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at March 31 2020 onits financial position in its financial statements - Refer Note 46.1 to the financialstatements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund ("IEPF") by the Company. However filingof respective forms could not be completed within the prescribed timelines due totechnical issues which have been referred to IEPF Authority for resolution.
Annexure A' to the Independent Auditors' Report
(Referred to in paragraph 1 with the heading Report on Other Legal and RegulatoryRequirements' section of our report of even date in respect to Statutory Audit of CheviotCompany Limited for the year ended March 31 2020)
We report that:
i. In respect of its property plant and equipment:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
b) As explained to us property plant and equipment have been physically verifi edduring the year by the management in a phased manner in accordance with a plannedprogramme of verifying them once in three years and no material discrepancies have beennoticed on such physical verifi cation. In our opinion this periodicity of physicalverifi cation is reasonable having regard to the size of the Company and the nature of itsassets.
c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company. However the Company is in the process of registration ofcertain portion of land at Budge Budge in it's name.
ii. In respect of inventories physical verifi cation has been conducted at reasonableintervals during the year by the management and in our opinion the frequency of verification is reasonable. According to the information and explanation given to us nomaterial discrepancies were noticed on physical verifi cation of inventories as comparedto the book records. Inventories lying with outside parties have been confi rmed by themat the year end.
iii. The Company has not granted any loan to parties covered in the register maintainedunder Section 189 of the Companies Act 2013. Accordingly clause 3 (iii) of the order isnot applicable to the Company.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act with respectto the loans and investments made. The Company has neither issued any guarantee nor hasprovided any security on behalf of any party.
v. According to the information and explanations given to us the Company has notaccepted any deposits from public within the meaning of Sections 73 to 76 of the Act andthe Companies (Acceptance of Deposits) Rules 2014 (as amended) during the year.Accordingly clause 3 (v) of the order is not applicable to the Company.
vi. We have broadly reviewed the accounts and records maintained by the Companypursuant to the Order made by the Central Government for the maintenance of cost recordsunder Section 148(1) of the Companies Act 2013. We are of the opinion that prime-faciethe prescribed accounts and records have been made and maintained. However we have notcarried out a detailed examination of the same.
vii. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company the Company is regular in depositingundisputed statutory dues including provident fund employee's state insurance incometax goods and service tax sales tax service tax duty of customs duty of excise valueadded tax cess and other statutory dues with the appropriate authorities. According tothe information and explanations given to us no undisputed amounts payable in respect ofprovident fund employees' state insurance income tax goods and service tax sales taxservice tax duty of customs duty of excise value added tax cess and other materialstatutory dues were in arrears as at March 31 2020 for a period of more than six monthsfrom the date they became payable.
(b) According to the information and explanation given to us the dues of goods andservice tax sales tax income tax duty of customs duty of excise service tax and valueadded tax which have not been deposited on account of any dispute and the forum where thedispute is pending as on March 31 2020 are as under:-
|Name of the statute ||Nature of dues ||Amount (Rs.) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||31.04 ||F.Y. 2010-11 ||Appeal Level |
| || ||23.91 ||F.Y. 2015-16 ||Appeal Level |
| || ||8.15 ||F.Y. 2016-17 ||Appeal Level |
| || ||23.38 ||F.Y. 2017-18 ||Appeal Level |
|Central Sales Tax Act 1956 ||Sales Tax ||133.89 ||F.Y. 2016-17 ||Appeal Level |
| || ||16.36 ||F.Y. 2017-18 ||Appeal Level |
viii. Based on our audit procedures and according to the information and explanationsgiven to us we are of the opinion that the Company has not defaulted in repayment of duesto banks or financial institutions. There were no debentures outstanding at any timeduring the year.
ix. In our opinion and according to the information and explanations given to us theCompany has not raised any moneys by way of initial public offer or further public offer(including debt instruments) and term loan during the year.
x. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.
xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly clause 3 (xii) of the Order is notapplicable.
xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
xiv. According to the information and explanations 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. Accordingly clause 3 (xiv) of the order is not applicable 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 him. Accordingly clause 3 (xv) ofthe Order is not applicable.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
Annexure - 'B' to the Independent Auditors' Report
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 with reference to financial statementsof CHEVIOT COMPANY LIMITED ("the Company") as of March 31 2020 inconjunction with our audit of the financial statements of the Company for the year endedon 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 (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 Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls overfinancial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the 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 Company's internal financial controls systemwith reference to financial statements.
MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS
A Company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorisations of management and directors of the Company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the Company's assets that could have amaterial effect on the financial statements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIALSTATEMENTS
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 controlswith reference to financial statements were operating effectively as at March 31 2020based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.