the members of
The KABSONS INDUSTRIES LIMITED
Hyderabad Report onthe Financial Statements:
We have audited the accompanying financial statements of the KABSONS INDUSTRIES LIMITED("the company") which comprise the Balance Sheet as at March 31 2021 theStatement of Profit and Loss (including other comprehensive income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information (hereinafter referred to as "the financial 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 section of our report the accompanying financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standard) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at March 312021 the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Qualified Opinion
The Company has not adopted and complied with the requirements of Ind AS-19Employee Benefits' in respect of the Gratuity liability which constitute a departurefrom the Accounting standards mentioned in the Companies (Indian Accounting Standards)Rules 2015 referred in section 133 of the Act. In view of this the liability of thecompany in this regard could not be ascertained. Consequently we are unable to commentabout the impact of the same on the profit for the year income tax and shareholder'sfunds.
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under Section 143(10) of the Act. Our responsibilities underthose standards are further described in the Auditors responsibility for the Audit ofFinancial Statements section of our report. We are independent of the company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit offinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the financial statements.Emphasis of matter
We draw attention to Note 34.1 in the financial statements which states that theCompany has not provided for the interest expense amounting to Rs.612049/- for the yearand Rs 12181317/- for earlier years against the Trade Deposits received from theDealers/ Distributors. Consequently the same has resulted in overstatement of profit forthe year by Rs.612049/- overstatement of the balance in the retained earnings in otherequity by Rs 12793366/- and understatement of Current Liabilities by Rs..12793366/-
Key Audit Matters
Key Audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Deferred Tax Assets |
|Key Audit matter description: |
|The Company has not recognised deferred tax asset for deductible temporary differences and unused tax losses. As the utilization of deferred tax assets is dependent on the company's ability to generate future taxable profits sufficient to utilize deductible temporary differences and tax losses before they expire. We determined this to be a key audit matter due to inherent limitations in estimation and uncertainty in forecasting the amount and timing of future taxable profits and the reversal of temporary differences and utilization of tax losses. Management has supported the non -utilization of the deferred tax assets mainly with taxable income projections which contain estimates of and tax strategies for future taxable income. Changes in the industrial scenario the business and its markets and changes in regulations may impact these projections. |
|Our Response |
|Our audit procedures include among others evaluating the future estimated business projections and projected tax computations prepared by the company to assess the recognition and measurement of the current tax and deferred tax assets and liabilities and evaluate the compliance with tax legislation. We paid attention to Longterm Forecasts and critically assessed the assumptions and judgements underlying these forecasts by considering the historical accuracy of forecasts and the sensitivities of the profit forecasts. We assessed the adequacy and the level of estimation involved. |
Report on Other Information other than Financial statements
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 CorporateGovernance and Shareholder's Information but does not include the financial statementsand our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to 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's Responsibility for the Financial Statements:
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (The Act") with respect to the preparation of theseInd AS financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income cash flows and changes inequity of the Company in accordance with the Indian Accounting Standards (Ind AS)prescribed under Section 133 of the Companies Act 2013 read with relevant rules issuedthere under and other accounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the companyand for preventing and detecting the frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofInd AS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the company or to cease operations orhas no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibility 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 scepticism throughout the audit. We also:
identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control;
obtain an understanding of internal 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 confrols;
evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management;
conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern;
evaluate the overall presentation structure and content ot the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in 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) Order2016("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure "A" a statement on the matters specified inthe paragraph 3 and 4 of the Order to the extent applicable.
2) As required by Section 143(3) of the Companies Act2013 we report that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) the Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account;
d) in our opinion the aforesaid financial statements comply with the Indian AccountingStandards (Ind AS) prescribed under Section 133 of the Companies Act 2013 read with Rule7 of Companies (Accounts) Rules 2014;
e) on the basis of written representations received from the directors as on 31stMarch 2021 taken on record by the Board of Directors none of the directors isdisqualified as on31BI March 2021 from being appointed as a director in termsof Section 164(2) of the Act;
f) with respect to the adequacy of internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate report in "Annexure B" Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the company's internal financialcontrols with reference to financial statements ;
g) with respect to Managerial Remuneration to be included in the Auditor's report underSection 197(16): Company has not paid any remuneration to the directors other than sittingfees to independent directors. The Ministry of Corporate Affairs has not prescribed otherdetails under Section 197(16) which are required to be commented upon by us;
h) 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 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition inits Ind AS financial statements Refer Note 34.1 (a)to the Ind AS financialstatements;
ii. the Company has no long-term contracts and did not have derivative contracts; and
iii. the instance of delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company is as given below.
|Amount (Rs.) ||Period to which the amount relates ||Due date |
|22550 ||1994-95 ||19.10.2001 |
ANNEXUREA'TOTHE INDEPENDENT AUDITORS'REPORT
Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of our report of even date to the members of Kabsons IndustriesLimited for the year ended 31st March 2021.
On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:
(i) a. the company has maintained proper records showing full particulars includingquantitative details and situation of its fixedassets;
b. all the Fixed Assets have not been physically verified by the management during theyear but there is a regular program of verification which in our opinion is reasonablehaving regard to the size of the company andthe nature of its assets. Pursuant to theprogram a portion of the fixed assets has been physically verified by the managementduring the year and no material discrepancies have been noticed on such verification;
c. according to the information and explanations given to us and on the basis of ourexamination of the records of the company the title deeds of the immovable property areheld in the name of thecompany.
(ii) the inventory has been physically verified by the management at reasonableintervals during the year under report and the discrepancies noticed during such physicalverification of inventories as compared to book records have been properly dealt with inthe books of account;
(iii) thecompanyhasnotgrantedanyloanstocompanies firms Limited Liability Partnershipsor other parties covered in the register maintained under section 189 of the Companies Act2013. Therefore the provisions of clauses 3(iii)(a) 3(iii)(b) & 3(iii)(c) of thesaid Order are not applicable to thecompany;
(iv) in our opinion and according to the information and explanations given to us thecompany has not advanced anyloans given guarantees ands ecurity and not made investments.Hence para 3(iv) of the afore said Order is not applicable ;
(v) theCompanyhasnotacceptedanydepositsfromthspublic. Hence the provisions of Sections73 to 76 or any other relevantprovisionsoftheCompaniesAct20l3andtherules framed thereunder do not apply to thisCompany;
(vi) maintenance of cost records has not been specified bytheCentralGovernment undersection 148(1) of the Companies Act 2013. Hence clause 3(vi) of the afore said Order isnot applicable;
(vii) (a) the company is not regular in depositing with appropriate authoritiesundisputed investor education and protection fund.
(b) according to the information and explanations given to us and on the basis of ourexamination of the records of the company there are no dues of sales tax income taxcustoms duty excise duty service tax and cess which have not been deposited on accountof any dispute;
viii) according to the records of the company examined by us and the information andexplanations given to us the company had not borrowed from financial institutions.Therefore the provision of clause 3(viii) of the Order is not applicable;
ix) in our opinion and according to the information and explanations given to us theCompany has not raised any moneys by way of initial public offer or further public offer(including debt instruments) and term loans during theyearTherefore the provision ofclause 3(ix) of the Order is not applicable;
x) during the course of our examination of the booksand records of the company carriedout in accordance with the Generally Accepted Auditing Practices in India and accordingto the information and explanations given to us we have neither come across any instancesof material fraud by the company or any fraud on the company byitsofficersoremployees.noticedorreportedduringthe year nor we have been informed any suchcases by the management;
xi) according to the information and explanations given to us and based on ourexamination of therecords of the company no managerial remuneration has beenpaid/provided during the year under report. Therefore the provision of clause 3(xi) ofthe Order is not applicable;
xii) thecompanyisnotachitfundoraNidhi/mutualbenefit fund/society Therefore theprovision of clause 3(xii) of the Order is not applicable to the company during the yearunder report;
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 of suchtransactions havebeen disclosed in the financial statements as required by the applicableaccounting standards;
xiv) according to the information and explanations given to us and based on ourexamination of the records of the company the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringtheyearTherefore the provision of clause 3(xiv) of the Order is not applicable;
xv) according to the information and explanations given to us and based on ourexaminations of the records of the company the company has not entered into non-cashtransactions with directors or persons connected with them. Therefore the provision ofclause 3(xv) of the Order is not applicable;
xvi) the Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934
ANNEXURE - B' TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referredtoin Paragraph2(f) under the heading "Report on other Legaland Regulatory Requirements" of our report of even date to the members of KABSONSINDUSTRIES LIMITED for the year ended 31st March2021
Report on the Internal Financial Controls under Clause(i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to financial statementsofKABSONS INDUSTRIES LIMITED ("theCompany"')asof31stMarch 2021 in conjunctionwith our audit of the Ind AS financial statements of the Company for the year ended onthat date.
Management'sResponsibilltyforlnternalFinancialControls with reference to financialstatements
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal financial control with reference to financialstatements criteria established by the Company considering the essential components ofinternal controlstated in the "Guidance Note on Audit of Internal Financial Controlsover financial reporting" issued by the Institute of Chartered Accountants of India(iCAP). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection off rauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act2013.
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 Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the"GuidanceNote")and the Standards on Auditing issued byICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof India. 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 allmaterialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements 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
Acompany's internal financial control 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 control withreference to financial statements includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail 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 inaccordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
Because of the inherent limitations of internal financialcontrols 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 in adequatebecause of changes inconditions or that the degree of compliance with the policies orprocedures maydeteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to financial statements we reoperating effectively as at 31stMarch 2021 based on the internal control with reference to financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Infernal Financial Controls over financial reportingissued by the Institute of Chartered Accountants of India.
| ||for K. S. RAO & Co. Chartered Accountants |
| ||Firm Registration No:003109S Sd/- |
| ||(P. GOVARDHANA REDDY) |
|Place : Hyderabad ||Partner Membership no:029193 |
|Date : 29th June 2021 ||UDIN: 21029193AAAAJO6068 |