Future Supply Chain Solutions Limited
Report on the Audit of the standalone Ind As Financial statements
We have audited the accompanying Standalone Ind AS Financial Statements of Futuresupply Chain solutions Limited ("the Company") which comprise the BalanceSheet as at March 31 2020 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year ended on that date and a summary of the significant accounting policies andother explanatory information (hereinafter referred to as "the standalone Ind ASfinancial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraph below the aforesaid standalone Ind AS financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312020the loss and total comprehensive loss changes in equity and its cash flows for the yearended on that date.
BASIS FOR QUALIFIED OPINION
i. As depicted in Note 9 of the standalone Ind AS financial statements total tradereceivables amounting to Rs.83260.29 lakhs includes related party receivables amountingto Rs.72547.19 lakhs as at March 31 2020. During the year based on internal evaluationthe management has provided for additional loss allowance amounting to Rs.1576.24 lakhs.There have been substantial delays in receipt from customers and subsequent receipts havenot been significant. In view of the above we are unable to obtain sufficient andappropriate audit evidence and are unable to comment on the adequacy of loss provisionvaluation and recoverability of balance outstanding amounting to Rs.81527.38 lakhs (netof provision).
ii. As depicted in Note 16 of the standalone Ind AS financial statements during theyear the Company has raised term loan from a bank amounting to Rs.22500 lakhs which hasnot been utilized for the purpose for which it was sanctioned and consequently used in thenormal course of business. In the absence of any clarity on non-compliance with the termsand conditions of sanction as well as breach of covenants we are unable to comment on theimpact of aforesaid utilization and non-compliances on the standalone Ind AS financialstatements.
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013 as amended ("the Act"). Ourresponsibilities under those Standards are further described in the "Auditor'sResponsibilities for the Audit of the standalone Ind AS financial statements" sectionof our report. We are independent of the Company in accordance with the Code of Ethicsissued 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 ICAI's Code of Ethics.
We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our qualified opinion on the standalone Ind AS financial statements.
EMPHASIS OF MATTER
We draw attention to note no 47 of the standalone Ind AS financial statements whichdescribes management's assessment of the impact of the COVID 19 pandemic on the operationsand standalone Ind AS financial statements of the Company.
Our opinion is not modified in respect of this matter.
KEY AUDIT MATTERS
Key audit matters ('KAM') are those matters that in our professional judgment were ofmost significance in our audit of the standalone Ind AS financial statements of thecurrent period. These matters were addressed in the context of our audit of the standaloneInd AS financial statements as a whole and in forming our opinion thereon and we do notprovide a separate opinion on these matters.
In addition to the matter described in the Basis for Qualified Opinion sectionwe have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matter ||Auditor's response |
|1. Revenue Recognition: ||Principal Audit procedures |
|Accuracy of recognition measurement presentation and disclosures of revenue and other related balances in view of adoption of Ind AS 115 " Revenue from Contracts with Customers" (new revenue accounting standard) ||We assessed the Company's process to identify the impact of adoption of the new revenue accounting standard. |
| ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: |
| || Evaluated the design of internal controls relating to implementation of the new revenue accounting standard. |
| || Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. |
| ||We carried out a combination of procedures involving enquiry and observation re-performance and inspection of evidence in respect of operation of these controls. |
| || Tested the relevant information technology system's access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard. |
| || Selected a sample of continuing and new contracts and performed the following procedures: |
| || Read analysed and identified the distinct performance obligations in these contracts. |
| || Compared these performance obligations with that identified and recorded by the Company. |
| || Performed analytical procedures for reasonableness of revenues. |
|2. Disclosure of related party transactions: ||Principal Audit procedures |
|Due to high volume of business transactions with related parties during the year ended March 31 2020 the matter pertaining to completeness of disclosures of related party transactions at arm's length price is considered as key audit matter. || Assessed the procedures adopted by the management in order to establish arm's length price. |
| || Obtaining an understanding of the Company's procedures in identification of related parties and process followed for ensuring completeness of accounting and disclosures of related party transactions and balances. |
| || Reading the statutory records and books of records to identify related party transactions and audit committee approvals for related party transactions. |
| || Verification of balance confirmations received from related parties and testing the transaction amounts and closing balances. |
|3. Accounting for Leases under Ind AS 116: ||Principal Audit procedures |
|As described in Note 1 (Accounting policies judgements and estimates) Ind AS 116 'Leases' is effective for the accounting period commencing 1 April 2019. ||1) Assessing the design and implementation of the key controls relating to the determination of the Ind AS 116 transition impact disclosure. |
|Ind AS 116 had a significant impact on the reported assets liabilities and the income statement of the Company. ||2) Our procedures to assess management's key modelling estimates and the completeness/ accuracy of the underlying lease data included: |
|The impact of the Ind AS 116 transition is reliant upon a number of key estimates primarily determining the appropriate discount rates. Additionally there is a risk that the lease data which is used in the calculation of Ind AS 116 transition calculation is incomplete or inaccurate. ||- assessing the discount rates used to calculate the lease obligation |
| ||- assessing the accuracy of the lease data by testing the lease data captured by management for a sample of leases through the inspection of lease documentation; and |
| ||- testing the completeness of the lease data by reconciling the Company's existing lease commitments to the lease data used in the Ind AS 116 model. |
| ||3) Evaluating whether the disclosures included in the notes to the financial statements are in conformity with the applicable standard. |
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Annualreport but does not include the standalone Ind AS financial statements and our auditor'sreport thereon.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE'S RESPONSIBILITY FOR THE STANDALONE IND ASFINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financialperformance total comprehensive income/ (loss) changes in equity and cash flows of theCompany in accordance with the Ind AS and other accounting principles generally acceptedin India. 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 standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone Ind AS financial statements Board of directors 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 Board of directors either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
AUDITORS RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE IND AS FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
OH Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the management.
Conclude on the appropriateness of the management's use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theability of the Company to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the Statement or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the standalone Ind ASfinancial statements of the Company to express an opinion on the standalone Ind ASfinancial statments.
Materiality is the magnitude of misstatements in the standalone Ind AS financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the standalone Ind AS financial statmentsmay be influenced. We consider quantitative materiality and qualitative factors in (i)planning the scope of our audit work and in evaluating the results of our work; and (ii)to evaluate the effect of any identified misstatements in the Standalone Ind AS FinancialStatements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements of the current year and are therefore the key audit matters. We describe thesematters in our auditor's report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be 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 ("the Order")issued by the Central Government in terms of sub-section (11) of section 143 of the Actwe give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. As required by section 143(3) of the Act based on our audit we report that:
a. We have sought and except for the matters described in basis of qualified opinionparagraph above obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit.
b. Except for the matters described in basis of qualified opinion paragraph above inour opinion proper books of account as required by law have been kept by the Company sofar as it appears from our examination of those books.
c. The company does not have any branches. Hence the provisions of section 143(3)(c)is not applicable.
d. The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the relevant books of account.
e. Except for the matters described in basis of qualified opinion paragraph above inour opinion the aforesaid standalone Ind AS financial statements comply with IndianAccounting Standards specified under Section 133 of the Act read with relevant ruleissued there under to the extent applicable to the company.
f. The matters described in basis of qualified opinion paragraph above in our opinionmay have adverse effects on the functioning of the company.
g. On the basis of written representations received from the Directors as on March 312020 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
h. The reservation relating to the maintenance of accounts and other matters connectedtherewith are as stated in the basis for qualified opinion paragraph above.
i. With respect to the adequacy of Internal financial controls over financial reportingof the company and the operating effectiveness of such control refer to our separatereport in "Annexure B". Our report expresses an unmodified opinion on theadequacy and operating effectiveness of the company's internal financial control overfinancial reporting.
j. With respect to the other matters to be included in the Auditor's Report inaccordance with requirement of section 197(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.
k. 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 explanation given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For GMJ & Co.
Firm Registration No: 103429W
CA Atul Jain
Membership No. 037097
Mumbai Date: July 31 2020
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in Paragraph 1 under the "Report on Other Legal and RegulatoryRequirements" section of our report to the Members of Future Supply Chain SolutionsLimited of even date)
i. In respect of Company's Property plant and Equipment:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of Property plant and Equipment.
b. The Company has a program of verification to cover all the items of Property plantand Equipment in a phased manner which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the program certainProperty plant and Equipment were physically verified by the management during the year.According to the information and explanations given to us no material discrepancies werenoticed on such verification.
c. The Company did not have any immovable property of freehold or leasehold land andbuilding as at March 31 2020. Therefore paragraph 3(i) (c) of Order is not applicable.
ii. The management has conducted physical verification of inventory at regularintervals during the year. In our opinion and according to the information andexplanations given to us the Company is maintaining proper records of inventory. Thediscrepancies noticed on verification between physical stocks and the book records werenot material having regard to the size of the operations of the Company.
iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to Companies Firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Therefore paragraph 3 (iii) of the Order is not applicable.
iv. According to the information and explanations given to us the Company has notgranted any loans or made any investments or provided any guarantees or security to theparties covered under section 185 and 186. Therefore the provisions of clause 3(iv) ofthe said order are not applicable to the company.
v. The Company has not accepted deposits during the year and does not have anyunclaimed deposits as at March 31 2020. Therefore paragraph 3 (v) of the Order is notapplicable.
vi. In our opinion and according to the information and explanations given to usmaintenance of cost records has not been specified by the Central Government under section148(1) of the Companies Act 2013 for the business activities carried out by the Company.Therefore paragraph 3(vi) of the Order is not applicable.
vii. a. According to the information and explanations given to us in our opinion theCompany is generally regular in depositing undisputed statutory dues including ProvidentFund Employees' State Insurance Income Tax Goods and Service Tax Cess and othermaterial statutory dues applicable to it with the appropriate authorities. b. According tothe information and explanations given to us there were no undisputed amounts payable inrespect of Provident Fund Employees' State Insurance Income Tax Goods and Service TaxCustoms Duty Cess and other material statutory dues in arrears as at March 31 2020 for aperiod of more than six months from the date they became payable.
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of loans or borrowings from banks or debentureholders. The Company has not taken any loans from Government or any Financial Institution.
ix. Except for the matters described in basis of qualified opinion paragraph above inour opinion and according to the information and explanations given to us the Company hasutilized the monies raised by way of term loans for the purposes for which they wereraised. The Company has not raised any money by way of initial public offer or furtherpublic offer.
x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no material fraud on the Company by its officers oremployees has been noticed or reported during the year.
xi. In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the provisions ofsection 197 read with Schedule V of the Act.
xii. In our opinion and according to the information given to us the Company is not aNidhi Company. Therefore paragraph 3(xii) of the Order is not applicable.
xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details have beendisclosed in the Financial Statements as required by the applicable accounting standard.
xiv. According to the information and explanations given to us and based on ourexamination of the records Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year. Thereforeparagraph 3(xiv) of the Order is not applicable.
xv. According to the information and explanations given to us and based on ourexamination of the records Company has not entered into any non-cash transactions withthe directors or persons connected with him. Therefore paragraph 3(xv) of the Order isnot applicable.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For GMJ & Co.
Firm Registration No: 103429W
CA Atul Jain
Membership No. 037097
Mumbai Date: July 31 2020
ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in Paragraph 2(i) under the "Report on Other Legal and RegulatoryRequirements" section of our report to the Members of Future Supply Chain SolutionsLimited of even date)
REPORT ON THE INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING UNDER CLAUSE (I) OFSUBSECTION 3 OF SECTION 143 OF THE COMPANIES ACT 2013 ("THE ACT")
We have audited the internal financial controls over financial reporting of FutureSupply Chain Solutions Limited ("the Company") as of March 31 2020 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor 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 (the "ICAI"). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our 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 standalone Ind AS financial statements whether due to fraudor 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 standalone Ind AS 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 themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standaloneInd AS financial statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the standaloneInd AS 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 GMJ & Co.
Firm Registration No: 103429W
CA Atul Jain
Membership No. 037097
Mumbai Date: July 31 2020.