To the Members of FINOLEX INDUSTRIES LIMITED
ReportontheAuditoftheStandalone Indian Accounting Standards (Ind AS)Financial Statements
We have audited the Standalone Ind AS Financial Statements of FinolexIndustries Limited ("the Company") which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss (including other comprehensive income) theStatement of Changes in Equity and the Statement of Cash Flows for the year then endedand notes to the Standalone Ind AS Financial Statements including a summary ofsignificant accounting policies and other explanatory information hereinafter referred toas "the Standalone Ind AS Financial Statements". In our opinion and to the bestof our information and according to the explanations given to us the aforesaid StandaloneInd AS Financial Statements give the information required by the Companies Act 2013 asamended ("the Act") in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2019 its profit its changes in equity and itscash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit ofthe Standalone Ind AS Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the Standalone Ind AS Financial Statements under the provisions of the Act and theRules thereunder 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.
Key Audit Matters
Key Audit matters are those matters that in our professionaljudgement were of most significance in our audit of Standalone Ind AS FinancialStatements of the current period. These matters were addressed in the context of our auditof Standalone Ind AS Financial Statements as a whole and in forming our opinion thereonand we do not provide a separate opinion on these matters. We have determined the mattersdescribed below to be key audit matters to be communicated in our report. a. Valuation ofinventory
At the balance sheet date the value of inventory amounted to H62047.13 lakhs representing 24.54% of total equity and 18.95% of total assets.Inventories have been considered key audit matter due to the size of the balance natureof the product price volatility of raw material and finished product process ofmanufacture and management judgements involved. Refer note 2.13 to the Standalone Ind ASFinancial Statements for accounting policy for valuation of inventories.
Principle Audit Procedures i. We have evaluated the design of internalcontrols relating to the process of inventory recording and valuation. ii. We haveconducted physical verification of inventory on a sample basis at the year-end in order totest the assertion of existence iii. We have conducted analysis of net realisable value(NRV) and cost of inventory on a sample basis in order to ascertain that inventory iscarried at lower of NRV and Cost. iv. We have evaluated on a test check basis the processfollowed by the management to identify non-moving slow moving obsolete inventory and wehave evaluated on a test check basis the appropriateness of the estimates for impairment(if any) accounted for on such inventory. v. We have conducted cut off procedures on atest check basis to ensure completeness of inventory recorded in the books of account. vi.We have tested on a sample basis compliance of the cost formulae as specified in theaccounting policy adopted by the company. b. Valuation of investments
At the balance sheet date the value of current and non-currentinvestments amounted to H 130303.11 lakhs representing 51.54% of total equity and 39.80%of the total assets. The net loss on fair valuation of investments amounted to H 40429.73in the total comprehensive income. Investments have been considered as key audit matterdue to the size of the balance various recognition and subsequent measurement principles.Refer note 2.12 and 2.20 to the Standalone
Ind AS Financial Statements for its accounting policy.
Principle Audit Procedures i. We have obtained independent externalconfirmations of all material current investments in order to test the assertion ofexistence accuracy valuation and completeness. ii. We have independently evaluated thefair values of listed and quoted non-current investments. iii. We have evaluated the fairvalue of unquoted non-current investments adopted by the management. iv. We have evaluatedthe process of the management to identify impairment (if any) for the investments measuredat amortised cost. v. We have assessed the compliance of the recognition and subsequentmeasurement principles as specified in the accounting policy adopted by the company.
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the Management Discussion and Analysis; Boardof Directors' Report along with its Annexures and Corporate Governance Reportincluded in the Annual Report but does not include the Standalone Ind AS FinancialStatements and our Auditors' Report thereon. Our opinion on the Standalone Ind ASFinancial Statements does not cover the other information and we do not express any formof assurance conclusion thereon. In connection with our audit of the Standalone Ind ASFinancial Statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the StandaloneInd AS Financial Statements or our knowledge obtained in the audit or otherwise appears tobe materially misstated. If based on the work we have performed we conclude that thereis a material misstatement of this other information we are required to report that fact.We have nothing to report in this regard.
Responsibility of Management for Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these StandaloneInd AS Financial Statements that give a true and fair view of the financial positionfinancial performance (including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the accounting Standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventinganddetectingfraudsandotherirregularities; selection and application of appropriateimplementation and maintenance of accounting policies; making judgments and estimates thatare reasonable and prudent; design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Standalone Ind AS Financial Statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.
In preparing the Standalone Ind AS Financial Statements management isresponsible 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.TheBoardofDirectorsarealsoresponsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements
Our objectives are to obtain reasonable assurance about whether theStandalone Ind AS Financial Statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditor's report that includes ouropinion. Reasonable assurance is a high level of assurance but is not a guarantee that anaudit conducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Standalone Ind AS FinancialStatements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of theStandalone Ind AS Financial Statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the Standalone Ind AS Financial Statements or ifsuch disclosures are inadequate to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the
Standalone Ind AS Financial Statements including the disclosures andwhether the Standalone Ind AS Financial Statements represent the underlying transactionsand events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the Standalone IndAS financial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
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 of the Act we give in the Annexure A a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable. As required bySection 143(3) of the Act we report that: (a) We have sought and obtained all theinformation and explanations which to the best of our knowledge and belief were necessaryfor the purposes of our audit.
(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss (includingother comprehensive income) Statement of Changes in Equity and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid Standalone Ind AS FinancialStatements comply with the Accounting Standards specified under Section 133 of the Actread with the Companies (Accounts) Rules 2014 (as amended). (e) On the basis of thewritten representations received from the directors as on March 31 2019 taken on recordby the Board of Directors none of the directors is disqualified as on March 31 2019 frombeing appointed as a director in terms of Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report in Annexure B.
(g) As required by section 197 (16) of the Act; in our opinion andaccording to information and explanation provided to us the remuneration paid by thecompany to its directors is in accordance with the provisions of section 197 of the Actand remuneration paid to directors is not in excess of the limit laid down under thissection.
(h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 (as amended) in our opinion and to the best of our information and accordingto the explanations given to us: i. The Company has disclosed the impact of pendinglitigations on its financial position in its Standalone Ind AS Financial Statements Refer Note 38.2 to the Standalone Ind AS Financial Statements; ii. The Company did nothave any long-term contracts including derivative contracts for which there were anymaterial foreseeable losses. iii. There has been no delay in transferring amountsrequired to be transferred to the Investor Education and Protection Fund by the Company.
|For M/s P.G.Bhagwat |
|Chartered Accountants |
|Firm's Registration Number: 101118W |
|Abhijeet Bhagwat |
|Membership Number: 136835 |
|May 25 2019 |