To the Members of
Heritage Foods Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Heritage FoodsLimited (the Company') which comprise the Balance Sheet as at 31 March 2020 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingIndian Accounting Standards (Ind AS') specified under section 133 of the Act of thestate of affairs of the Company as at 31 March 2020 and its loss (including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
Key Audit Matter
4. 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.
5. We have determined the matter described below to be the key audit matter to becommunicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
|Revenue recognition ||Our audit included but was not limited to the following procedures: |
|Revenue from sale of goods is recognised when control of the products being sold is transferred to the customer and when there are no longer any unfulfilled obligations. The performance obligations in the contracts are fulfilled at the time of dispatch delivery or upon formal customer acceptance depending on terms. ||Assessed the appropriateness of the revenue recognition accounting policies including those relating to discounts in accordance with Ind AS 115 Revenue from contracts with customers (Ind AS 115'). |
|Majority of the Company's sales arrangements are on a point of sale basis and requires little judgement to be exercised. ||Evaluated the integrity of the general information and technology control environment and tested the operating effectiveness of key IT application controls. |
|Discounts are material and there are arrangements with varying terms based on schemes implemented throughout the year. ||Evaluated the design and implementation of Company's controls in respect of revenue recognition including discounts. |
|There is a risk of revenue being overstated resulting from pressure the management may feel to achieve performance targets at the reporting period end. ||Performed substantive testing by selecting samples of revenue transactions recorded during the year by verifying the underlying documents which included trip sheets invoices shipping documents and evidence of collection of receipts as appropriate. |
|Due to the materiality of amounts involved and above said considerations revenue recognition from sale of goods is determined to be a key audit matter for the current year audit. ||Performed substantive testing by selecting samples of discount transactions recorded during the year and comparing the parameters used in the calculation of the discounts with the relevant source documents (including invoices and schemes) to assess whether the methodology adopted in the calculation of the discounts was in accordance with the terms and conditions defined in the schemes. |
|Refer Note 3(d) to the Standalone Financial Statements Summary of the significant accounting policies and Note 25 for the revenue recognized during the year. ||Performed cut-off testing by selecting samples of revenue transactions recorded before and after the financial year end date by tracing to the relevant underlying documentation to assess whether the revenue was recognized in the correct period. |
| ||Assessed manual journal entries posted to revenue to identify unusual items and tested such entries on a sample basis. |
| ||Evaluated appropriateness of disclosures made in the financial statements in accordance with the requirements of Ind AS 115 and other applicable regulations. |
Information other than the Financial Statements and Auditor's Report thereon
6. 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 standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
7. The accompanying standalone financial statements have been approved by the Company'sBoard of Directors. The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including the IndAS specified under section 133 of the Act. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
8. 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. 9. Those Board of Directors is also responsible for overseeingthe Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
10. 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individually orin the aggregate they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain 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 disclosuresand whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. 13. Wealso provide those charged with governance with a statement that we have complied withrelevant ethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most in the audit of the financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor'sreport unless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
15. As required by section 197(16) of the Act based on our audit we report that theCompany has paid remuneration to its directors during the year in accordance with theprovisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 (the Order')issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure Aa statement on the matters specified in paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure A as required by section 143(3) of the Actbased on our auditwe report to the extent applicable that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit of theaccompanying standalone financial statements;
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 standalone financial statements dealt with by this report are in agreement withthe books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors disqualified none of the directors as on 31 March2020 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls with reference to financialstatements of the Company as on 31 March 2020 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 27 May 2020 as per Annexure B expressed unmodified opinion; and
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 as detailed in note 43(b) to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2020;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2020;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2020;
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE TO THE MEMBERS OF HERITAGEFOODS LIMITED ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2020
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property plant and equipment.
(b) The Property plant and equipment have been physically verified by the managementduring the year by engaging the outside expert and no material discrepancies were noticedon such verification. In our opinion the frequency of of the Property plant andequipment is reasonable having regard to the size of the Company and the nature of itsassets.
(c) The title deeds of all the immovable properties (which are included under the headProperty plant and equipment') are held in the name of the Company.
(ii) In our opinionthe management has conducted physical verification of inventory atreasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stocks lying with third parties at the year-end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.
(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.
(iv) In our opinion the Company has complied with the provisions of Section 186 inrespect of investments and guarantees. Further in our opinion the Company has notentered into any transaction covered under Section 185 and Section 186 of the Act inrespect of loans and security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs goods and services taxduty of excise value added tax cess and other material statutory dues as applicablehave generally been regularly deposited to the appropriate authorities though there hasbeen a slight delay in a few cases. F no undisputed amounts payable in respect thereofwere outstanding at the year-end for a period of more urther than six months from thedate they became payable.
(b) The dues outstanding in respect of income-tax sales-tax service-tax goods andservices tax duty of customs duty of excise and value added tax on account of anydispute are as follows: (in lakhs)
|Name of the statute ||Nature of dues ||Amount () ||Amount paid under Protest () ||Period to which the amount relates ||Forum where dispute is pending |
|Andhra Pradesh General Sales Tax Act 1957 ||Purchase Tax ||95.12 ||11.36 ||2001-02 ||The High Court of Judicature at Hyderabad for the State of Telangana |
|Andhra Pradesh Value Added Tax Act 2005 ||Sales Tax/ VAT ||46.88 ||- ||2008-09 ||The High Court of Judicature at Hyderabad for the State of Telangana |
|The Central Sales Tax Act1956 ||SalesTax/VAT ||15.93 ||15.93 ||2010-11 ||Joint Commissioner of commercial taxes (Appeals) Bangalore |
|The Central Sales Tax Act1956 ||Sales Tax/ VAT ||21.48 ||15.82 ||2011-12 ||Joint Commissioner of commercial taxes (Appeals) Bangalore |
|The Central Sales Tax Act1956 ||Sales Tax/VAT ||7.31 ||7.31 ||2012-13 ||Joint Commissioner of commercial taxes (Appeals) Bangalore |
Telangana Tax on Entry Entry tax 4.06 1.02 2011-12 The High Court of Judicature at ofGoods into Local Hyderabad for the State of Telangana Areas Act 2001 Telangana Tax onEntry Entry tax 27.20 6.80 2012-13 The High Court of Judicature at of Goods into LocalHyderabad for the State of Telangana Areas Act 2001 Telangana Tax on Entry Entry tax38.16 9.54 2013-14 The High Court of Judicature at of Goods into Local Hyderabad for theState of Telangana Areas Act 2001 Telangana Tax on Entry Entry tax 2.89 0.72 2014-15 TheHigh Court of Judicature at of Goods into Local Hyderabad for the State of Telangana AreasAct 2001 Telangana Tax on Entry Entry tax 4.09 1.02 2015-16 The High Court of Judicatureat of Goods into Local Hyderabad for the State of Telangana Areas Act 2001 Telangana Taxon Entry Entry tax 27.03 6.76 2016-17 The High Court of Judicature at of Goods into LocalHyderabad for the State of Telangana Areas Act 2001 Telangana Tax on Entry Entry tax 0.230.06 2017-18 The High Court of Judicature at of Goods into Local Hyderabad for the Stateof Telangana Areas Act 2001 Haryana Murrah Buffalo Milk cess 103.07 34.77 December 2014to The Supreme Court of India and other Milch Animal September 2019 Breed Act 2001
(viii) The Company has not defaulted in repayment of borrowings to any bank during theyear. There are no loans or borrowings payable to financial institutions or government andno dues payable to debenture-holders.
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors orpersons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THESTANDALONE FINANCIAL STATEMENTS UNDER CLAUSE (i) OF SUB-SECTION 3 OF SECTION 143 OF THECOMPANIES ACT 2013 (THE ACT')
1. In conjunction with our audit of the standalone financial statements of HeritageFoods Limited (the Company') as at and for the year ended 31 March 2020 we haveaudited the internal financial controls with reference to financial statements of theCompany as at that date.
Responsibilities of Management and Those Charged with Governance for Internal FinancialControls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on 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 Reporting("Guidance Note") issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the designimplementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Company's 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.
Auditor's Responsibility for the Audit of the Internal Financial Controls withReference to Financial Statements
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Standards on Auditing issued by the Institute of CharteredAccountants of India (ICAI')prescribed under Section 143(10) of the Act to theextent applicable to an audit of internal financial controls with reference to financialstatements and the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the Guidance Note') issued by the ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls withreference to financial statements were established and maintained and if such controlsoperated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements includes obtaining an understanding of such internal financialcontrols assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
5. 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 withreference to financial statements.
Meaning of Internal Financial Controls with Reference to Financial Statements
6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detailaccurately and fairlyreflect 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 inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised 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
7. 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 controls with reference to financial statements may become inadequatebecause of changes inconditions or that the degree of compliance with the policies orprocedures may deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls with reference to financial statements and such controls were operatingeffectively as at 31 March 2020 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by the ICAI.