THE MEMBERS OF
EVEREST ORGANICS LIMITED.
We have audited the accompanying financial statements of Everest Organics Limited("the Company") which comprise the Balance Sheet as at March 31 2021 theStatement 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.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph the aforesaid financial statements give the informationrequired by the Act as amended in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India including Ind-ASspecified under Section 133 of the Act of the state of affairs (financial position) of theCompany as at March 31 2021 and its profit (financial performance including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.
BASIS FOR QUALIFIED OPINION:
As stated in Note 26 (C) (xvii) (a) (2) to the financial statements of the Company asat March 31 2021 under report the liability for payment of Gratuity stands at Rs.112.71Lakhs calculated as per the assessment of the management but not as per the actuarialvaluation as required under the Indian Accounting Standards. As against the said liabilityof Rs.112.71 Lakhs the company has deposited only part of the contribution to the Fundi.e. Rs.86.47 Lakhs and for the remaining liability of Rs.26.24 Lakhs provision is made.As per the requirement of the Indian Accounting Standard-19 on Employee Benefits suchliability should have been deposited in total in a fund as against a partial sum. Ouraudit opinion on the financial statements for the year ended March 312021 is qualified inrespect of this matter.
We draw attention to Note 26(C) (xii) of the financial statements in respect of theEnvironmental issues. Wherein attention has been drawn to the event on the closure ofoperations order by Telengana State Pollution Control Board and its subsequent revocationfor a temporary period has been dealt-with. Further we also draw attention to thegenesis and the current status of Company's application for increase in the productioncapacity of the company. Our Opinion 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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
We draw attention to following matters of the Company.
A) Revenue recognition:
Revenue is recognized when the control over the underlying products has beentransferred to the customer. Due to the Company's sales under various contractual termsand across the country delivery to customers in different regions might take differenttime periods and may result in undelivered goods at the period end. We consider a risk ofmisstatement of the Financial Statements related to transactions occurring close to theyear end as these transactions could be recorded in the incorrect financial period(cut-off). Our tests of detail focused on sample of cut-off transactions to verify thatonly revenue pertaining to current year is recognized based on terms and conditions setout in sales contracts and delivery documents and performing testing on selectedstatistical samples of revenue transactions recorded during the year.
B) Raw material Consumption:
Raw material Consumption for the year is recognized based on the product composition atvarious stages and the customers requirement for all the products. The estimates relatingto the charge are important given the significance process knowhow and the distinctiveterms of arrangement with customers. These compositions consumption norms are complex andrequires significant judgments and estimation by the Company for establishing the matchingconcept. An appropriate charge of raw material consumption and accuracy thereof maydeviate due to change in judgments and estimates. Accordingly the same has beenconsidered as a key audit matter.
We obtained Management's calculations for raw material consumption specifications andrelied upon the same.
C) IT Systems and Controls:
We have identified IT Systems and controls over financial reporting as a key auditmatter for the company because it's financial and reporting system should be integratedand must be fundamentally reliant on IT systems and controls to process the voluminousdata specifically with respect to revenue debtors inventory management and raw materialconsumption. Automated accounting procedures and IT environment controls are required tobe modified and implemented to operate effectively to ensure accurate financial reportingto comply with all the reporting requirements under various statues. We have assessed themanagement's position through discussion with the inhouse and external experts. Managementhas initiated steps to integrate all activities in this regard.
Accordingly the same is considered as a key Audit matter.
Information Other than the Financial Statements and Auditors' Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe Financial Statements and our auditors' report thereon.
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 such 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 a 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 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 financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015 asamended.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue 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 theCompany's financial reporting process.
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 scepticism 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 with reference to financial statements in place andthe operating effectiveness 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.
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 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:
As required by the Companies (Auditors' Report) Order 2016 ("The Order")issued by the Central Government of India in terms of sub-section 11 of Section 143 of theAct we give in the Annexure-A a Statement on the matters specified in Paragraph 3 and 4of the Order to the extent applicable.
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 Profit and Loss Statement the Cash Flow Statement and theStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account.
d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Indian Accounting Standards) Rules 2015 as amended;
e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors Shri KRK Raju Independent Director ofthe Company is also a Director on the Board of another company whose name has beenstruck off from the register of companies by the Ministry of Company Affairs. On a writpetition filed in this regard the Honorable High court of Telengana has passed an orderon 22nd Jan 2020 consequently the DIN of Mr KRK Raju is active as on date. As per thesaid order the same order holds good for active companies. Subject to the above none ofthe directors is disqualified as on March 31 2021 from being appointed as a director interms of Section 164(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-B".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements as referred to Para 26(C) (xii) Under Notes onAccounts to the Financial Statements.
(ii) The Company does not have any long term contracts including derivative contractsfor which there were any material foreseeable losses.
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
ANNEXURE - A TO THE INDEPENDENT AUDITORS' REPORT DT.12-06-2021 ISSUED TO THE MEMBERS OFEVEREST ORGANICS LIMITED
Statement on the matters specified in Paragraphs 3 & 4 of the Companies (AuditorsReport) Order 2016.
(i) a) The Company has maintained proper records showing broad particulars includingquantitative details and situation of fixed assets on the basis of available information.However the fixed assets register is to be updated. We are informed by the managementthat the company is in the process of compiling and reconstructing the Fixed AssetsRegister to show full particulars including quantitative details and situation of FixedAssets.
b) As per the information and explanations furnished to us by the management majorityof the fixed assets have been physically verified in a broad manner by the management in aphased manner which in our opinion is reasonable having regard to the size of theCompany and nature of its assets. We are informed that no material discrepancies werenoticed on such verification pending adjustment.
c) As per the information and explanations furnished to us by the management the titledeeds of immovable properties are held in the name of the company. However the originalland documents were transferred from the erstwhile banker Kotak Mahindra Bank Limited toHDFC Bank Limited. The confirmation to this effect is awaited from the HDFC Bank Limited.
(ii) The physical verification of inventories has been conducted during the year by themanagement in respect of majority of the high value items at reasonable intervals. In ouropinion the frequency of such verification is reasonable. The discrepancies that werenoticed have been properly dealt with in the books of account.
(iii) As per the information and explanations furnished to us by the management and asper the books of account and other documents examined by us the company has not grantedany loans secured or unsecured to companies firms limited partnerships or other partiescovered in the register maintained under Section 189 of the Companies Act 2013.
(iv) As per the information and explanations furnished to us by the management and asper the books of accounts and other documents examined by us the company has not givenany loans made investments given guarantees securities to the parties to whichprovisions of Sections 185 and 186 of the Companies Act 2013 are applicable.
(v) According to the information and explanations given to us the Company has notaccepted deposits to which the directives issued by the Reserve Bank of India and theprovisions of Section 73 to 76 or the other relevant provisions of the Companies Act andthe rules framed there under wherever applicable from the public.
However there are certain unsecured loans accepted from Directors and their relatedparties total amount outstanding in this regard as at 31-03-2021 is Rs. 117.91 lakhs.
(vi) As per the information and explanations furnished to us prima facie it appearsthat the company broadly meets the requirement prescribed by the Central Government undersection 148(1) of the Companies Act 2013 read with Companies (Cost Records and Audit)Rules 2014. We have however not made a detailed examination of the cost records.
(vii) a) As per the information and explanations furnished to us by the managementaccording to the records of the Company undisputed statutory dues including ProvidentFund Employees' State Insurance Income Tax Sales Tax Service Tax duty of CustomsDuty of Excise Value Added Tax Cess and other statutory dues have been generallydeposited with the appropriate authorities with delays. However according to theinformation and explanations given to us no other undisputed amounts payable in respectof the aforesaid dues were outstanding as at 3103-2021 for a period of more than sixmonths from the date they became payable.
(b) As per the information and explanations furnished to us by the management thereare no dues of income tax sales tax or service tax or duty of customs or duty of exciseor value added tax that have not been deposited on account of any dispute.
(viii) As per the information and explanations given to us the company has notdefaulted in repayment of loans or borrowings to the Banks or Government. The company hasnot made any borrowings from the financial institutions or debenture holders.
(ix) During the year the company has not raised money by way of initial public offer orfurther public offer (including debt instruments). As per the information and explanationsgiven to us the term loans raised during the year were applied for the purposes for whichthe same were raised.
(x) During the year under review no fraud by the company or on the company by itsofficers or employees has been noticed or reported.
(xi) As per the information and explanations given to us by the management themanagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct.
(xii) The Company is not a Nidhi company. Hence Clause (xii) is not applicable to thecompany.
(xiii) As per the information and explanations given to us and based on our audit inour opinion the transactions with the related parties are in compliance with sections 177and 188 of Companies Act 2013 where applicable and the details have been disclosed in theFinancial Statements etc. as required by the applicable accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.
(xv) As per the information and explanations and based on examination the company hasnot entered into any non-cash transactions with directors or persons connected with them.
(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 OF EVEN DATE ON THE FINANCIAL STATEMENTSOF EVEREST ORGANICS LIMITED
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 EverestOrganics Limited ("the Company") as of March 312021 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to 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 the Institute ofChartered Accountants of India and deemed to be prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsboth issued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial 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 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 judgment 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 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 authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 312021 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. However the following internal financial controls are essential anddesirable.
a) The system of physical verification of fixed assets tagging of fixed assets andcomputerization of records needs to be improved to be commensurate with the size of thecompany & level of operations.
b) The system of physical verification of inventories tagging of inventoriesrecognition & valuation of inventories needs to be further improved to be commensuratewith the size of company & level of operations.
c) The system of obtaining periodical confirmation of balances from Debtors CreditorsAdvances Deposits etc. needs to be improved to be commensurate with the size of company.
d) The system of obtaining comparative quotations from different independent partiesand keeping them on record needs to be further strengthened to be commensurate with thesize of the company and nature of operations of the Company.
e) The method of customer evaluation needs to be further improved for extending creditto the customers.
| ||For SURYAM & CO |
| ||Chartered Accountants |
| ||FRN: 012181S |
| ||Sd/- |
| ||(SRINIVAS OLETI) |
|Place : Hyderabad ||Partner |
|Date : 12-06-2021. ||ICAI M.No.206457 |
| ||UDIN. 21206457AAAAAC5072 |