To the Members
Lahoti Overseas Limited
Report on the Audit of Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of LahotiOverseas Limited (the Company') which comprise the Balance Sheet as at 31 March2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Cash Flows and the Statement of Changes in Equity for the year then ended anda summary of the significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Ind AS Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS 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 Standards) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2019 the profit andtotal 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 and IND AS. Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe Standalone Ind AS Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that are relevant toour audit of the financial statements under the provisions of the Companies Act 2013 andthe Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinionon the Standalone Ind AS 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 determined the matters described below to bethe key audit matters to be communicated in our report.
Description of Key Audit Matter
|Sr. No. ||The Key Audit Matter ||How the matter was addressed in our audit |
|1 ||Foreign Exchange Gain/Loss: ||Our audit procedures included: |
| ||The Company has major revenue from export of yarns and other varied sectors which leads to the inflow and outflow of foreign exchange in regular course of business during the year. ||a. Assessing the appropriateness of the accounting policies and standards followed by company with applicable accounting standards. |
| ||The company is into the practice of entering in the forward contracts with the bank against export orders and the same leads to foreign exchange gain/loss while receiving the payment after the specified lock in period. ||b. Verifying company's IT and manual controls relating to recording of foreign transactions and fair valuation according to required IND AS. |
| || ||c. Verifying the forward contract entered with banks for export sales made. |
| ||As per the requirement under IND AS fair valuation of the receivables has been done based on the exchange rates prevailing as on 31st March 2019. The gain or loss of the same is routed through Other Comprehensive Income. || |
|2 ||Revenue Recognition: ||Our audit procedures included: |
| ||Revenue is measured net of discounts rebates earned by customers on the company's sales. ||a. Assessing the appropriateness of the revenue recognition accounting policies including those relating to discounts rebates and incentives by comparing with applicable accounting standards. |
| ||Due to company's presence across different marketing regions in various countries and the competitive business environment the estimation of the various types of discounts to be recognised based on sales made during the year is material and considered to be judgemental. ||b. Testing the design implementation and operating effectiveness of the Company's general IT controls over the Company's systems and manual controls which govern recording of revenue and discounts rebates and incentives in the general ledger accounting system. |
| || ||c. Performing substantive testing by selecting samples of revenue transactions recorded during the year by verifying the underlying documents which included sales invoices/contracts and shipping documents. |
| || ||d. Assessing manual journals posted to revenue to identify unusual items. |
|3 ||Adoption of Ind AS 115 Revenue from Contracts with Customers: ||Our audit procedures included: |
| ||As described in Note 19 to the Standalone Financial Statements the Company has adopted Ind AS 115 Revenue from Contracts with Customers (Ind AS 115') which is the new revenue accounting standard. The application and transition to this accounting standard is complex and is an area of focus in the audit. ||Our audit procedures on adoption of Ind AS 115 Revenue from contracts with Customers (Ind AS 115') which is the new revenue accounting standard include - |
| || ||a. Evaluated the design and implementation of the processes and internal controls relating to implementation of the new revenue accounting standard; |
| || ||b. Evaluated the detailed analysis performed by management on revenue streams by selecting samples for the existing contracts with customers and considered revenue recognition policy in the current period in respect of those revenue streams; |
| ||The revenue standard establishes a comprehensive framework for determining whether how much and when revenue is recognized. This involves certain key judgments relating to identification of distinct performance obligations determination of transaction price of identified performance obligation the appropriateness of the basis used to measure revenue recognized over a period. ||c. Evaluated the cumulative effect adjustments as at 1 April 2018 for compliance with the new revenue standard; and |
| ||Additionally the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. ||d. Evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. |
| ||The Group adopted Ind AS 115 and applied the available exemption provided therein to not restate the comparative periods. || |
Management's Responsibility for the Standalone 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 Standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act read with relevant rules issued thereunder. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS 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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
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 skepticism 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 internalcontrols.
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 controls.
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 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 However future events or conditions may cause the Company to cease to continueas 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 financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified 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 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 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 the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure A a statement on the matters specified in the paragraph 3 and 4 of theorder.
2. 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 ComprehensiveIncome the Statement of Cash Flows and the Statement of Changes in Equity dealt with bythis Report are in agreement with the relevant books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with relevant ruleissued thereunder;
(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;
(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". Our report expresses an unmodified opinion onthe adequacy 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 opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule11 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 does not have any pending litigations which would impact its financialposition
ii) The company did not have any long-term contracts including derivative contracts forwhich there would be any material financial losses
iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For PALAN & Co.
Firm No. 133811W
Chandrahas K. Palan
Membership Number: 100741
Date: May 30 2019
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 1 under "Report on other Legal and RegulatoryRequirements" section of our Independent Auditors Report to the Members of LahotiOverseas Limited for the year ended March 31 2019]-in terms of Companies (Auditor'sReport) Order 2016
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:
1) In respect of fixed assets:
(a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management at reasonableintervals. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.
(c) The title deeds of immovable properties are held in the name of the company.
2) Physical verification of inventory has been conducted at reasonable intervals by themanagement and discrepancies if any are dealt suitably in the Accounts.
3) The company has not granted any loans secured or unsecured to parties covered inthe register maintained u/s 189 of the Companies Act 2013 and accordingly the provisionsof clause iii(a)(b) (c) of the Companies (Auditor's Report) Order 2016 are not applicableto the company
4) The provisions of Sec. 185 and 186 have been complied with in respect of loansinvestments guarantees and securities.
5) The Company has not accepted any deposits from the public attracting the directivesissued by the Reserve Bank of India and the provisions of Section 73 to 76 of theCompanies Act 2013 and the rules framed there under. Therefore the provisions of Clause3(v) of the Companies (Auditor's Report) Order 2016 are not applicable to the Company.
6) Maintenance of cost records has not been specified by the Central Government undersub-section (1) of section 148 of the Companies Act 2013. Hence provisions of clause (vi)of the Companies (Auditor's Report) Order 2016 is not applicable.
7) a) The company is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax sales-tax service tax duty ofcustoms duty of excise value added tax cess and any other statutory dues to theappropriate authorities.
b) According to the information and explanations given to us and the records of thecompany examined by us there are no dues of Income Tax as at March 31 2019 and henceprovisions of clause (vib) of the Companies (Auditor's Report) Order 2016 is notapplicable.
8) According to the records of the company examined by us and the information andexplanation given to us the company has not defaulted in repayment of loans andborrowings to a bank or government. Company has not borrowed from a financial institutionnor have they issued any debentures.
9) No moneys have been raised by way of initial public offer and hence point (ix) ofCompanies (Auditor's Report) Order 2016 is not applicable.
10) During the course of our examination of the books and records of the companycarried in accordance with the auditing standards generally accepted in India we haveneither come across any instance of fraud by the Company or any fraud on the company byits officers or employees during the year nor have we been informed of any such instanceby the Management.
11) The Managerial Remuneration has been paid in accordance with requisite approvalsmandated by the provisions of the section 197 read with Schedule V to the Companies Act2013.
12) This company is not a Nidhi Company and hence point (xii) of Companies (Auditor'sReport) Order 2016 is not applicable.
13) According to the information and explanations given to us and based on ourexaminations of the records of the Company transactions with related parties are incompliance with section 177 and 188 of the Companies Act 2013 and the details have beendisclosed suitably.
14) The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.
15) The company has not entered into any non-cash transactions with directors orpersons connected with him. Accordingly the provisions of section 192 of Companies Act2013 are not applicable.
16) The company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
For PALAN & Co.
Firm No. 133811W
Chandrahas K. Palan
Membership Number: 100741
Date: May 30 2019
ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT
[The Annexure referred to in paragraph 2(f) under "Report on other Legal andRegulatory Requirements" section of our Independent Auditors Report to the Members ofLahoti Overseas Limited for the year ended March 312019]
[Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")]
We have audited the internal financial controls over financial reporting LahotiOverseas Limited ("the Company") as of March 31 2019 in conjunction with ouraudit 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 designing implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets of theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under 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 accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial 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 ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material 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.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 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 FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For PALAN & Co.
Firm No. 133811W
Chandrahas K. Palan
Membership Number: 100741
Date: May 30 2019