To The Members KHFM Hospitality & Facility Management Services Ltd Report on theAudit of the Standalone Financial Statements Opinion
We have audited the standalone Ind AS financial statements of KHFM Hospitality &Facility Management Services Ltd (the Company) which comprises of the BalanceSheet as at 31st March 2020 and the Statement of Profit and Loss (includingOther Comprehensive Income) the Cash Flow Statement and the Statement of Changes inEquity for the year then ended and notes to the standalone financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation. In our opinion and to the best of our information and according to theexplanations given to us except for the effects of the matter described in the Basis forQualified Opinion paragraph below the aforesaid standalone financial statements give theinformation required by the Companies Act2013 (the act) in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31stMarch 2020 and its profit (including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered
Reg. off: B-15 Sai Prasad Telly Gully Cross Road Andheri (East) Mumbai 400 069
Accountants of India together with the ethical requirements that are relevant to ouraudit of the standalone financial statements under the provision of the Act and the Rulesthere under and we have fulfilled our other ethic responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion on standalonefinancial statements.
Emphasis of Matter
1. We draw attention to Note no.14 to the standalone financial statementsrelating to Non-Current Liabilities as on 31st March 2020 the Company has opted forMoratorium benefit offered by bankers due to COVID-19 pandemic allowing deferment ofrepayment of principal / interest as per bank's policy. However Management of the companyinformed us that the revised repayment schedules considering the moratorium availed on theunsecured loans for calculation of effective rate of interest is not yet made availablefrom the Banks / NBFC to the company to assess and quantify effect of interest on loansrecognized in the financial statements and hence the impact of moratorium and reschedulingof liabilities has not been considered in this financial statement.
Our opinion is not modified in respect of this matter
2. We draw attention to Note No.2.12 and 26 to the standalone financialstatements relating to Employee Benefit Expenses (including transactions related toprovident fund ESIC profession tax & gratuity) Site Expenses Advance for SiteExpenses for the year ended on 31st March 2020. We found that the system of recordingneeds improvement to ensure completeness transaction trail and related documentaryevidences. The board of directors have stepped in by directing the top management to keepsuitable records and are placing efforts to invest resources to establish and maintaininternal controls over such expenses. However according to Management estimates the siteexpenses and related transactions are fairly stated in the financial statement and thereare no material deficiencies.
Our opinion is not modified in respect of this matter
3. Refer Note No. 44 of Standalone Financial Statements the Confirmations/Reconciliation of balances of secured & unsecured loans certain balances with banksincluding certain fixed deposits trade receivables trade and other payables (includingmicro and small enterprises and including capital creditors) and loans and advances arepending. The management is confident that on confirmation/ reconciliation there will notbe any material impact on the financial statements. Our Opinion is not modified in respectof aforesaid matter.
4. As more fully described in Note no.2.2 to the standalone financialstatements the Company is responding to inquiries from Indian regulatory authorities. Thescope duration or outcome of these matters are uncertain. Our Opinion is not modified inrespect of aforesaid matter.
5. However we found that the recording system are scant regard to site expensesand pertinent advances needs improvement to ensure completeness transaction trial andrelevant documentary evidences. In absence of conventional record we are unable to assessand quantify the effect of said transactions on financial statements. However Managementis reasonably assured about transactions are fairly stated in the financial statement andthere is no material deficiencies.
Our opinion is not modified in respect of aforesaid matter.
6. Restatement with respect to Gratuity Provision & Plan Assets. We drawattention to Note no.2.12 to the Standalone Financial Statements which states that duringthe current year the management noted an error in accounting of Gratuity Provision andits plan Assets with respect to accounting for Plan assets during fiscal years. TheCompany during the year could not practically determine the period specific effect of anerror on comparative information for prior period presented therefore the opening balanceof gratuity plan asset and equity is restated for the financial year 2019-20. Our opinionis not modified in respect of aforesaid matter.
Key Audit Matters
Key audit matters (KAM') are those matters that in our professional judgmentwere of most significance in our audit of the standalone Ind AS financial statements ofthe current period. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters.
|The key audit matters ||How our audit addressed the key audit matter |
|Revenue recognition || |
|Revenue recognition was identified as key Audit Matter since- ||Our Audit Procedures on revenue recognized from fixed price contracts included: |
|There is an inherent risk around the accuracy and existing of revenues recognized considering the customized and complex nature of these contracts. accounting standard (Ind As 115 ||Obtained an understanding of the systems process and controls implemented by the management for recording and computing revenue and the associated contract assets. |
|Revenue from contracts with customers) is complex and involves a number of key judgements and estimates in mainly identifying performance obligations related transaction price and estimating the future cost to completion of these contracts which is used to determine the percentage of completion of the relevant performance obligation. ||On selected specific/statistical samples of contracts we tested that the revenue recognized is in accordance with the revenue recognition accounting standard. We selected a sample of continuing and new contracts and performed the following procedures: |
|Due to large variety and complexity of contractual terms significant judgements are required to estimate the amounts. If the actual amount differs from the amount estimated this will have an impact on the accuracy of the revenue recognized in the current period. ||We read the agreements with the customers to identify the distinct performance obligations the transaction price and its allocation to the performance obligations in the contract and the classification of the contract for the basis of revenue recognition in accordance with Ind As 115. |
|These contracts may involve onerous obligations which requires critical assessment of foreseeable losses to be made. ||For Fixed maintenance contracts we verified the period of the contract with the customer agreements and the determination of the revenue. We verified if the revenue was recognised appropriately over the period of contract of services being rendered and whether the revenue recognised was based on the estimate of the amount of consideration to which the |
| ||Company is entitled in exchange for transferring the services. For Fixed price contracts we have verified the measurement of revenue for the extent of delivery of performance obligations with the actual and estimated cost of efforts as per the projected budgets. |
| ||Evaluated the identification of performance obligations and the prescribed transaction. Tested the management's computation of the estimation of contract costs and onerous obligations if any. |
| ||We performed analytical procedures as |
applicable for reasonableness of revenues
disclosed and service offerings.
| ||Assessed that the estimates of costs to complete were reviewed and approved by appropriate designated management personnel; |
|Allowance for doubtful debts/ Provision for Expected Credit Loss || |
|Allowance for doubtful debts was identified as key Audit Matter since- || |
|Receivables comprise a significant portion of the liquid assets of the Company. ||We assessed the validity of material long outstanding receivables by considering past payment history and unusual patterns to identify potentially impaired balances. |
|There is an inherent risk around the accuracy of company's trade receivables being fairly valued and adequately provided against where doubt exists. ||The assessment of the appropriateness of the allowance for trade receivables comprised a variety of audit procedures including: |
|There is a risk of debtors being misstated and disclosures related to the same in the financial statements. 31% of the trade receivables are past due for more than 6 months but not impaired. ||Verifying the appropriateness and reasonableness of the assumptions applied in the management's assessment of the receivables allowance. |
|Accordingly the estimation of the allowance for trade receivables is a significant judgement area and is therefore considered a key audit matter. ||To address the risk of management bias we evaluated the results of our procedures against audit procedures on other key balances to assess whether or not there was an indication of bias. |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditor'sreport thereon. Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon. Inconnection with our audit of the standalone financial statements our responsibility is toread the other information and in doing so consider whether the other information ismaterially inconsistent with the standalone financial statements or our knowledge obtainedin the audit or otherwise appears to be materially misstated. If based on the work wehave 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.
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 with respect to the preparation of these standalone IndAS 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 accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) prescribed under section 133 ofthe Act. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error. In preparing the standalone financialstatements management and Board of Directors are responsible for assessing the Company'sability to continue as a going concern disclosing as applicable matters related togoing concern and using the going concern basis of accounting unless management eitherintends to liquidate the Company or to cease operations of has no realistic alternativebut to do so. Board of Directors is also responsible for overseeing the company'sfinancial reporting process.
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudof error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also: Identify and assess the risks of materialmisstatement of the standalone financial statements whether due to fraud of error designand perform audit procedures responsive to those risks and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risks of not detectinga material misstatement resulting from fraud is higher than for one resulting from erroras fraud may involve collusion forgery intentional omission misrepresentation of theoverride of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstance. Under Section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial control with reference to standalone financial statements inplace and the operating effectiveness of such controls. Evaluate the appropriateness ofaccounting policies used and the reasonableness of accounting estimates and relateddisclosures made by management. Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the company ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the standalone financial statements or if such disclosers areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern. Evaluate the overallpresentation structure and content of the standalone financial statements including thedisclosures and whether the standalone financial statements represent the underlyingtransaction and events in a manner that achieves fair presentation. We communicate withthose charged with governance regarding among other matters the planned scope and timingof the audit and significant audit findings including any significant deficiencies ininternal control that we identify during our audit. We also provide those charged withgovernance with a statement that we have complied with relevant ethical requirementsregarding independence and to communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence and where applicable relatedsafeguards. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the currents period and are therefore the key audit matter. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
1) As required by the Companies (Auditor's Report) Order 2016 (theOrder) issued by the Central Government in terms of Section 143(11) of the Act andon the basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us we give in theAnnexure A a statement on the matters specified in the paragraph 3 and 4 ofthe Order. A. As required by Section 143(3) of the Act we report to the extent applicablethat: i. We have sought and obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit. ii. In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books. iii. The Standalone Balance Sheet theStatement of Profit and Loss including Other Comprehensive Income the Cash Flow Statementand Statement of Changes in Equity dealt with by this Report are in agreement with therelevant books of account iv. In our opinion the aforesaid standalone Ind AS financialstatements comply with the Indian Accounting Standards prescribed under section 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2014. v. On the basis of thewritten representations received from the directors as on 31st March 2020 taken on recordby the Board of Directors none of the directors is disqualified as on 31st March 2020from being appointed as a director in terms of Section 164(2) of the Act. vi. With respectto the adequacy of the internal financial controls over financial reporting of theCompany and the operating effectiveness of such controls refer to our separate Report inAnnexure B. B. With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 as amended in our opinion and to the best of our information and according to theexplanations given to us:
i. The Company has disclosed the impact of pending litigation as at 31 March 2020 onits financial position in its standalone financial statements- refer Note no.30 to thestandalone financial statements. ii. The Company has made provision as required under theapplicable law or accounting standards for material foreseeable losses if any onlong-term contracts including derivatives contract. iii. There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company.
The disclosures in the standalone financial statements regarding holding as well asdealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these standalone financial statements since they do not pertainto the financial year ended 31 March 2020.
C. With respect to the matter to be included in the Auditor's Report under section197(16): i. In our opinion and according to the information and explanation given to usthe remuneration paid by the company to this director during the current year is inaccordance with the provisions of Section 197 of the Act. The remuneration paid to anydirector is not in excess of the limit laid down under Section 197 of the Act. TheMinistry of Corporate Affairs has not prescribed other details under Section 197(16) whichare required to be commented upon by us.
For Bhushan Khot & Co.
(Firm's Registration No.116888W)
Membership No. 101858
UDIN : 20101858AAAACA7067
Date: 23rd July 2020
Annexure A to the Independent Auditor's Report
With reference to the Annexure A reference to in the Independent Auditor's Report tothe member of the Company on the standalone financial statements for the year ended 31StMarch 2020 we report the following:
1. (a) The Company has maintained but not updated fixed assets register and recordedany additions or disposal of fixed assets in the books of accounts on the basis ofpurchase or sales invoices only.
(b) The Company has a regular Schedule of Physical Verification of its fixed assetsperformed by Management and Internal Auditors by which all fixed assets are verified in aphased manner over a period of three year. In our opinion this periodicity of physicalverification is reasonable having regards to the size of the Company and the nature of itsassets. Pursuant to the Schedule of Physical Verification certain fixed assets werephysically verified existing in office during the year and no material discrepancies werenoticed on such verification.
(c) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable propertiesincluded in fixed assets are held in the name of the Company.
2 The inventory has been physically verified by the management during the year.In our opinion The frequency of such verification is reasonable. The Company hasmaintained proper record of inventory. The discrepancies noticed on verification betweenthe physical stock and the book record were not material.
3. According to the information and explanation given to us the Company has notgranted any loans secured or unsecured to company Firm limited liability partnershipsor other parties covered in the register maintained under Section 189 of the Act.Accordingly the provisions of clause 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company.
4. In our opinion and according to the information and explanation given to usthe Company has complied with the provisions of Section 185 and 186 of the Act withrespect to the loan given investments made guarantees and securities given.
5. The Company has not accepted any deposits from the public within the meaningof the directives issued by the Reserve Bank of India provisions of Section 73 to 76 ofthe Act. Any other relevant provisions of the Act and the relevant rules framedthereunder.
6. The Central Governments has not prescribed the maintained of cost recordsunder Section 148 of the Act for any of the services rendered by the Company.
7. (a) According to the information and explanation given to us and on the basisof our examination of the records of the Company amount deducted / accrued in the booksof account in respect of undisputed statutory dues including Provident fund EmployeeState Insurance Income tax Goods and Service tax duty of Customs Cess and othermaterial statutory dues have generally been deposited but not accurately during the yearby the Company with the appropriate authorities.
(b) According to the information and explanation given to us it is not feasible for usto comment on timely payment in respect of Provident fund Employee State InsuranceIncome tax Goods and Service tax Profession Tax Cess and other material statutory dueswere in arrears as at 31 March 2020 belongs to a period for more than Six months from thedate they become payable.
(c) According to the information and explanation given to us there are no dues ofIncome-tax or Sales tax or Service tax or Goods and service tax or duty of Customs of dutyof excise or value added tax which have not been deposited by the Company on account ofdisputes except for the following:
|Name of the Statue ||Nature of the Dues ||Amount( in Lakh) ||Period ||Forum where dispute is pending |
|The Financial Act1994 ||Service Tax ||625.79 ||F Y 2007-2008 to 2014-15 ||Customs Excise and Service Tax Appellate Tribunal. |
|763.62 ||F Y 2015-16 |
8. In our opinion and according to the information and explanation given to usthe Company has not defaulted in the repayments of loans or borrowings to financialinstitutions banks government and there are no dues to debenture holders during theyear.
9. In our opinion and according to the information and explanations given to usthe Company has utilized the money raised by way of initial public offer and the termloans during the year for the purposes for which they were raised. Pending utilization ofthe funds raised through Initial Public Offer the funds were temporarily kept under FixedDeposit but were ultimately utilized for the stated end-use
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.
11. To the best of our knowledge and according to the information and explanation givento us and based on examination of the record of the Company the Company has paid /provided managerial remuneration in accordance with the requisite approvals mandated bythe provisions of Section 197 read with Scheduled V tot the Act.
12. According to the information and explanation given to us in our opinion theCompany is not a Nidhi Company as prescribed under Section 406 of the Act.
13. According to the information and explanation given to us and based on ourexamination of the records of the Company all transactions with the related parties arein compliance with Section 177 and 188 of the Act where applicable and details of suchtransaction have been disclosed in the standalone financial statements as required by theapplicable Indian Accounting Standards.
14. According to the information and explanation 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 of fully or partly convertible debentures duringthe year Accordingly paragraph 3(xiv) of the Order is not applicable to the Company.
15. According to the information and explanation given to us and based on ourexamination of the record of the Company the Company has not entered into any non-cashtransaction with its directors or persons connected with him. Accordingly Paragraph 3(xv)of the Order is not applicable to the Company.
16. According to the information and explanation given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
For Bhushan Khot & Co.
FRN 116888 W
CA Bhushan Khot
Mem. No. 101858
UDIN : 20101858AAAACA7067
Date: 23rd July 2020
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 KHFMHospitality and Facility Management Services Ltd as of 31st March 2020 in conjunctionwith our audit of the standalone 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 control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statement based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the Guidance Note) and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
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 with reference financialstatements 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 judgment including the assessment of therisks of material misstatement of the standalone financial statements whether due tofraud 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 over Financial Reporting
A company'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 over Financial Reporting
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.
In our opinion the Company has in all material aspects have an adequate internalfinancial controls with reference to financial statements and such internal financialscontrols peculiarity to updation of maintained fixed assets register factual allocationand disbursement of expenses against site advances unfit documentation and inappropriatepayroll reconciliation with actual payments of employee benefit expenses sustentation ofcredit and collection policy for trade receivables and procedure of collecting externalbalance for verification of variations confirmation with reference to standalone financialstatements were operating effectively as at 31st March2020 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialReporting issued by the Institute of Chartered Accountants of India.
For Bhushan Khot & Co.
(Firm's Registration No.116888W)
Membership No. 101858
UDIN : 20101858AAAACA7067
Date: 23rd July 2020