The Members of
MONARCH NETWORTH CAPITAL LIMITED
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying Standalone financial statements of Monarch NetworthCapital Limited ("the Company") which comprise the balance sheet as atMarch 312019 and the Statement of Profit and Loss and statement of cash flows for theyear then ended and notes to the Standalone financial statements including a summary ofsignificant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone financial statements give the information requiredby the Companies Act 2013 ('Act') in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2019 its Profit/Loss and cash flows for the yearended on that date.
Basis for opinion
We conducted our audit in accordance with the standards on auditing specified undersection 143 (10) of the Companies Act 2013. Our responsibilities under those Standardsare further 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 together with the ethical requirements that are relevant to our audit of theStandalone financial statements under the provisions of the Act and the rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the code of ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide 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 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 below to be key audit matters to be communicated in ourreport:
|Key audit matters ||How the matter was addressed in our Audit |
|Information Technology system for the financial reporting process |
|The Company is highly dependent on its information technology (IT) systems for carrying on its operations which require large volume of transactions to be processed on a daily basis. ||In view of the significance of the matter we applied the following audit procedures on test check basis in this area among others to obtain reasonable audit assurance: |
|Further the Company's accounting and financial reporting processes are dependent on the automated controls enabled by IT systems which impacts key financial accounting and reporting items such as Brokerage income Trade receivable ageing amongst others. The controls implemented by the Company in its IT environment determine the integrity accuracy completeness and validity of data that is processed by the applications and is ultimately used for financial reporting. || Obtained an understanding of the Company's IT environment and conducted risk assessment and identified IT applications databases and operating systems for the areas which are relevant to our audit. Also obtained an understanding of key controls operating over the such identified systems; |
|We have focused on user access management change management segregation of duties developer access to the production environment and changed to IT environment. || Tested the design and operating effectiveness of the Company's IT controls over IT applications as identified above on test check basis; |
|Further we also focussed on key automated controls relevant for financial reporting. || Tested related interfaces configuration and other application layer controls identified during our audit and report logic for system generated reports relevant to the audit mainly for Brokerage income Trade receivable ageing for evaluating completeness and accuracy. |
|Accordingly our audit strategy has focused on key IT systems and controls due to pervasive impact and performing an extensive testing of automated controls and ITGCs; we have determined the same as a key audit matter for current year audit. || Where deficiencies were identified tested compensating controls or performed alternative procedures. |
| || Management has given us reasonable assurance about the existence of the suitable IT controls and their persistent review and monitoring of the performance and issues arising on IT matters on a periodic basis. |
| || Reliance is also placed on the independent system audit carried out by the external agencies as per the mandate of the regulators. |
|Revenue Recognition || |
|The principal services offered by the company include stock broking merchant banking and depository services amongst others. Brokerage revenue is recognised on trade date upon exchange confirmations and income from depository services and merchant banking are recognised based on agreements with clients and when the right to receive income is established. ||In view of the significance of the matter we applied the following audit procedures on test check basis in this area among others to obtain reasonable audit assurance: |
|We identified revenue recognition as a key audit matter because there is a risk of revenue considering the judgements involved in the revenue recognition for services including merchant banking and depository services. || Assessed the appropriateness of the revenue recognition accounting policies by comparing with applicable accounting standards. |
| || Evaluated the design of controls and operating effectiveness of the relevant controls with respect to revenue recognition and accounting for sales incentive arrangements on selected transactions. |
| || Performed substantive testing by selecting samples of revenue transactions recorded during the year by verifying the underlying documents. |
| || Carried out analytical procedures on revenue recognized during the year to identify unusual variances. |
| || Performed confirmation procedures on trade receivable balances at the balance sheet date on a sample basis. |
| || Tested on a sample basis specific revenue transactions recorded before and after the financial year end date to determine whether the revenue had been recognised in the appropriate financial period. |
| || Reconciled the revenue recognised as per the financial statements with the statutory reporting made by the company to different regulators revenue authorities etc. |
| || Reliance is also placed on the independent internal audit carried out by the external agencies as per the mandate of the regulators which contained a detailed testing of the matter. |
|Impairment of Financial Assets || |
|Recognition and measurement of impairment of financial assets involve significant management judgement. ||In view of the significance of the matter we applied the following audit procedures on test check basis in this area among others to obtain reasonable audit assurance: |
|With the applicability of Ind AS 109 credit loss assessment is now based on expected credit loss (ECL) model. The Company's impairment allowance is derived from estimates including the historical default and loss ratios. Management exercises judgement in determining the quantum of loss based on a range of factors. || Evaluated the appropriateness of the impairment principles based on the requirements of Ind AS 109 our business understanding and industry practice. |
|The most significant areas are: || Understood management's new/revised processes systems and controls implemented in relation to impairment allowance process. |
|- Loan staging criteria || Assessed the design and implementation of key internal financial controls over assets impairment process used to calculate the impairment charge. |
|- Calculation of probability of default/Loss given default || Tested management review controls over measurement of impairment allowances and disclosures in financial statements. |
|- Consideration of probability weighted scenarios and forward looking macroeconomic factors || Test of details over of calculation of impairment allowance on test check basis for assessing the completeness accuracy and relevance of data. |
|As per management opinion there is no expected credit loss in several financial assets including the trade receivables of the Company and all are on fair value based on the assessment and judgement made by the management comprising directors of the company. || Model calculations were tested through re-performance where possible on selected samples. |
|There is a large increase in the data inputs required by the ECL model. This increases the risk of completeness and accuracy of the data that has been used to create assumptions in the model. In some cases data is unavailable and reasonable alternatives have been applied to allow calculations to be performed. || The appropriateness of management's judgments was also independently reconsidered in respect of calculation methodologies segmentation economic factors the period of historical loss rates used loss emergence periods and the valuation of recovery assets and collateral. |
|Deferred Tax Assets || |
|Recognition and measurement of deferred tax assets The Company has deferred tax assets in respect of temporary differences and MAT credit entitlements. ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain reasonable audit assurance: |
|The recognition of deferred tax assets involves judgment regarding the likelihood of the reasonable certainty of realisation of these assets in particular whether there will be taxable profits in future periods that support recognition of these assets. || Through discussions with management we understood the Company's process for recording deferred tax assets; |
|Management records deferred tax assets in respect of MAT credit entitlements temporary differences and brought forward business losses in cases where it is reasonably certain based on the presumed profitability determined on the basis of management estimation that sufficient taxable income will be available to absorb the differed tax assets in future. || Performed study and inquired into the basis of the management estimations of the future revenue for the reasonable certainty of utilisation of the deferred tax assets and therefore recognition of deferred tax assets; and |
| || Tested the underlying data for the key deferred tax and tax provision calculations. |
|Investment and Loans to group companies || |
|The Company has investments in group company which are considered to be associated with significant risk in respect of valuation of such investments. These investments are carried at cost. Management has given us confirmation that the investments are reviewed for impairment at each reporting date. This assessment is based on the presumed future financial performance of these underlying entities which involve significant estimates and judgment due to the inherent uncertainty involved in forecasting future cash flows. There is significant judgment in estimating the timing of the cash flows and the appropriate discount rate. ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain reasonable audit assurance: |
|In addition considering the materiality of the investments in group companies vis-a-vis the total assets of the Company this is considered to be significant to our overall audit strategy and planning. || Comparing the carrying amount of investments with the relevant group entity's balance sheet to identify whether their net assets being an approximation of their minimum recoverable amount were in excess of their carrying amount and assessing whether those entities have historically been profit-making; |
|The Company has also extended loans to group entities and related parties that are assessed for recoverability at each period end. || For the investments where the carrying amount exceeded the net asset value comparing the carrying amount of the investment with the profitability estimation by the management of these group entities; |
| || Understanding the return prospects from the group entities based on our knowledge of the Company and the markets in which the group entities operate; and |
| || Review of the controls in place for issuing new loans and evidenced the board approval obtained. We obtained management's assessment of the recoverability of the loans |
| || Obtained independent confirmations to ensure completeness and existence of loans and advances held by related parties as on reporting date. |
Information other than the financial statements and auditors' 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 including Annexures to Board's Report Business Responsibility Report but does notinclude the Standalone financial statements and our auditor's report thereon.
Our opinion on the Standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Management's responsibility for the Standalone financial statements
The Company's board of directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone financial statementsthat give a true and fair view of the Standalone financial position financial performanceand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the accounting standards specified under section 133 of theAct. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand 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 Standalone financial statement that give a true and fair view and are free frommaterial misstatement whether due 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 also responsible for overseeing the Company's financialreporting 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 Standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal 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 Standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the Standalonefinancial statements including the disclosures and whether the Standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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.
We did not audit the financial statements/ information of Networth Insurance BrokingPrivate Limited Networth Softtech Limited Networth Wealth Solutions Limited and MonarchNetworth Comtrade Limited (all referred to as " Transferor Companies") includedin the financial statements of the company pursuant to the scheme of Amalgamation betweenthe above transferor companies with Monarch Networth Capital Limited as approved by theHon'ble National Company Law Tribunal Mumbai Bench (NCLT) on May 09 2019 with appointdate of 1 April 2017. The financial statements/financial information of these transferorcompanies reflect total assets of Rs. 278974905/- as at 31st March 2019 and the totalrevenue of Rs. 70427502/- for the year ended on that date (before giving the effect ofmerger) as considered in the standalone financial statements/information of theseTransferor Companies have been audited by the earlier statutory auditors of the respectivecompanies whose reports have been furnished to us and our opinion in so far as itrelates to the amounts and disclosures included in respect of branches is based solely onthe report of such branch auditors.
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 sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure "A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order 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 books;
(c) The balance sheet the statement of profit and loss and the cash flow statementdealt with by this report are in agreement with the 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 2019 taken on record by the board of directors none of the directors is disqualifiedas on March 312019 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 in our opinionand to the best of our information and according to the explanations given to us;
a. The Company does not have any pending litigations which would impact its Standalonefinancial position other than those mentioned in Note 35 to 37 to the StandaloneFinancial Statements;
b. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and
c. There has not been an occasion in case of the Company during the year under reportto transfer any sums to the Investor Education and Protection Fund. The question of delayin transferring such sums does not arise
| ||For PAREKH SHAH & LODHA |
| ||Chartered Accountants |
| ||Firm Registration No.: 107487W |
| ||Ashutosh Dwivedi |
|Place: Mumbai ||(Partner) |
|Date: 30th May 2019 ||M. No. : 410227 |
ANNEXURE A TO AUDITORS' REPORT
[Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'in the Independent Auditors Report of even date]
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 its fixed assets
a) The Company has maintained the proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b) As explained to us fixed assets have been physically verified by the management atregular intervals; as informed to us no material discrepancies were noticed on suchverification;
c) As explained to us the title deeds of all the immovable properties are held in thename of the company.
2. In respect of its inventories
Inventory represents securities held as stock-in-trade in course of acting as amerchant banker and market maker for the acquired equity shares and on account of error inexecution of transaction. As explained to us inventories have been verified andreconciled during the year by the management at reasonable intervals. As informed to usno material discrepancies were noticed on verification of inventories by the management ascompared to book records.
3. The company has granted loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under section189 of the Companies Act 2013:
a) the terms and conditions of the grant of such loans are not otherwise prejudicial tothe company's interest;
b) According to the information and explanations given to us the loans given by thecompany are repayable on demand. As informed repayment of Principal amount and interest(if agreed) has been received during the year whenever demanded by the company.
c) There is no overdue amount for more than ninety days in respect of loans to theparties covered in the above register.
4. According to the information and explanations given to us and based on ourexamination of the records of the Company in respect of loans investments guaranteesand security given/ made by the company during the year the company has complied withthe provisions of section 185 & 186 of the Companies Act 2013.
5. The Company has not accepted any deposits from the public covered under thedirectives issued by the Reserve Bank of India and the provisions of Section 73 to 76 orany other relevant provisions of the Companies Act 2013 and the rules framed thereunder.Further no order has been passed by Company Law Board or National Company Law Tribunal orReserve Bank of India or any court or any other tribunal on the company. Hence Paragraph3(v) of the Order is not applicable.
6. The Central Government of India has not prescribed the maintenance of cost recordsunder sub-section (1) of Section 148 of the Companies Act 2013 for any of the products ofthe Company.
7. In respect of Statutory Dues:
a) According to the information and explanations given to us and based on the recordsof the company examined by us the company is generally regular in depositing theundisputed statutory dues including provident fund employees' state insuranceincome-tax sales-tax service tax duty of customs duty of excise value added tax cessand any other statutory dues to the appropriate authorities in India. According to theinformation and explanation given to us there was no outstanding statutory dues as on thelast day of the financial year concerned for a period of more than six months from thedate they became payable;
b) According to the information and explanations given to us and based on the recordsof the company examined by us there are no dues of income tax or sales tax or service taxor duty of customs or duty of excise or value added tax which have not been deposited onaccount of any disputes except the followings.
|Sr No ||Name of Statue ||Amount (Rs. in Lacs) ||Period to which the amount related ||Forum where dispute Pending |
|1 ||Service Tax ||15.14 ||01.04.2002 to 31.03.2007 ||Pending With Service tax Tribunal With Joint Commissioner of Service Tax |
| ||Service Tax ||3.01 ||F.Y2006-07 ||Superintendent Service tax Range XI Ahmedabad |
| ||Service Tax ||6.76 ||F.Y2005-07 ||Pending With Commissioner (Appeals) of Service Tax |
| ||Service Tax ||29.03 ||F.Y2007-08 ||Pending With Commissioner (Appeals) of Service Tax |
| ||Service Tax ||10.78 ||F.Y2007-08 ||Pending With Commissioner (Appeals) of Service Tax |
|2 ||Income Tax ||8.54 ||A.Y 2002-03 ||First Appellate Authority |
| ||Income Tax ||4.91 ||A.Y 2006-07 ||Assessing Officer |
| ||Income Tax ||30.48 ||A.Y 2010-11 ||Pending with CIT (Appeals); Original Demand Rs 75.69 lacs; Rectification Applied: Rs 45.21 lacs |
| ||Income Tax ||45.21 ||A.Y. 2011-12-# ||First Appellate Authority |
| ||Income Tax ||1.96 ||A.Y. 2016-17 ||Appeal Field against Assessing Office Order |
# pertaining to Monarch Networth Comtrade Limited since merged with Company
There are no dues of Sales tax Customs tax/Wealth tax Excise duty/cess which havenot been deposited on account of any dispute.
8. According to the records of the company examined by us and as per the informationand explanations given to us the company has not defaulted in repayment of loans orborrowings to any financial institution banks or government. The company has also notissued debentures. Hence Paragraph 3 (viii) of the Order is not applicable.
9. According to the records of the company examined by us and as per the informationand explanations given to us the
Company did not raise any money by way of initial public offer or further public offer(including debt instruments) during the year and the term loans raised during the yearwere applied for the purpose for which those were raised.
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 on or by the Company noticed or reported duringthe course of our audit nor have we been informed of any such instance by the Management.
11. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/ provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions of Sec197 read with Schedule V to the Act.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
13. 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 arein compliance with sections 177 and 188 of Companies Act 2013 where applicable and thedetails have been disclosed in the Financial Statements etc. as required by theapplicable accounting standards
14. The company has not made preferential allotment or private placement of shares orfully or partly convertible debentures during the year under review.
15. 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) isnot applicable.
16. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
| ||For PAREKH SHAH & LODHA |
| ||Chartered Accountants |
| ||Firm Registration No.: 107487W |
| ||Ashutosh Dwivedi |
| ||(Partner) |
| ||M. No. : 410227 |
|Place: Mumbai || |
|Date: 30th May 2019 || |
ANNEXURE B TO AUDITORS' REPORT
[Referred to in Clause (f) in paragraph 2 under 'Report on Other Legal and RegulatoryRequirements' in the Independent Auditors Report of even date]
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 MONARCHNETWORTH CAPITAL LIMITED ("the Company") as of March 312019 in conjunction withour audit of the Standalone financial statements of the Company for the year ended on thatdate.
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 (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets 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 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 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 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 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 the Company has in general in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were found operating effectively as at March 31 2019based on the internal control over financial reporting criteria established by theCompany. However the same needs to be further improved and formally documented in view ofthe size of the company and nature of its business considering the essential componentsof internal control stated in the Guidance Note on Audit of Internal Financial Controlsover Financial Reporting issued by the Institute of Chartered Accountants of India.
| ||For PAREKH SHAH & LODHA |
| ||Chartered Accountants |
| ||Firm Registration No.: 107487W |
| ||Ashutosh Dwivedi |
| ||(Partner) |
| ||M. No. : 410227 |
|Place: Mumbai || |
|Date: 30th May 2019 || |