LIBAS DESIGNS LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of LIBAS DESIGNSLIMITED (the "Company") and which comprise the Balance Sheet as at March31 2020 the Statement of Profit and Loss and the Statement of Cash Flows ended on thatdate and a summary of significant accounting policies and other explanatory information.In our opinion and to the best of our information and according to the explanations givento us expect for matter mentioned in the para "Basis for Qualify Opinion" theaforesaid Standalone Financial Statements give the information required by the CompaniesAct 2013 (the "Act") in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2020 its profit and loss statement and cash flowsfor the year ended on that date.
Basis for Qualify Opinion
x Company got listed on main board (NSE) during the current financial year and whichrequire the management to follows the provision of Ind AS 101 "First Time Adoption ofIndian Accounting Standard" and prepare and present the Standalone financialstatement in accordance Indian Accounting Standard however management yet to adopt Ind ASfor the preparation and presentation of these standalone annual Financial Results thatgive a true and fair view of the net profit/ loss and other comprehensive income and otherfinancial information in accordance with the recognition and measurement principleslaid down in Indian Accounting Standards prescribed under Section 133 of the Actand other accounting principles generally accepted in India.
x Non compliance of applicable financial reporting framework (Ind AS) may lead tomisstatement in the financial statement the effect of such non compliance is difficult toascertain. However in our opinion it will impact the carrying value of Financial Assetsand Liabilities Property Plant & Equipment and Investment in subsidiary whichultimately impacts the profit and loss of the company.
x Adoption of Ind AS also requires restating the balance sheet figure of previous yearand opening balance of previous year which is expected to impact opening balance ofretained earnings for any adjustments pertains to said previous years.
x Attention is also invited on the undisputed income tax liability for the FY 2018-19is remain unpaid till the signing of this report as at 05th August 2020amounting to Rs.41.18 Lakhs/-.
x Attention is also invited that there is undisputed tax liability in relation toProfessional Tax are unpaid till the signing of this report as at 05th August2020 amounting to Rs. 2.22 Lakhs/-.
x As per note "28" of the Standalone financial statement company has pendinglitigation under ESIC and amount involved under litigation is amounting to Rs 19.44 Lakhssame were not provided in the Standalone financial statement. x Company has madeInvestment if Foreign Subsidiary (LIBAS DESIGN LLC (Ajman U.A.E)) however approval fromRBI with respect to Overseas direct investment (ODI) is yet to be obtained by the company.
x Company has internal auditor for the year but internal audit report was not producedduring our Audit in contravention with section 138 of Indian Companies Act 2013 read withRule 13 Of Companies (Accounts) Rules 2014. We conducted our audit of the StandaloneFinancial Statements in accordance with the Standards on Auditing ("SA"s)specified under section 143(10) of the Act. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial 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 ouraudit of the Standalone Financial Statements under the provisions of the Act and the Rulesmade there under and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the ICAI's Code of Ethics. We believe that the audit evidenceobtained by us is sufficient and appropriate to provide a basis for our audit opinion onthe 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 Standalone Financial Statements of the currentperiod. These matters were addressed in the context of our audit of the standaloneStandalone Financial Statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. We have determined the matters describedbelow to be the key audit matters to be communicated in our report.
|Sr. No Key Audit Matters ||How the matter was addressed in our audit |
|Evaluation of tax positions:- || |
|1. The Company as a whole operates in India and Ajman U.A.E. is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including direct tax transfer pricing and indirect tax matters. ||Our audit procedures include the following substantive procedures: |
|These involve significant management judgment to determine the possible outcome of the tax litigations consequently having an impact on related accounting and disclosures in the financial Statements. ||Obtained an understanding of key tax litigations and potential tax exposures |
| ||We along with our internal tax experts read and analyzed select key correspondences and consultations carried out by management with external tax experts for key tax litigations and potential tax exposures; |
| ||discussed with appropriate senior management and evaluated management's underlying key assumptions and grounds of appeal in estimating the tax provisions; and |
| ||Evaluated the status of the recent and current tax assessments / inquiries results of previous tax assessments and changes in the tax environment to assess management's estimate of the possible outcome of key tax litigations and potential tax exposures. |
|Revenue Recognition || |
|2. Revenue recognition on SOR Sales. ||Our Audit procedure on revenue recognition from Sales or returnable sale include |
| ||Obtaining an understanding of the systems processes and controls implemented by management for recording such transaction |
| ||Calculating revenue from those transactions. |
| ||Reviewing the continuity of supply and the associated contract with the vendors. |
Information Other than the Standalone 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 Management Discussion and AnalysisBoard's Report including Annexures to Board's Report Business Responsibility ReportCorporate Governance and Shareholder's Information but does not include the StandaloneFinancial Statements and our auditor's report thereon. Our opinion on the StandaloneFinancial Statements does not cover the other information and we do not express any formof assurance conclusion thereon. In connection with our audit of the financial statementsour responsibility 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. If based on the work we have performed we conclude that there is amaterial misstatement of this other information; we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibilities for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Standalone Financial Statementsthat give a true and fair view of the consolidate financial position consolidatefinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the Standalone Financial Statements that give a true andfair view and are free from material misstatement whether due to fraud or error. Inpreparing the Standalone financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. The Board of Directors are responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities 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 skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the 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 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 Standalone financialstatements including the disclosures and whether the Standalone Financial Statementsrepresent 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 our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the Standalone financialstatements. However due to global COVID-19 pandemic lockdown placed by Central and StateGovernment which has impacted our audit procedure which are generally expected to performin normal situation. Due to such issues we are majorly rely on the analytical auditprocedure instead of substantive procedure which is generally expected while performingaudit procedure on client place. We have also applied other appropriated audit procedureto minimize the risk of material misstatement in financials statement of the company. Wecommunicate with those charged with governance regarding among other matters the plannedscope and timing of the audit and significant audit findings including any significantdeficiencies in internal control that we identify during our audit. We also provide thosecharged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence and whereapplicable related safeguards. From the matters communicated with those charged withgovernance we determine those matters that were of most significance in the audit of theStandalone Financial Statements of the current period and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit 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 Standalone Balance Sheet the Statement of Profit and the Statement of CashFlows dealt with by this Report are in agreement with the relevant books 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 March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct.
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 Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company have pending litigations which would impact its financial position(refer note "28" of Standalone Financial Statement.)
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and
iii. There has been no delay in transferring amounts required to be transferred tothe Investor
Education and Protection Fund by the Company
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
"ANNEXURE A" TO THE INDEPENDENT AUDITORS' REPORT
As required by section 143(11) of the act we report to the extent applicable that:
i. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assetsby which all fixed assets are verified. Pursuant to the programme certain fixed assetswere physically verified during the year and no material discrepancies were noticed onsuch verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company do not have immovable properties as at balancesheet date and hence clause for ownership of the property do not applicable to company tothat extent.
ii. The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The Company has maintainedproper records of inventory. The discrepancies noticed on verification between thephysical stock and the book records were not material.
iii. The company has granted interest free unsecured advance /loans to the directorsand relatives of Directors of the company covered in the registration maintained undersection 189 of the Companies Act 2013 the terms and condition of loan is prejudicial tothe interest of the Company. The repayment schedule was not in line with prudentialpractice. (Refer Note no. 30 to Standalone financial statement.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act with respectto the loans given investments made guarantees and securities given. Accordinglyparagraph 3(iv) of the Order is not applicable to the Company.
v. The Company has not accepted any deposits from the public within the meaning of thedirectives issued by the Reserve Bank of India provisions of Section 73 to 76 of the Actany other relevant provisions of the Act and the relevant rules framed there under.
vi. The Central Government has not prescribed the maintenance of cost records underSection 148 of the Act for any of the services rendered by the Company.
vii. a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident fund Employees' StateInsurance Income-tax Goods and Services tax duty of Customs Cess and other materialstatutory dues have generally been regularly deposited during the year by the Company withthe appropriate authorities. According to the information and explanations given to us noundisputed amounts payable in respect of Provident fund Employees' State InsuranceIncome Tax Goods and Services tax Duty of Customs Cess and other material statutorydues were in arrears as at 31 March 2020 for a period of more than six months from thedate they became payable except Professional Tax of Rs 2.22 Lakhs and Income Tax Liabilityof Rs 141.18 Lakhs.
b) According to the information and explanations given to us there are no dues ofIncome-tax or Sales tax or Service tax or Goods and Services tax or duty of Customs orduty of Excise or Value added tax which has not been deposited by the Company on accountof disputes.
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans or borrowings to banks. The Companydid not have any outstanding loans or borrowings from financial institutions or governmentand there are no dues to debenture holders during the year.
ix. In our opinion and according to the information and explanations given to us theCompany has raise any money by way of initial public offer or further public offer(including debt instruments) and term loans during the year and same has been utilized forthe purpose for which it was raised.
x. To the best of our knowledge and according to the information and explanations givento us no material fraud by the Company or on the Company by its officers or employees hasbeen noticed or reported during the course of our audit.
xi. In our opinion and according to the information and explanations given to us andbased on examination of the records of the Company the Company has paid/providedmanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
xii. According to the information and explanations given to us in our opinion theCompany is not a Nidhi Company as prescribed under Section 406 of the Act. Accordinglyparagraph 3(xii) of the Order is not applicable to the Company.
xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company all transactions with the related parties arenot in compliance with Sections 177 and 188 of the Act as company has not passed necessaryresolution for Related Party Transaction during the year however details of suchtransactions have been disclosed in the Standalone financial statements as required by theapplicable accounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year and accordingly paragraph 3(xiv) of the Order is not applicable to the Company.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable to the Company.
xvi. According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
"ANNEXURE B" TO THE INDEPENDENT AUDITORS' REPORT
Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 (Referred to in paragraph 1(A)(f) under Report on Other Legal andRegulatory Requirements' section of our report of even date)
We have audited the internal financial controls with reference to Standalone financialstatements of Libas Designs Limited ("the Company") as of 31 March 2020 inconjunction with our audit of the Standalone financial statements of the Company for theyear ended on that date. In our opinion the Company has in all material respectsadequate internal financial controls with reference to Standalone financial statements andsuch internal financial controls were operating effectively as at 31 March 2020 based onthe internal financial controls with reference to Standalone financial statements 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 (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to Standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to the Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013 (hereinafterreferred to as "the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to Standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to Standalone financial statements. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to Standalone financial statements were established andmaintained and whether such controls operated effectively in all material respects. Ouraudit involves performing procedures to obtain audit evidence about the adequacy of theinternal financial controls with reference to Standalone financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference toStandalone financial statements included obtaining an understanding of such internalfinancial controls assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the Standalone financial statementswhether due to fraud or error. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the Company'sinternal financial controls with reference to Standalone financial statements.
Meaning of Internal Financial Controls with Reference to Standalone FinancialStatements
A company's internal financial controls with reference to Standalone financialstatements are a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of Standalone financial statementsfor external purposes in accordance with generally accepted accounting principles. Acompany's internal financial controls with reference to Standalone financial statementsinclude 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 Standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance 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 Standalone financial statements.
Inherent Limitations of Internal Financial Controls with Reference to Standalonefinancial statements
Because of the inherent limitations of internal financial controls with reference toStandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to Standalone financial statements to future periods are subjectto the risk that the internal financial controls with reference to Standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.