TO THE MEMBERS OF COROMANDEL ENGINEERING COMPANY LIMITED
Report on the audit of Financial Statements Opinion
We have audited the standalone financial statements of COROMANDEL ENGINEERING COMPANYLIMITED ("the Company") which comprise the balance sheet as at 31st March 2020and the statement of Profit and Loss and statement of cash flows and the statement ofchanges in the equity for the year then ended and notes to the financial statementsincluding a summary of significant accounting policies and other explanatory information
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 loss and total comprehensive income and its cash flows for the yearended and statement of changes in the equity on that date.
Basis for Opinion:
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Companies Act 2013 and theRules there under and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to Note 41 of the Statement which describes the impact of Covid-19pandemic and its possible consequential implications on the Company's operations. Ouropinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment 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.
a) Existence and impairment of Trade Receivables
Trade Receivables are significant to the Company's financial statements. TheCollectability of trade receivables is a key element of the company's working capitalmanagement which is managed on an ongoing basis by its management. Due to the nature ofthe Business and the requirements of customers various contract terms are in place whichimpacts the timing of revenue recognition. There is a significant element of judgment.Given the magnitude and judgment involved in the impairment assessment of tradereceivables we have identified this as a key audit matter.
We performed audit procedures on existence of trade receivables which includedsubstantive testing of revenue transactions obtaining trade receivable externalconfirmations and testing the subsequent payments received. Assessing the impact of tradereceivables requires judgment and we evaluated management's assumptions in determining theprovision for impairment of trade receivables by analyzing the ageing of receivablesassessing significant overdue individual trade receivables and specific local riskscombined with the legal documentations where applicable.
In calculating the Expected Credit Loss as per Ind AS 109 - "FinancialInstruments" the company has also considered the estimation of probable futurecustomer default and has taken into account an estimation of possible effect from thepandemic relating to Covid-19.
We tested the timing of revenue and trade receivables recognition based on the termsagreed with the customers. We also reviewed on a sample basis terms of the contract withthe customers invoices raised etc. as a part of our audit procedures.
Furthermore we assessed the appropriateness of the disclosures made in note 10 to thefinancial statements.
b) Revenue recognition (IND AS 115)
The application of the standard on recognition of revenue involves significant judgmentand estimates made by the management which includes identification of performanceobligations contained in contracts determination of the most appropriate method forrecognition of revenue relating to the identified performance obligations assessment oftransaction price and allocation of the assessed price to the individual performanceobligations. In case of Fixed Price Contracts Revenue is recognized using the Percentageof Completion computed as per Input method .There exists an inherent risk and presumedfraud risk around the accuracy and existence of revenues. These contracts may involveonerous obligations which requires critical assessment of foreseeable losses to be made bythe Group
Audit procedure involved review of the company's IND AS 115 implementation process andkey judgments made by management evaluation of customer contracts in light of IND AS 115on sample basis and comparison of the same with management's evaluation and assessment ofdesign and operating effectiveness of internal controls relating to revenue recognition.
Based on the procedures performed it is concluded that management's judgments withrespect to recognition and measurement of revenue in light of IND AS 115 is appropriate.
Furthermore the appropriateness of the disclosures made in note 34 to the financialstatements was assessed
c) Recognition and measurement of deferred taxes
The recognition and measurement of deferred tax items requires determination ofdifferences between the recognition and the measurement of assets liabilities income andexpenses in accordance with the Income Tax Act and other applicable tax laws includingapplication of ICDS and financial reporting in accordance with IND AS.
This involves significant calculations requiring detailed knowledge of applicable taxlaws.
The key matter was addressed by performing audit procedures which involved assessmentof underlying process and evaluation of internal financial controls with respect tomeasurement of deferred tax and re-performance of calculations and assessment of the itemsleading to recognition of deferred tax in light of prevailing tax laws and applicablefinancial reporting standards on sample basis.
The audit procedures performed did not lead to identification of any materialmisstatement with respect to recognition and measurement of deferred taxes.
Furthermore the appropriateness of the disclosures made in note 07 to the financialstatements was assessed.
d) Contingent Liability
Assessment of Provisions for taxation litigations and claims: As at 31st March 2020Coromandel Engineering Company Limited had disputed tax dues to the tune of Rs 138.41lakhs.
The Audit addressed this Key Audit Matter by assessing the adequacy of tax Provisionsby reviewing correspondence with tax Authorities.
Discussing significant litigations and claims with the Company's Internal Legal Team .
Reviewing previous judgments made by relevant tax Authorities and opinions given byCompany's advisors.
Assessing the reliability of the past estimates of the management.
Based on the procedures performed it is concluded that the management's assessment ofthe outcome of pending litigations and claims is appropriate.
Furthermore the appropriateness of the disclosures made in note 30 to the financialstatements was assessed.
e) Accuracy of Unbilled Revenues in Civil Contracts:
Unbilled Revenue in Civil Contracts operations is a critical estimate to determine therevenues. This estimate has a high risk of uncertainty as it requires consideration ofprogress of the work done efforts till date and efforts to complete the remainingcontract performance obligations. (Refer note 13)
Audit Procedure involved evaluating the design of the Internal Controls relating torecording of efforts incurred and estimation of efforts incurred to complete theperformance obligations.
Performed analytical Procedure and test of details for reasonableness of incurred andestimated efforts.
The audit procedures performed did not lead to identification of any materialmisstatement with respect to recognition and measurement of unbilled revenue.
f) Inventory WIP:
Management judgment is required to establish the carrying value of inventoryparticularly in relation to determining the appropriate level of provisions in relation toobsolete and Surplus items.
The judgment reflects that inventory is held to support company's operations whichresults in the company holding inventory for extended periods before utilization. In casesof disputes with land owners we have relied on Management Representation.
Physical Verification of Inventory was not conducted on 31st March 2020 owing to lockdown accordingly necessary Alterative Audit Procedures have been conducted to concludethat inventory is free of material misstatements . With respect to the Net Realizablevalue of Inventory the company has provided Management Representations that there is nosignificant impact on account of Covid as all contracts are based on fixed prices.
Audit procedures include testing the inventory provisions we assessed the managementcontrol and estimation of inventory provisions and their appropriateness. Futuresalability of inventory was assessed based on past track records.
Based on the audit procedure performed no material discrepancies were identified.
Information Other than the Standalone 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 standalone financial statements and our reportthereon.
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 in the 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.
[Description of each key audit matter in accordance with SA 701.]
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 Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act read with the rule 3 of the companies (IndianAccounting Standards) Rules 2015 and companies (Indian Accounting Standards) AmendmentRules 2016. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate implementation and maintenance of 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 statement that give a true and fair view andare free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such 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.
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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's 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 (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of subsection (11) ofsection 143 of the Companies Act 2013 we give in the Annexure a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
(2) As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In 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 Cash Flow Statement and statement of changes in the equity dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2020 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 and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2".
(g) With respect to the matter to be included in the Auditors' Report under section197(16) of the Act as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of 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 impact of pending litigations on its financialposition in its financial statements- Refer Note 30
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 by the Company.
ANNEXURE 1 TO THE AUDITOR'S REPORT
Referred to in Paragraph 1 of Report on Other Legal and Regulatory Requirements of ourReport of even date
i. a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) As explained to us all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable havingregard to the size of the Company and nature of its assets. According to the informationand explanations given to us no material discrepancies were noticed on such physicalverification.
c) There are no immovable properties held by the company.
ii. Physical verification of inventory has been conducted at reasonable intervals bythe management and no material discrepancies were noticed on such verification. However ason 31st March 2020 the physical verification was not conducted owing to Covid 19 lockdown the Company has employed necessary cut off procedures in this regard. Accordinglynecessary alternative Audit Procedures have been conducted to conclude that inventory isfree of material misstatement .
iii. According to the information and explanations given to us during the year theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Companies Act 2013.
iv. In our opinion and according to the information and explanations given to us theCompany has not given any loans guarantees and securities and has not made anyinvestments.
v. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposits during the year. Accordingly reporting under thisclause does not arise.
vi. The Central Government has vide notification dated 3rd June 2011 prescribed themaintenance of cost records by various classes of companies. We have broadly reviewedbooks of accounts maintained by the company pursuant to the rules under section 148 (1) ofthe Companies Act 2013 and are of the opinion prima facie the prescribed accounts andrecords have been made and maintained
vii. a) According to the records of the Company
and information and explanations given to us the company is regular in depositingundisputed statutory dues including provident fund employees' state insuranceincome-tax sales-tax wealth tax service tax duty of customs duty of excise valueadded tax cess and any other statutory dues with the appropriate authorities. There areno undisputed statutory dues outstanding for more than six months.
b) As at 31st March 2020 according to the records of the Company the following are theparticulars of the disputed dues on account of value added tax and entry tax:
|Nature of Dues ||Amount Disputed (' in Lakhs) ||Amount paid under protest (' in Lakhs) ||Forum where Pending |
|1 Andhra Pradesh VAT ||43.32 ||28.37 ||STAT Hyderabad(2006-07 & 2007-08) |
|2 Telangana VAT ||86.50 ||26.62 ||STAT Hyderabad (2010-11 to 2012-13) |
|3 Tamil Nadu Entry Tax ||2.99 ||2.99 ||Additional Commissioner Chennai (AY 2012-13) |
|4 Kerala VAT ||5.60 ||0.66 ||Assistant Commissioner Commercial Tax officer Ernakulam |
viii. Based on our audit procedures and according to the information and explanationsgiven to us by the management we are of the opinion that the company has not defaulted inrepayment of loans or borrowings to a financial institution bank Government. The companyhas not issued any debentures.
ix. The company has not raised money by way of initial public offer or further publicoffer during the Current year and the term loans were applied for the purposes for whichthose were raised.
x. In our opinion and according to the information and explanations given to us nofraud by the company or any fraud on the company by its officers or employees has beennoticed or reported during the financial period.
xi. In our opinion and according to the information and explanations given to usmanagerial remuneration has been provided in accordance with the requisite approvalsmandated by Section 197 read with Schedule V of the Companies Act 2013.
xii. In our opinion the Company is not a Nidhi Company. Accordingly clause xii ofPara 3 of Companies (Auditors Report) Order 2016 is not applicable.
xiii. In our opinion and according to the information and explanation given to us alltransactions with the related parties are in compliance with sections 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the FinancialStatements as required by the applicable accounting standards.
xiv. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Based on the abovepara matters referred in clause (xiv) of paragraph 3 of Companies (Auditors Report) Order2016 is not applicable.
xv. ln our opinion and according to the information and explanations given to us theCompany has not entered into any non - cash transactions with directors or personsconnected with the Directors. Accordingly clause xv of Para 3 of Companies (AuditorsReport) Order 2016 is not applicable.
xvi. In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-lA of the Reserve Bank of IndiaAct 1934. Accordingly clause xvi of Para 3 of Companies (Auditors Report) Order 2016 isnot applicable.
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S 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 over financial reporting of M/sCOROMANDEL ENGINEERING 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. 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 company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
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 March 31 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
| ||For CNGSN & ASSOCIATES LLP |
| ||Chartered Accountants |
| ||F.R.No.004915S |
| ||C.N Gangadaran |
|Place: Chennai ||Partner |
|Date: 08.06.2020 ||Membership No 11205 |