The Members of KG Petrochem Limited
Report on the Audit of the Financial Statements
We have audited the financial statements of KG Petrochem Limited ("theCompany") which comprise the Balance Sheet as at 31 March 2020 and the Statement ofProfit and Loss (including Other Comprehensive Income) the Statement of Changes in Equityand the Statement of Cash Flow Statement for the year ended on that date and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under Section133of the Companies Act 2013 read with the Companies (Indian Accounting Standards) Rules2015 as amended ("IND AS") and other accounting principles generally accepted inIndia of the state of affairs of the Company as at March 312020 the profit includingother comprehensive income changes in equity and its cash flows for the year ended onthat date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the "Auditor's Responsibilities for the Audit ofthe Financial 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 of thefinancial statements under the provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
Attention has to be drawn to Note No. 52 to the financial statements regarding theuncertainties arising out of the outbreak of COVID-19 pandemic and the assessment made bythe management on its business and financials including valuation of assets policyliabilities and solvency for the year ended March 31 2020 this assessment and theoutcome of the pandemic is as made by the management and is highly dependent on thecircumstances as they evolve in subsequent periods. Our opinion is not modified on theabove matter.
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 andinforming our opinion thereon and we do not provide a separate opinion on these matters.We have determined the matters described below to be the key audit matters to becommunicated in our report.
|S.NO. KEY AUDIT MATTER ||AUDITOR'S RESPONSE |
|1 Trade Receivables Recoverability: ||Our audit procedures related to the allowance for expected credit losses for trade receivables included the following among others: |
|The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the Company deals with. ||We tested the effectiveness of controls over the: |
|In calculating expected credit loss the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID- 19. ||? Development of the methodology for the allowance for credit |
|We identified allowance for credit losses as a key audit matter because the Company exercises significant judgment in calculating the expected credit losses with reference to recoverability of trade receivables. ||losses including consideration of the current and estimated future economic conditions |
|Refer Note No. 11 to the financial statements. ||? Completeness and accuracy of information used in the estimation of probability of default and |
| ||For a sample of customers: |
| ||We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information. |
|2 Impairment of Property Plant and Equipment: ||Our audit procedures included the following: |
|As at 31 March 2020 the value of property plant and equipment held by the Company is Rs. 15613.41 Lacs as disclosed in ||? Evaluating the appropriateness of the judgments regarding identification of assets. |
|Note No. 6 to the financial statements. ||? Critically assessing the valuation report containing assumptions and estimates used to determine the recoverable amount of property plant and equipment. |
|Determining the recoverable amount of the assets requires a number of significant judgment and estimates especially in respect of the amount of future cash flows and applied discounting rate. The projected operating cash flows from upstream activities are influenced by assumptions concerning future prices. These projections are exposed to significant variability due to changing market condition. || |
|3 Replacement and component based accounting in Property Plant and Equipment: ||Our audit procedures included the following: |
|There are number of areas where management judgment is involved in respect of useful life in component based accounting in property plant and equipment and while derecognizing as a replacement accounting in property plant and equipment. ||We tested controls in place over the property plant and equipment cycle evaluated the appropriateness of capitalization policies performed tests of details on costs capitalized and assessed the timeliness of the transfer of assets and the application of the asset life including component assets life. |
|Refer Note No. 4.7 to the financial statements. ||In performing these substantive procedures we assessed the judgments made by management including: |
| ||? The nature of underlying component costs capitalized as part of the cost of the assets; |
| ||? The appropriateness of asset life applied in the calculation of depreciation; and No issues were noted from our testing. |
Information other than the Financial Statements and Auditor's Report thereon
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 financial statements and our auditor's report thereon. The
Annual Report is expected to be made available to us after the date of this auditor'sreport.
Our opinion on the financial statements does not cover the other information and wewill 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 Annual Report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance. On audit report date we have nothing to report in this regard because theannual report is expected to be made available to us after the date of this auditorreport.
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 ofthese financial statements that give a true and fair view of the financial positionfinancial performance total comprehensive income changes in equity and cash flows of theCompany in accordance with the Ind AS and other accounting principles generally acceptedin India. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting 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 of thefinancial statement that give a true and fair view and are free from material misstatementwhether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable matters relatedto going concern and using the going concern basis of accounting unless management eitherintends to liquidate the Company or to cease operations or has no realistic alternativebut to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
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 they couldreasonably be expected to influence the economic decisions of users taken on the basis ofthese 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 theCompanies Act 2013 we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the 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 uncertainty existsrelated to events or conditions that may cast significant doubt on the Company's abilityto continue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions 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.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of a reasonablyknowledgeable user of the financial statements may be influenced. We consider quantitativemateriality and qualitative factors in (i) planning the scope of our audit work and(ii) toevaluate the effect of any identified misstatements in the financial statements.
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 themallrelationships and other matters that may reasonably be thought to bear on our independenceand 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 be communicatedin our report 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
As required by the Companies (Auditor's Report) Order 2016 ("theOrder")issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 we give in the "Annexure A" statement onthe matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
1. As required by Section 143(3) of the Act 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
Comprehensive Income Statement of Changes in Equity and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
d. In our opinion the aforesaid financial statements comply with the Indian
Accounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
e. On the basis of the written representations received from the directors as on 31stMarch2020 taken on record by the Board of Directors none of the directors is disqualified as on31st March 2020 from being appointed as a director in terms of Section164 (2) of the Act.
f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
g. In our opinion and to the best of our information and according to the explanationgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of Section 197 read with Schedule V to the Act.
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 financialpositions in its financial statements Refer note 42 to the financial statements.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. There were no amounts which were required to be transferred to the
Investor Education and Protection Fund by the Company.
ANNEXURE - A REFERRED TO IN THE AUDITOR'S REPORT ON THE ACCOUNTS OF KG PETROCHEMLIMITEDFOR THE YEAR ENDING 31 MARCH 2020
As required by the Companies (Auditor's report) Order 2016 issued by the CentralGovernment of India in terms of section 143(11) of the Companies Act 2013 we report that:
1) In respect of fixed assets: a. According to information and explanation given to usThe Fixed Asset
Register of the Company has been under the process of Updation.
b. As explained to us the fixed assets have been physically verified by the managementduring the year at reasonable intervals.
c. According to the information and explanations given to us the records examined byus we report that the title deeds comprising all the immovable properties of land andbuildings which are freehold are held in the name of the Company as at the balance sheetdate.
2) In respect of its inventories:
As explained to us the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies were noticed on suchphysical verification.
3) In respect of loans:
According to the information and explanations given to us the Company has not grantedany loans secured and unsecured to companies firms and other parties covered in theregister maintained under section 189 of Companies Act 2013.
4) As per information and explanations provided to us in respect of loans investmentsguarantees and securities provisions of Section 185 and 186 of the Companies Act 2013have been complied with.
5) According to the information and explanations given to us the Company has notaccepted any deposits from the public within the meaning of the directives issued by theReserve Bank of India and the provisions of section 73 to 76 or any relevant provisions ofthe Companies Act 2013 and the rules made there under.
6) In respect of cost records:
We have been explained that the maintenance of cost records has not been prescribed bythe Central Government under Section 148(1) of the Companies Act 2013 for the periodunder review for any of the products.
7) In respect of statutory dues:
(a) The Company is generally regular in depositing with the appropriate authoritiesundisputed statutory dues including Provident Fund Investor Education Protection FundEmployees' State Insurance Income Tax Sales Tax Value Added Tax Wealth Tax ServiceTax Custom Duty Excise Duty Goods and service tax Cess and other material statutorydues as recorded in books of accounts applicable to it. Further no undisputed amountspayable in respect thereof were outstanding at the yearend for a period more than sixmonths from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofIncome Tax Wealth tax Sales Tax Value Added Tax Service Tax Custom duty and ExciseDuty and Goods and Service Tax which have not been deposited on account of any disputeexcept the following:
|Nature of Dispute ||Amount (In Rs.) ||Period to which the amount relates ||Forum where dispute is pending |
|Civil Suit against the Company ||1375622/- with interest ||F.Y. 2009-10 ||Bombay High Court |
8) In respect of repayment of dues:
As per information and explanation given to us the Company has not defaulted inrepayment of any amount to a financial institution or bank or debenture holders.
9) In our opinion and according to the information and explanation given to us termloans have been applied for the purposes for which they were obtained.
10) According to the information and explanations provided to us we have neither comeacross any instance of material fraud by the Company or on the Company by its officers oremployees noticed or reported during the year nor we have been informed of any such caseby the Management except the information that an employee of the Company was involved incash theft amounting to Rs. 6622500/- during the preceding year and the year underaudit. The Company has recovered the said amount from the employee during the course ofinvestigation before the end of the reporting period.
11) In respect of managerial remuneration:
According to the information and explanations given to us we report that managerialremuneration has been paid in accordance with the requisite approvals mandated by theprovisions of section 197 read with schedule V to the Companies Act 2013.
12) The Company is not a Nidhi Company. Therefore this clause is not applicable to theCompany.
13) In respect of related parties:
All transactions with the related parties are in compliance with Section 188 and 177 ofCompanies Act 2013 where applicable and the details have been disclosed in the FinancialStatements etc. as required by the accounting standards and Companies Act 2013.
14) In respect of preferential allotment / private placement of shares:
The Company has not made any preferential allotment / private placement of shares orfully or partly convertible debentures during the year under review.
15) In respect of Non-cash transactions with directors:
The Company has not entered into any non-cash transactions with directors or personsconnected with him.
16) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For R Sogani & Associates Chartered Accountants FRN: 018755C
BHARAT Digitally signed by BHARAT SONKHI SONKHIYA
Date: YA 2020.07.07
(Bharat Sonkhiya) Partner Membership No.: 403023
Place: Jaipur Date: 07.07.2020
ANNEXURE - B TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIALSTATEMENTS OF KG PETROCHEM LIMITED
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 over financial reporting of KG
Petrochem Limited ("the Company") as of March 31 2020 in conjunction withour audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to respective Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and timely preparation of reliable financial information as requiredunder the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over
Financial Reporting (the "Guidance Note") and the Standards on Auditingissued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the 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 systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internal financial control over financialreporting 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 over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects judging by the nature andquantum of transactions appearing in the financial statements an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.