To the Members of
M/s. KMF Builders and Developers Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of M/s. KMFBuilders and Developers LIMITED. which comprise the Balance Sheet as at March 312019 and the Statement of Profit and Loss statement of changes in Equity statement ofCash Flow for the year then ended and Notes to financial statements including a summaryof significant accounting policies and other explanatory information (hereinafter referredto as "the standalone financial statements"].
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 Act2013 ("the Act"] in the manner so required and give a trueand fair view in conformity with the Accounting Standards prescribed under section 133 ofthe Act and other accounting principles generally accepted in India of the state ofaffairs of the Company as at 31 March 2019 and its profit changes in equity its cashflows 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 Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibility for the Audit of theStandalone Financial Statements section of our report. We are independent of the Companyin accordance 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 thestandalone financial statements under the provisions of the Companies Act 2013 and theRules made there under and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have described below to be the Key audit matters tobe communicated in our report.
|S. No. ||Key Audit Matter ||Auditors Response |
|1. ||Revenue Recognition of Construction Contracts ||Principal Audit Response |
| ||The Company has applied the Full Modified Retrospective approach in accordance with Ind AS 115 only to contracts that are not completed contracts as on April 1 2018. This transitional adjustment of Rs. 38.45/- lakhs have been adjusted against opening Retained Earnings as per the requirements of Ind AS 115. ||We assessed the Company's process to identify the impact of adoption of the New Revenue Accounting Standard. Our Audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows. |
| || ||- Evaluated the design of the internal controls relating to implementation of the new revenue accounting standard. |
| || ||- Obtained listing of all the contracts as on 31.03.2019. Identified the contracts that are not completed contracts for which handover of units not done and Partial Occupancy certificate received as on 28.03.2018. |
|2. ||Carrying Values of Inventories (Construction work in progress and Stock in trade) ||Principal Audit procedures We assessed the Company's Process for the valuation of inventories. |
| ||There is a Risk that the valuation of inventory may be misstated as it involves the determination at Cost and estimated total construction cost of completion of the projects which is an area of Judgement. Refer Notes to the Standalone Financial statements. ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: |
| || || Evaluated the design of the internal controls relating to the valuation of inventories. |
| || || Tested the operating effectiveness of controls for the review of estimates involved for the expected cost of completion of projects including construction cost incurred construction budgets and net realizable value. We carried out a combination of procedures involving enquiry and observation and inspection of evidence in respect of operation of these- controls. |
| || ||Selected a sample of project specific inventories and performed the procedures around: |
| || || Construction costs incurred for the project specific inventories by tracing to the supporting documents estimated total construction cost to be incurred for completing the construction of the project and corroborated the same with the reports from external supervising engineers where applicable. Obtained the company's assessment of NRV for the project specific inventories. |
| || || The expected net amounts to be realized from the sale of inventory in the-ordinary course of business. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. Theother information comprises the information included in the Board's Report ManagementDiscussion and Analysis Report and Business Responsibility 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 otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated any form of assurance conclusion thereon.
If based on the work we have performed we conclude that there is no materialmisstatement of this other information we are required to report that fact. We havenothing to regard in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors are responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalonefinancial statements that give a true and fair view of the financialposition financial performance and cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor 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 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Undersection143(3)(I) of the Act we are also responsible for expressing our opinion on whetherthe Company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone 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 themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safe guards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when 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 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 and the Statement of Profit and Loss the statement of cash flowand statement of changes in equity dealt with by this Report are in agreement with thebooks of account;
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting 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 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164 (2) of the Act; and
(f) With respect to the adequacy of the "internal financial controls overfinancial reporting of the company with reference to financial statements" reportingof the Company and the operating effectiveness of such controls refer to our separateReport in "Annexure-A". Our report expresses an unmodified opinion o theadequacy and Operating effectiveness of the company's Internal financial controls overfinancial reporting.
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended in our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of 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:
1. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any.
iii. The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses;
iv. There has been no amount in transferring amount required to be transferred to theInvestor Education and Protection fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")as amended issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure B'' a statement on the mattersspecified in paragraphs 3 and 4 of the Order
| ||For C S Nagendra &Co. |
| ||Chartered Accountants |
| ||Firm Reg No.9486S |
| ||CA C S Nagendra |
| ||Proprietor |
| ||ICAI Reg. No. 27390 |
|PLACE : Bangalore || |
|DATE : || |