To the Members of Gopala Polyplast Limited
Report on the Audit of the Financial Statements
Corporate insolvency Resolution Process ("CIRP")
The Hon'ble National Company Law Tribunal Ahmedabad ("NCLT") by an orderdated May 2 2019 admitted the Corporate Insolvency Resolution Process ("CIRP")consequent upon an application filed by Bonus Plastics Private Limited u/s 9 of Insolvencyand Bankruptcy Code and appointed Mr. Vikash Gautamchand Jain as the Interim ResolutionProfessional ("IRP") in term of the Insolvency and Bankruptcy Code 2016("Code") to manage the affairs of the Company as per the provisions of the Code.The CIRP is ongoing.
We have audited the financial statements of Gopala Polyplast Limited ("theCompany") which comprise the Balance Sheet as at March 31 2020 and the Statementof Profit and Loss (including Other Comprehensive Income) Statement of Changes in Equityand Statement of Cash Flows for the year then ended and notes to the 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 because of the significance of the matters described in the Basis forAdverse Opinion section of our report the accompanying Ind AS financial statements donot give a true and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at 31st March2020 its loss (including other comprehensive income) its cash flows and the changes inequity for the year ended on that date.
Basis for Adverse Opinion
1. In respect of Inventories during the reporting period the management has notundertaken physical verification of Inventories at periodic intervals and has not obtainedany technical /market/commercial evaluation for the inventories. Hence we are unable tocomment on the realizable value of the same which may be lower than the amount at whichit has been reflected in the balance sheet. Indirect taxes are also considered as part ofInventory cost. The Company has not maintained adequate inventory records at the factory.No provision has been made on diminution in the value of old and slow-moving inventory.The impact of the above remarks presently not ascertainable and therefore cannot becommented upon.
2. In respect of Trade Receivables amounting to Rs. 1962.91 Lakhs we have notreceived balance confirmations from the debtors. The realisability of these amounts isdoubtful and company has not made any provision for Bad and Doubtful debts in respect ofthese receivables other than specified in Note no. 36. In our opinion the provision madeis inadequate and the impact on loss and carrying value of trade receivables could not beascertained.
3. Note 31C (xviii) to the standalone financial results in respect of recognition ofdeferred tax assets on account of carried forward unused tax losses and other taxabletemporary differences aggregating to Rs. 356.43 lakhs. The Management of the Company isconfident that sufficient future taxable income will be available against which suchdeferred tax assets will be realized. However in our opinion in absence of convincingevidence that sufficient future taxable income will be available against which suchdeferred tax assets can be realized such recognition is not in accordance with IndianAccounting Standard 12 "Income Taxes" (Ind AS 12). Had the aforesaid deferredtax assets not been recognized loss after tax for the year ended on March 31 2020 wouldhave been higher by Rs. 33.16 Lakhs and other equity would have been lower by same amount.
4. The borrowings have not been shown on amortized cost method as required under IndAS. Hence the same are not subsequently measured using the EIR method as per Ind AS 109.
5. The present liability for future payment of gratuity as on March 31 2020 is notactuarially determined and provided for as per Indian Accounting Standard - 19 (Ind AS19) "Employee Benefits" and also as per provisions of Section 128 of TheCompanies Act 2013 relating to preparation of books of account on accrual basis.However the Company has provided for the amount of gratuity liability for the employeeson the basis of the management's estimate. In the absence of actuarial valuation reportthe quantum of short provision of gratuity and its impact on the Statement of Profit andLoss for the period ended March 31 2020 cannot be determined.
6. As reported in Note 32 to the standalone financial statements in respect ofphysical verification conducted by the employees and not by any technical personnel fairvalue reports of fixed assets of Rs. 3245.34 lakhs for Tangible Assets and 1.70 lakhs forIntangible Assets as at March 31 2020 are not available from any Technical Personnel. Thesaid assets are not tested for impairment and hence no provision for impairment has beenmade. In absence of any alternative corroborative evidence we are unable to comment onthe recoverability of the same.
Material Uncertainty Related to Going Concern
We draw attention to Note 30 and 31C (i) to the financial statement wherein it isindicated that the company has incurred a loss of Rs. 2070.36 lakhs during theyear ended March 31 2020 due to which its net worth has been fully eroded and as of thedate the company's current liabilities exceeded its current assets by Rs. 11472.68lakhs. Corporate Insolvency Resolution process (CIRP) has been initiated for theCompany on May 2 2019. These conditions indicate that a material uncertainty exist thatmay cast significant doubt regarding on the company's ability to continue as a goingconcern and therefore the company may be unable to realise its assets and discharge itsliabilities in the normal course of business. The ultimate outcome of these matters is atpresent not ascertainable. Accordingly we are unable to comment on the consequentialimpact if any on the accompanying standalone financial statement.
The Resolution Professional had invited Resolution Plans from prospective ResolutionApplicants refer to Note no 47 by way of issuing invitation for Expression of Interest innewspaper as public Announcement. The Resolution plan based on highest quote or benefit tothe stakeholders was approved by the Committee of Creditors ("CoC'') which is pendingfor approval by Hon'ble NCLT.
The above factors cast a significant uncertainty on the Company's ability to continueas a going concern. Pending the resolution of the above uncertainties the Company hasprepared the aforesaid statement on a going concern basis.
Emphasis of Matter
We draw attention to the following matters in the notes to the financial statements:
a. Note No. 14.1 to financial statements in respect of arrears of dividend onCumulative Redeemable Preference Share.
b. Note no. 32 33 36 of the financial statements in respect of Physical Verificationof Fixed Assets pending statutory dues and various claims received from OperationalFinancial Creditors and Employees and Other Creditors.
c. Note 34 to the financial statements in respect of various claims submitted by thefinancial creditors operational creditors workmen or employee and authorizedrepresentative of workmen and employees of the Company to Resolution Professional pursuantto the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process forCorporate Persons) Regulation 2016 that are currently under consideration/reconciliation.Pending reconciliation/admission of such claims by the RP we are unable to comment on theconsequential impact if any on the accompanying statement.
d. Note no 44 to financial statements in respect of Contingent Liabilities.
e. Note no 47 (a) to financial statements event occurred after Balance Sheet Date inrespect of Resolution plan received from M/s. Plastene India Limited based on highestquote or benefit to the stake holders has been approved by Committee of Creditors("CoC") which is pending for approval by Hon'ble NCLT Court.
f. Note No. 47 (d) to the financial statements regarding uncertainties arising out ofthe outbreak of COVID-19 pandemic and the assessment made by the management on itsoperations and financial reporting for the year ended 31st March 2020; such anassessment and the outcome of pandemic as made by the management is dependent on thecircumstances as they evolve in subsequent periods.
Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. In addition to the matters described in the Basis for Adverse Opinionsection and Material Uncertainty Related to Going Concern section we have determined thematters described below to be the key audit matters to be communicated in our report.
|Key Audit Matters ||How the matter was addressed in our audit |
|I. Revenue Recognition || |
|As required by Ind AS 115 Revenue from sale of goods is recognized when the control of the goods has transferred to the customer and when there are no longer any unfulfilled obligations to the customer. Revenue is adjusted for estimated sales returns discounts and other similar allowances ||Our audit procedure included following:- |
| ||- Understanding the process followed by the management for the purpose of identifying and determining the amount of provision of sales returns |
| ||- Evaluating the data used by the management for the purpose of calculation of the provision for sales returns and checking of its arithmetical accuracy |
| ||- Comparison between the estimate of the provision for sales returns created in the past with subsequent actual sales returns and analysis of the nature of any deviations to corroborate the effectiveness of the management estimation process; |
|Sales return estimation || |
|As disclosed in Note 31 (C)(xii) to the financial statements revenue is recognised net of estimated sales returns. Estimation of sales returns involves significant judgement and estimates since it is dependent on various internal and external factors. Estimation of sales return amount together with the level of judgement involved make its accounting treatment a significant matter for our audit. || |
| ||- Considering the appropriateness of the Company's accounting policies regarding revenue recognition as they relate to accounting for rebates and scheme allowances |
| ||- Testing the Company's process and controls over the calculation of discounts rebates and customer incentives |
| ||- Selecting a sample on test check basis of revenue transactions and scheme circular to re-check that scheme allowance as at year end were calculated in accordance with the eligibility criteria mentioned in the relevant circulars |
| ||- Selecting a sample (using statistical sampling) of credit note issued to the customers during the year and verifying the same is in accordance with the scheme |
| ||- Evaluating the assumptions and judgements used by the Company in calculating rebates and schemes allowances including the level of expected claims by comparing historical trends of claims |
|II. Trade Receivables ||Our audit procedures to assess the recoverability of trade receivables included the following: |
|The carrying amount of trade receivable is Rs.1962.91 lakhs representing 28% of the total asset of the company which is significant. ||- obtaining an understanding of and assessing the design implementation and operating effectiveness of the Company's key internal controls over the processes of credit control collection of trade receivables and follow up of overdue balances |
|There are customers with large amount of outstanding balances for long period. There are outstanding balances which involves material risk. Management should take into account ageing analysis of the customer and any other factor specific to individual debtor concerned. || |
| ||- evaluating the Company's policy for making allowances for doubtful debts with reference to the requirements of the prevailing accounting standards |
| ||- assessing the classification of trade receivables in the trade receivable ageing report by comparison |
|Accordingly we identified the recoverability of trade receivables as a key audit matter because of the significance of trade receivables to Company's balance sheet and because of the significant degree of management judgement involved in evaluating the adequacy of the allowance for doubtful debts and Rebate and Discounts. ||with sales invoices and other underlying documentation on a test check basis; |
| ||- Verification of Doubtful Debt & Rebate-Discount done. |
| ||- However we have not received balance confirmations from the debtors. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone financial statements and our auditor's report thereon. The abovementioned reports comprising of other information are expected to be made available to usafter the date of this auditor's report.
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 financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the above mentioned reports comprising other information and if weconclude that there is a material misstatement therein we are required to communicate thematter to those charged with governance and describe actions applicable in the applicablelaws and regulations.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Company's Management is responsible for the matters stated in section 134(5) theAct with respect to the preparation of these Ind AS financial statements that give a trueand fair view of the financial position financial performance cash flows and changes inequity statement of the Company in accordance with the Accounting principles generallyaccepted in India including the Accountant Standards (Ind AS) referred to in section 133of the Act read with Companies (Indian Accounting Standards) Rules 2015 (as amended).This responsibility includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities selection and application of appropriateaccounting policies making judgements and estimates that are reasonable and prudent anddesign implementation and maintenance of adequate internal financial control that we areoperating effectively for ensuring the accuracy and completeness of accounting recordsrelevant to the preparation and presentation of the Ind AS financial statements that givea true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Pursuant to ongoing Corporate Insolvency Resolution Process (CIRP) powers of the boardof Directors have been suspended and these Powers are now vested with ResolutionProfessional (RP).
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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct 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 reasonableness ofaccounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions 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 with reference to financial statements thatwe 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 ("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 statement on the matters specified in paragraphs 3 and 4 ofthe Order.
2. As required by section 143(3) of the Act we report that:
a) We have sought and except for the possible effects of the matter described in theBasis for Adverse Opinion paragraph above obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our audit;
b) Except for the possible effects of the matters described in the Basis for AdverseOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as appears from our examination of those books.
c) The Balance Sheet Statement of Profit and Loss (including other comprehensiveincome) Cash Flow Statement and Statement of Change in Equity dealt with by this Reportare in agreement with the books of account.
d) Except for the effects of the matters described in the Basis for Adverse Opinionparagraph above in our opinion the Ind AS financial statements comply with theAccounting Standards (Ind AS) referred to in section 133 of the Companies Act 2013 readwith Companies (Indian Accounting Standards) Rules 2015 as amended.
e) The matter described in the Basis for Adverse Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.
f) On the basis of written representations received from the directors as on March 312020 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of section 164(2) of theCompanies Act 2013.
g) The adverse remarks relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Adverse Opinion paragraph above.
h) With respect to the adequacy of the internal finance controls with reference tofinancial statements of the Company and the operating effectiveness of such control referto our separate Report in "Annexure-B". Our report expresses modified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls withreference to financial statements.
i) With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit & Auditors) Rules 2014 in our opinionand to the best of our information and according to explanations given to us by themanagement the requirements of the same are duly complied with as under:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements by way of disclosure in Note no. 44 to the financialstatements.
ii. Provision has been made in the standalone Ind AS financial statements as requiredunder the applicable law or accounting standards for material foreseeable losses if anyon longterm contracts including derivative contracts.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
3. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended
In our opinion and according to the information and explanations given to us theremuneration paid during the current year by the company to its directors is in accordancewith the provisions of section 197 of the Act. The remuneration paid to any director bythe company is not in excess of the limit laid down under section 197 of the Act.
| ||For Ashok Dhariwal & Co. |
| ||Chartered Accountants |
| ||(Registration No. 100648W) |
|Place: Ahmedabad ||(CA Ashok Dhariwal) |
|Date : 30th July 2020 ||Partner |
| ||Membership No. 36452 |
| ||UDIN: 20036452AAAABJ4551 |
Annexure to the Auditors' Report
The Annexure-A referred to in our report to the members of the above Company for theyear Ended on March 31 2020. We report that:
|S.No. Particulars ||Auditors Remark |
|(i) (a) whether the Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets; ||Yes |
|(b) whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so whether the same have been properly dealt with in the books of account; ||Yes but not on regular interval. |
|(c) Whether title deeds of immovable properties are held in the name of the Company. If no provided details thereon. ||Yes |
|(ii) (a) whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so how they have been dealt with in the books of account; ||As informed to us management has conducted physical verification but there is no record available to substantiate that. |
|(iii) Whether the Company has granted any loans secured or unsecured to companies firms Limited Liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act. ||No loans given to parties covered in the register maintained under section 189 |
|(a) Whether the terms and conditions of the grant of such loans are prejudicial to the Company's interest; ||Not Applicable |
|(b) Whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayment or receipts are regular. ||Not Applicable |
|(c) If the amount is overdue state the total amount overdue for more than ninety days and whether reasonable steps have been taken by the Company for recovery of the principal and interest: ||Not Applicable |
|(iv) In respect of loans investments and guarantees whether provision of section 185 and 186 of the companies' act 2013 have been complied with. If not provide details thereof. ||Yes |
|(v) In case the Company has accepted deposits whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed there under where applicable have been complied with? If not the nature of contraventions should be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal whether the same has been complied with or not? ||No such deposits accepted |
|(vi) where maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act 2013 whether such accounts and records have been made and maintained; ||Not Applicable |
|(vii) (a) Is the Company regular in depositing undisputed statutory dues including provident fund employees' state insurance income-tax Goods & Service Tax duty of customs Cess and any other statutory dues with the appropriate authorities and if not the extent of the arrears of outstanding statutory dues as at the last ||The Company is Generally regular as per explanation given to us except Excise Duty PLA Payment of |
|day of the financial year concerned for a period of more than six months from the date they became payable shall be indicated by the auditor. ||Rs. 06.08/- lakhs payment pending since July 2017 + TDS Payable is Rs 33.23 Lakh is due Since July 2018 + TCS Payable is Rs 0.15 Lakh is due Since January 2019 + Professional Tax Rs 2.1 1 Lakh is due Since November 2018 + GST Payable Rs 248.92 Lakh is due Since January 2019. |
|(b) Where dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax or Goods and Service Tax or cess have not been deposited on account of any dispute then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not constitute a dispute). ||No such dues pending |
|(viii) Whether the Company has defaulted in repayment of dues to a financial institution bank government or dues to debenture holders? If yes the period and amount of default to be reported; (in case of defaults to banks financial institute and government lender wise details to be provided). ||Yes. The Company is under CIRP Proceedings from 02nd May 2019. ALL EMIs are stopped in Moratorium Period due to CIRP. |
|(ix) Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those raised. If not the details together with delay / default and subsequent rectification if any as may be applicable be reported. ||Not applicable |
|(x) Whether any fraud by the Company or any fraud on the Company by its officer/ employees has been noticed or reported during the year; If yes the nature and the amount involved is to be indicated. ||No such instance as per audit procedures and management explanations. |
|(xi) Whether managerial remuneration has been paid/provided in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act? If not state the amount involved and steps taken by the Company for securing refund of the same. ||Yes |
|(xii) Whether all transactions with the related parties are in compliance with Section 188 and 177 of Companies Act 2013 where applicable and the details have been disclosed in the Ind AS Financial Statements etc as required by the accounting standards and Companies Act 2013. ||Yes |
|(xiii) Whether the Nidhi Company has complied with Net Owned Funds to Deposit Ratio of 1: 20 ||Not applicable |
|(xiv) Whether the Company has made any preferential allotment / private placement of shares or fully or partly convertible debentures during the year under review and if so as to whether the requirement of Section 42 of the Companies Act 2013 have been complied and the amount raised have been used for the purposes for which the funds were raised. If not provide details thereof of amount involved and nature of noncompliance. ||Not applicable |
|(xv) Whether the Company has entered into any non-cash transactions with directors or persons connected with him and if so whether provisions of Section 192 of Companies Act 2013 have been complied with. ||No Such Transactions made |
|(xvi) Whether the Company is required to be registered under Section 45-IA of the Reserve Bank of India Act 1934 and if so whether the registration has been obtained. ||Not Applicable |
| ||For Ashok Dhariwal & Co. |
| ||Chartered Accountants |
| ||(Registration No. 100648W) |
|Place : Ahmedabad ||(CA Ashok Dhariwal) |
|Date : 30th July 2020 ||Partner |
| ||Membership No. 36452 |
| ||UDIN : 20036452AAAABJ4551 |
Annexure - B to Independent Auditors' Report
Referred to in paragraph 2(h) under Report on Other Legal and RegulatoryRequirements' of our report of even date
Report on the Internal Financial Controls with reference to financial statements undersection 143(3)(i) of the Companies Act 2013("the Act")
We have audited the internal financial controls with reference to financial statementsof Gopala Polyplast Limited ("the Company") as of March 312020 in conjunctionwith our audit of the Ind AS financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal financial controls with reference to financialstatements criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence to thecompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to Financial Statement based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing issued by ICAI anddeemed to be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to and 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 with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain evidence about the adequacy of theinternal financial controls system with reference to financial statement and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statement included obtaining and understanding of internal financial statementsassessing 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 Ind AS 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 systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A Company's internal financial controls with reference to Financial Statement is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A Company's internal financialcontrol with reference to financial statements includes those policies and proceduresthat
(1) Pertain to the maintenance of records that in reasonable details accurately andfairly reflect the transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts
and expenditures of the Company are being made only in accordance with authorization ofmanagement 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 with reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference toFinancial Statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
Basis of Adverse opinion
In our opinion and according to the information and explanations given to us and basedon our audit the following material weaknesses have been identified as at March 31 2020:
a) Physical verification of fixed asset and Inventories
b) Control over Impairment in the value of trade receivable
c) Assessment of recoverability of Deferred tax assets
d) Assessment of expected loss by trade receivable which are subject matters of variousdisputes / arbitration proceedings/ negotiations with the customers due to termination /foreclosure of contracts and other disputes.
A material weakness' is a deficiency or a combination of deficiencies ininternal financial control with reference to financial statements such that there is areasonable possibility that a material misstatement of the company's annual or interimfinancial statements will not be prevented or detected on a timely basis.
In our opinion except for the possible effects of material weaknesses described in"basis of adverse opinion" paragraph above the Company has in all materialrespects an adequate internal financial controls systems with reference to financialstatements and such internal financial controls with reference to financial controls wereoperating effectively as at March 31 2020 based on the internal financial control withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note issued by theInstitute of Chartered Accountants of India.
| ||For Ashok Dhariwal & Co. |
| ||Chartered Accountants |
| ||(Registration No. 100648W) |
|Place: Ahmedabad ||(CA Ashok Dhariwal) |
|Date : 30th July 2020 ||Partner |
| ||Membership No. 36452 |
| ||UDIN : 20036452AAAABJ4551 |