To the Members of Madras Fertilizers Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying amended and restated financial statements of MadrasFertilizers Limited Manali which comprise the amended and restated Balance Sheet asat March 31 2020 and the amended and restated Statement of Profit and Loss (includingOther Comprehensive Income) the amended and restated Statement of Changes in Equity andthe amended and restated Statement of Cash Flows for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the matters mentioned in the Basis of Qualified Opinion'section of our report the aforesaid amended and restated financial statements givethe information required by the Act in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the company as at March 31 2020; and its Loss after Tax TotalComprehensive Loss the changes in Equity and Cash Flows for the year ended on that date.
Basis of Qualified Opinion
We draw attention to Note 34 of the financial statements which discloses that fairvaluation of investment in unquoted shares of Indian Potash Limited has been carried outby an external valuer. The Valuer as on March 31 2020 had fair valued the investmentusing Net Asset Value (NAV) and Comparable Company Market (CCM) Multiple Method and thevalue assessed was Rs.1325.95 per share and Rs.1783.49 per share respectively. The companyadopted CCM Multiple Method to ascertain the fair value of the investments held as onMarch 31 2020. We observed that there is (i) increase of 33% in projected Sales for2019-20 vs Actual Sales for 2018-19 when compared to 16.88% in 2018-19 Vs 2017-18 and(ii) projected PAT has increased by 90.88% for 2019-20 Vs Actual for 2018-19 when comparedto decrease of 1.22% 2018-19 vs 2017-18. Since such high growth in Sales and PAT isestimated the same should be supported with adequate evidence. In the absence of the samewe are not able to rely on the Valuation Report for Fair Value arrived for Equity sharesof Indian Potash Limited (IPL). Further we are not able to assess the Fair Value of IPLdue to lack of information. Due to the aforementioned we are unable to quantify thefinancial effects on the Total Comprehensive Income and Financial Assets.
Emphasis of Matter
i. We draw attention to Note 47 regarding a. Accounting of a sum of Rs.144.46 Crorestowards de-escalation in input prices which has been considered as payable to FertilizerIndustry Coordination Committee (FICC) for the year ended March 31 2020 under New PricingScheme (NPS) for Urea. Adjustments may arise in future in respect of the above on finalpayment. b. Accounting of a sum of Rs.16.26 Crores of subsidy claim for additional fixedcost of Rs.350/ MT of Urea as envisaged in the modified NPS III Policy announced by DOFdated April 02 2014 the notification of which is awaited.
ii. We draw attention to Note 43 (g) regarding balances in Long term borrowings andOther current liabilities from GOI Trade Receivable/ Payables Claim recoverable andloans and advances are subject to confirmation and consequential adjustments; Our opinionis not modified in respect of the above matters.
Restatement of Financial Statements
Without modifying our opinion we draw attention to the following which explains thatthe amended and restated Financial Statements for the year ended March 31 2020 have beenrestated from those which were originally reported on June 19 2020.
The Company has accounted subsidy income of Rs.64.97 Crore towards additionalcompensation for Nutrient Based Subsidy (NBS) for producing P&K fertilizers. Weobserved that during FY 2015-16 based on the Order of SEBI dated December 16 2015regarding reversal of Additional Compensation for NPK for the FY 2012-13 the Company hasreversed entire amount of Additional Compensation recognized during FY 2012-13 ( 47.40Cr) 2013-14 ( 20.80 Cr) and 2014-15 ( 23.80 Cr) totalling to 92 Cr. Hence SEBI hassought clarification regarding the same and directed the company to place the matterbefore its Audit Committee for further review. Based on the instructions issued by theSecurities and Exchange Board of India (SEBI) The Annual Accounts for FY 2019-20 wassubmitted for further review to the Audit Committee in its meeting held on August 132020. Accordingly the Audit Committee reviewed it and advised that the Company mayrestate the Annual Accounts and reverse the booking of Additional compensation of Rs.64.97Crores. The Additional Compensation may be taken into account only as and when final orderwill be received from the Department of Fertilizers Government of India.
The above restatement has been modified to include brief note instead of drawingattention based on the comments of the CAG. This report replaces our earlier Report datedAugust 28 2020.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial 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 together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical 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.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|Sl. No ||Key Audit Matter ||Auditors' Response |
|1 ||Revenue Recognition Sale of goods ||We have performed the following principal audit procedures in relation to revenue recognised. |
| ||Revenue from sale of goods is recognized when the control of goods is transferred to the customers. In terms of the application of the new revenue accounting standard Ind AS 115 (Revenue from Contracts with Customers) for some contracts control is transferred either when the product is delivered to the customer's site or when the product is shipped depending on the applicable terms. The Management has exercised judgement in applying the revenue accounting policy while recognising revenue. || Understood the revenue recognition process evaluated the design and implementation and operating effectiveness of internal controls relating to revenue recognised. |
| || || Selected samples and tested the operating effectiveness of internal controls relating to transfer of control. We carried out a combination of procedures involving enquiry observation and inspection of evidence in respect of operation of these controls. |
| || || Tested the relevant information technology general controls automated controls and the related information used in recording and disclosing revenue. |
| || ||In respect of the selected sample of transactions: |
| || || Tested whether the revenue is recognised upon transfer of control to customer. |
| || || We have evaluated the delivery and shipping terms of the contracts for revenue recognised during the period. |
| || || We have also tested the location stock reports from Company warehouses where applicable for confirmation on sales quantity made during the year. |
| || || Tested that the revenue recorded is after considering the applicable rebates and discounts. |
| || || For samples near to period end tested the acknowledgments of customers. |
| ||Subsidy income / Government subsidies and related receivables ||The following principal audit procedures have been performed by us in relation to subsidy income recognition. |
| ||Refer to note 3 (f) Revenue and note 2(d)(iv) Use of estimates and judgements' to the financial statements. Subsidy income pertaining to the Nutrient and other allied business is recognised on the basis of the rates notified from time to time by the Department of Fertilizers Government of India (GOI') in accordance with the Nutrient Based Subsidy (NBS') policy on the quantity of fertilizers sold by the Company for the period for which notification has been issued and for the remaining period based on estimates when there is a reasonable assurance that the Company will comply with all necessary conditions attached to Subsidy including Direct Benefit Transfer (DBT') System which was introduced by Government of India. || We have read the relevant circulars and notifications issued by GOI from time to time with regard to the subsidy policies. |
| || || We have had robust interactions with the relevant personnel in the Company with regard to updates of GOI Policy their interpretations of the relevant circulars and notifications. |
| || || Tested the relevant information technology general controls automated controls and the related information used in recording and disclosing subsidy income. |
| || || We have tested the NBS rates considered by the Company for the product subsidy with the applicable circulars and notifications. |
| || || We have correlated the sales quantity considered for subsidy income with the actual sales made by the Company. |
| || || We have also agreed the quantities sold as per the Company books with the customer acknowledgements as per the iFMS portal of the Department of Fertilizers and tested the DBT claims made by the Company. |
| || || We have enquired from the Management and discussed with the Board of Directors the appropriateness of the subsidy rates applied to recognise subsidy income. |
| || ||Valuation of subsidy receivables: |
| || ||Following are the principal audit procedures performed on testing of valuation of subsidy receivables: |
| || || We have analysed and discussed the status of outstanding subsidy receivables and its realisability with the Management. |
| || || We have tested the sanction notes received from the GOI for receipts. |
| || || We have tested the credits in the bank statements for the receipts. |
| || || We have tested whether the deductions made by the GOI have been adjusted in the books of accounts. |
|3 ||Property Plant and Equipment ||We have done verification of controls in place over the fixed assets cycle evaluated the appropriateness of capitalisation process performed tests to verify the capitalised costs assessed the timelines of the capitalisation of the assets and assessed the derecognition criteria for assets retired from active use. |
| ||Management judgement is utilised for determining the carrying value of property plant and equipment intangible assets and their respective depreciation/ amortization rates. These include the decision to capitalise or expense costs; the annual asset life review; the timelines of the capitalisation of assets and the measurement and recognition criteria for assets retired from active use. Please refer accounting policy. || |
| || ||Useful life review of assets has been assessed by the management. In performing these procedures we reviewed the judgements made by management including the nature of underlying costs capitalised; determination of realizable value of the assets retired from active use; the appropriateness of asset lives applied in the calculation of depreciation/ amortization; and the useful lives of assets prescribed in Schedule II of the Companies Act 2013. |
|4 ||Provisions and Contingent Liabilities ||Our audit procedure in response to same is included among others |
| ||The Company is involved in certain legal and tax disputes and the assessment of the risks associated with the litigations is based on Management assumptions which require the use of judgement and such judgement relates primarily to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings. || Assessment of the process to identify legal and tax litigations and pending administrative proceedings. |
| || || Assessment of assumptions used in the evaluation of potential legal and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings/judgement in similar cases. |
| || || Analysis of opinion received from the tax consultant where available. |
| || || Review of the adequacy of the disclosures in the notes to the financial statements. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sreport Management discussion and analysis and Report on corporate governance but doesnot include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon. In connection with our audit of thefinancial statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated. If based on the work we have performed we conclude thatthere is no material misstatement of this other information we are required to report thatfact. We have nothing to report in this regard.
Management's Responsibility for the Financial Statements The Company's Board ofDirectors is responsible for the matters stated in section 134(5) of the Companies Act2013 ("the Act") with respect to the preparation of these financial statementsthat give a true and fair view of the financial position financial performance (changesin equity) and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the accounting Standards specified under section133 of the Act. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable 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.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process. Auditor's Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statementsas a whole are free from material misstatement whether due to fraud or error and toissue an auditor's report that includes our opinion. Reasonable assurance is a high levelof assurance but is not a guarantee that an audit conducted in accordance with SAs willalways detect a material misstatement when it exists. Misstatements can arise from fraudor error and are considered material if individually or in the aggregate they couldreasonably be expected to influence the economic decisions of users taken on the basis ofthese financial statements.
Paragraph 40(b) of this SA explains that the shaded material below can be located in anAppendix to the auditor's report. Paragraph 40(c) explains that when law regulation orapplicable auditing standards expressly permit reference can be made to a website of anappropriate authority that contains the description of the auditor's responsibilitiesrather than including this material in the auditor's report provided that the descriptionon the website addresses and is not inconsistent with the description of the auditor'sresponsibilities below.
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 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 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 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation. 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 thefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would 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 ("the Order") issued by the Central Government ofIndia in terms of sub-section (11) of section 143 of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
(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;
c) the Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the books of account;
d) In our opinion the aforesaid financial statements comply with the Indian AccountingStandards specified under Section 133 of the Act.
e) The Ministry of Corporate Affairs has clarified that the provisions of sub section(2) of Section 164 the Companies Act 2013 are not applicable to Government Companies.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements.
ii. The Company has made provision as required under the applicable law and Accountingstandards for material foreseeable losses if any on long-term contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe investor's education and protection fund by the Company.
(3) As required by section 143(5) of the Act we have considered the directions issuedby the Comptroller and Auditor General of India the action taken thereon and its impacton the accounts and financial statements of the company:
|Sl No ||Areas Examined ||Suggested Replies |
|1 ||Whether the company has system in place to process all the accounting transactions through IT system? If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated. ||Yes the company has system in place to process all the accounting transactions through IT system. |
|2 ||Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the company's inability to repay the loan? If yes the financial impact may be stated. ||During the year there was no Restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to Madras Fertilizers. |
|3 ||Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. ||During the year No funds were received or are receivable for Specific Schemes from Central or State Agencies. |
(4) Additional Company specific directions issued u/s 143(5) of the Companies Act 2013by C&AG:
|Sl.No. ||Sub Direction ||Suggested Replies |
|4 ||Whether Subsidy was recognized as per the provisions of Direct Benefit Transfer Scheme? ||Under Direct Benefit Transfer (DBT) scheme of GOI the Company is entitled to receive subsidy only upon sale of fertilizer by the dealer to the ultimate beneficiary through Point of Sale (PoS) devices. However the Company continues to account subsidy as income at the time of sale to dealers as in the earlier scheme considering the reasonable assurance that the sale will take place and subsidy will be received based on the industry practice and past experience. |
The above sub-direction is included in the report based on the direction of CAG.
| ||for J. V. RAMANUJAM & Co. |
| ||Chartered Accountants |
| ||FRN: 02947S |
| ||(SRI NARAYANA JAKHOTIA) |
|Chennai ||Partner |
|Oct 09 2020 ||M. No: 233192 |
| ||UDIN: 20233192AAAAAJ4792 |
"ANNEXURE A" TO INDEPENDENT AUDITORS' REPORT
(Referred to in Paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date on the accounts of MadrasFertilizers Limited Manali ("the Company") for the year ended March 31 2020)
i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
(b) According to the information and explanations given to us physical verification ofmovable fixed assets is being conducted in a phased manner by the management under aprogramme designed to cover all the movable fixed assets over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and natureof its business. As per the information and explanations provided by the management thesame has been carried out during the financial year. Immovable Fixed Assets like plant andmachinery is being inspected every year by an independent chartered engineer.
(c) Title deeds of immovable properties were not provided to us for verification; hencewe are unable to comment on the same.
ii) (a) Physical verification of inventories inside factory premises and at ChennaiPort has been carried out by a independent surveyor at year end and the physicalverification of stocks of stores and spare parts has been conducted by an independent firmof Chartered Accountants on a ongoing basis so as to complete the verification of allitems over the period of one year. Finished goods at warehouse are taken as perwarehousing certificates. Warehousing certificates has not been received in a few caseswhich however is not significant in value.
(b) In our opinion and according to the information and explanations given to us theprocedures for physical verification of inventory followed by the management werereasonable and adequate in relation to the size of the company and the nature of itsbusiness.
(c) In our opinion the company has maintained proper records of inventory. We areinformed that no major discrepancies were noticed on verification between the physicalstock and book records.
iii) According to the information given to us the Company has not granted any loanssecured or unsecured to companies firms Limited Liability Partnerships or other partiescovered in the register maintained under section 189 of the Companies Act 2013. Thereforeclauses (iii) (a) (iii) (b) and (iii)(c) of Paragraph 3 of the Order are not applicableto the Company.
iv) The Company has complied with the provisions of the section 185 and 186 of theCompanies Act 2013 in respect of loans investments guarantees and security.
v) According to the information and explanations given to us the Company has compliedwith the provisions of Section 73 to 76 other relevant provisions of the Act and theCompanies (Acceptance of Deposits) Rules 2014 with regard to deposits accepted frompublic. The Company has not accepted any deposits from public during the year within themeaning of sections 73 to 76 or any other relevant provisions of the Companies Act 2013and the Companies (Acceptance of Deposits) Rules 2014.
vi) We have broadly reviewed the books of account and records maintained by the Companypursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the CentralGovernment under section 148(1) of the Companies Act 2013 and are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. We havehowever not made a detailed examination of the cost records with a view to determinewhether they are accurate and complete.
vii) (a) According to the information and explanations given to us in our opinion theCompany is generally regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund Employees' State Insurance Income Tax SalesTax Service Tax duty of Customs duty of Excise Value Added Tax Cess and any otherstatutory dues as applicable to it.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees State Insurance Income Tax Sales TaxService Tax duty of Customs duty of Excise Value Added Tax Cess and any otherstatutory dues were outstanding as at March 31 2020 for a period of more than six monthsfrom the date they became payable except for the following:
|Nature of Dues ||INR Crores |
|Entry tax (Tamil Nadu) ||2.53 |
|VAT (Tamil Nadu) ||2.51 |
|Sales Tax under TNGST Act ||7.79 |
|Total ||12.83 |
(c) According to the information and explanations given to us there are no dues ofIncome Tax Act Excise Duty Customs Duty Value Added Tax Sales Tax and Service Taxwhich have not been deposited with the appropriate authorities on account of any dispute.
viii) Based on our audit procedures and according to the information and explanationsgiven to us the Company has not defaulted in repayment of loans or borrowings to afinancial institution bank or dues to debenture holders except in respect of the defaultof repayment of principal amount of the following Government of India (GOI) Loans:
|Nature of Loan ||Year of Default ||INR in Crores ||Year of default ||INR in Crores |
|GOI Loans ||2004-05 ||23.49 ||2012-13 ||38.33 |
|GOI Loans ||2005-06 ||23.48 ||2013-14 ||45.78 |
|GOI Loans ||2006-07 ||24.89 ||2014-15 ||32.68 |
|GOI Loans ||2007-08 ||26.07 ||2015-16 ||32.68 |
|GOI Loans ||2008-09 ||27.03 ||2016-17 ||31.28 |
|GOI Loans ||2009-10 ||26.44 ||2017-18 ||30.09 |
|GOI Loans ||2010-11 ||27.34 ||2018-19 ||29.14 |
|GOI Loans ||2011-12 ||28.63 ||2019-20 ||28.25 |
|Total * || || || ||475.62 |
* The above loan consists of Plan loans Non Plan Loans and Revamp Loans.
ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year.
Accordingly paragraph 3 (ix) of the Order is not applicable.
x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us no fraud by the Company or anyfraud on the Company by its officers or employees has been noticed or reported during thecourse of our Audit.
xi) In respect of sl. no. (xi) being a Govt. Company Section 197 of the CompaniesAct 2013 is not applicable to the Company in view of Notification no. G.S.R. 463(E) dtd.05-06-2015
xii) The company is not a Nidhi Company. Therefore clause 3 (xii) of the Companies(Auditor's Report) Order 2016 is not applicable to the Company.
xiii) According to the records of the Company examined by us and the information andexplanations given to us there are no related party transactions; accordingly clause (xi)of the Companies (Auditor's Report) Order 2016 is not applicable to the Company.
xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review and therefore clause 3(xiv) of theCompanies (Auditor's Report) Order 2016 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.
xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.
| ||for J. V. RAMANUJAM & Co. |
| ||Chartered Accountants |
| ||FRN: 02947S |
| ||(SRI NARAYANA JAKHOTIA) |
|Chennai ||Partner |
|Oct 09 2020 ||M. No: 233192 |
| ||UDIN: 20233192AAAAAJ4792 |
"ANNEXURE B" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THEFINANCIAL STATEMENTS OF MADRAS FERTILIZERS LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of M/s MadrasFertilizers Limited ("the Company") as of March 31 2020 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 design 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 the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies 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 over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India and jointly controlled companies which are companies incorporated inIndia as of that date.
| ||for J. V. RAMANUJAM & Co. |
| ||Chartered Accountants |
| ||FRN: 02947S |
| ||(SRI NARAYANA JAKHOTIA) |
|Chennai ||Partner |
|Oct 09 2020 ||M. No: 233192 |
| ||UDIN: 20233192AAAAAJ4792 |