To the Members of Monte Carlo Fashions Limited
Report on the audit of the Financial Statements
1. We have audited the accompanying financial statements of Monte Carlo FashionsLimited (Rs. the Company') which comprise the Balance Sheet as at 31 March 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 (Rs. Act') in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India including IndianAccounting Standards (Rs. Ind AS') specified under section 133 of the Act of the state ofaffairs (financial position) of the Company as at 31 March 2019 and its profit (financialperformance including other comprehensive income) its cash flows and the changes inequity for the year ended on that date.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (Rs. ICAI') together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
Key Audit Matters
4. 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.
5. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matters ||How our audit addressed the key audit matters |
|Sales returns || |
|As described in note 1(iii)(i) 18 and 40 to the Financial Statements. ||Our audit procedures in relation to revenue returns included but were not limited to the following: |
|One of the significant adjustments considered in revenue recognition is the adjustment for sales returns. The Company has arrangements with the customers where the customers have the right to return the goods in the normal course of business with no specified period of return from the date of purchase. Returns are generally made upto 3 years from the date of sale. Further the Company has various types of arrangements with the customers including outright sales sales with right of return in normal course of business etc. || Reviewed the process of sales returns and assessed the appropriateness of the accounting policy adopted by the company for revenue recognition. |
|The above arrangements result in a significant risk that sales recognised during the current year might be reversed subsequently in future years. Management adjusts revenue recognized during the year for expected returns in the subsequent years based on sales made during the current year and historical trends of sales return in the earlier years for various transactions which are grouped on the basis of similar characteristics. || Assessed the design and implementation of controls in respect of the revenue recognition and sales returns and tested the effectiveness of key revenue controls operating across the business. |
|Further the Company has retrospectively adopted the IndAS 115 notified by Ministry of Corporate Affairs on 28 March 2018 under section 133 of the Companies Act 2013 read together with the Companies (Indian Accounting Standards) Rules 2015 (as amended) (Ind AS') and based on the assessment performed by the Company revenue has been adjusted for the expected return with a corresponding refund liability being recognised. The Company has corresponding recognized the right to recover the products from customers. || Obtained the historical trends for revenue and corresponding sales returns based on the accounting records maintained by the Company. |
|Considering the materiality of the amounts involved combined with retrospective application of new accounting standard and significant judgements discussed including the inherent limitations involved in estimating the future sales returns based on past trends this matter has been identified as a key audit matter for the current year audit. || Analysed the appropriateness for the exclusions of certain revenue transactions from the estimations for expected sales returns. Verified the customer's right to return goods with the signed agreements and corroborated the sales return estimates made by the management for the year based on discussions with management around past trends and other relevant factors. |
| || Obtained the classification of contracts with similar characteristics performed detailed analysis of the terms applicable for different types of contracts. |
| || Tested the arithmetical accuracy of the calculations performed by the management in arriving at the expected value of sales returns. |
| || Ensured that the accounting treatment in accordance with the provisions of Ind-AS 115. |
| || Tested the appropriateness of the disclosures made in the financial statements is in accordance with the applicable accounting standards. |
|Change in the inventory valuation method of manufactured finished goods inventory ||Our audit procedures in relation to change in the inventory valuation method of manufactured finished goods inventory included but were not limited to the following: |
|As described in note 1(ii) 1(iii)(c) 7 22 and 40 to the Financial Statements the Company has changed the method of inventory valuation for manufactured finished goods inventory from retail method to actual cost method. The Company has applied the change in accounting policy retrospectively in accordance with Ind AS 8. || Reviewed the process of inventory valuation and assessed the appropriateness of the accounting policy adopted by the Company for inventory valuation. |
|Under the actual cost method the Company has valued the manufactured finished goods inventory based on raw material cost and allocating the appropriate overheads. The raw material cost is valued using the moving weighted average of the raw material as on date of consumption and the bills of material prepared by the management. The overheads are allocated by using the specific identification of their individual costs to the applicable cost centre. Significant judgements are involved in loading of overheads to each category of products along with the appropriate absorption in the total inventory valuation. || Assessed the design and implementation of controls in respect of the inventory valuation and tested the effectiveness of key inventory controls operating across the business. |
| || Evaluated whether the retrospective application of the change in method of valuation was in compliance with Ind AS 8 and whether inventory valuation method was in compliance with the requirements of Ind AS 2. |
| || Discussed and examined the approach followed by the management for the change in method of valuation. |
|Considering the materiality of the amount involved combined with the significant judgments and the retrospective change in accounting policy this matter has been identified as a key audit matter for the current year audit. || Raw material quantities consumed in the manufactured finished goods inventory were tested from the bills of material to trace whether the rates used were the weighted average rates automatically calculated by the accounting software. |
| || Conversion cost for each category of products were tested for allocation to the appropriate cost centres based on the production records of the Company. |
| || For overhead absorption evaluated whether the fixed and variable overheads were appropriately calculated and further whether the allocation made was on the basis of normal capacity of the business to ascertain there was no over/under absorption of overheads. |
| || Tested the arithmetical accuracy of the above calculations. |
| || Evaluated the appropriateness and adequacy of disclosures with respect to the reconciliations prepared and presented by the management in the financial statements in accordance with Ind AS 8. |
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
7. 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 financial statements that givea true and fair view of the state of affairs (financial position) profit or loss(financial performance including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
8. 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.
9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain 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 Act we are also responsible for explaining 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 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.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
15. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 (Rs. The Order') issuedby the Central Government of India in terms of section 143(11) of the Act we give in theAnnexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure I as required by section 143(3) of the Act wereport that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose 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 financial statements dealt with by this report are in agreement with the booksof account;
d) in our opinion the aforesaid financial statements comply with Ind AS specifiedunder section 133 of the Act;
e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2019 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of the financialstatements of the Company for the year ended on that date and our report dated 20 May 2019as per Annexure II expressed unmodified opinion;
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 as detailed in note 28 to the financial statements has disclosed theimpact of pending litigations on its financial position as at 31 March 2019;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2019;
iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended 31 March 2019;
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these financial statements. Hence reporting under this clause is notapplicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 099410
Place : Ludhiana
Date : 20 May 2019
Annexure I to the Independent Auditor's report of even date to the members of MonteCarlo Fashion Limited on the Financial Statements for the year ended 31 March 2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assetsunder which fixed assets are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the headRs. Property plant and equipment') are held in the name of the Company.
(ii) In our opinion the management has conducted a physical verification of inventoryat reasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stock lying with third parties at the year- end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.
(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.
(iv) In our opinion the Company has not entered into any transaction covered underSections 185 and 186 of the Act. Accordingly the provisions of clause 3(iv) of the Orderare not applicable.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products. Accordinglythe provisions of clause 3(vi) of the Order are not applicable.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax goods and service tax duty of custom dutyof excise value added tax cess and other material statutory dues as applicable havegenerally been regularly deposited to the appropriate authorities though there has been aslight delay in a few cases. Further no undisputed amounts payable in respect thereofwere outstanding at the year-end for a period of more than six months from the date theybecome payable.
(b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount (Rs. in lakhs) ||Amount paid under Protest (Rs. in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|West Bengal Value Added Tax 2003 ||Interest on VAT ||1.34 ||- ||FY 2008-09 ||Deputy Commissioner of Commercial Taxes Kolkata |
|Central Sales Tax Act 1956 ||Interest on CST ||0.16 ||- ||FY 2008-09 ||Deputy Commissioner of Commercial Taxes Kolkata |
|West Bengal Value Added Tax 2003 ||Penalty on VAT ||2.31 ||2.31 ||FY 2009-10 ||West Bengal Taxation Tribunal |
(viii) The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution or government during the year. The Company did not have anyoutstanding debentures during the year.
(ix) In our opinion the Company has applied the term loans for the purposes for whichthese were raised. The Company did not raise moneys by way of initial public offer/further public offer (including debt instruments during the year.
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable IndAS.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 009410
Place : Ludhiana
Date : 20 May 2019
Annexure II to the Independent Auditor's report of even date to the members of MonteCarlo Fashion Limited on the
Financial Statements for the year ended 31 March 2019
Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (Rs. the Act')
1. In conjunction with our audit of the financial statements of Monte Carlo FashionsLimited (Rs. the Company') as at and for the year ended 31 March 2019 we have audited theinternal financial controls over financial reporting (Rs. IFCoFR') of the Company as atthat date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the IFCoFR criteria established by the Companyconsidering the essential components of internal financial controls stated in the GuidanceNote on Audit of Internal Financial Controls over Financial Reporting (the Rs. GuidanceNote') issued by the Institute of Chartered Accountants of India (Rs. ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of the Company's 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 Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate IFCoFR wereestablished and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A Company'sIFCoFR include 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
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that the IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2019 based on the IFCoFR criteria established by the Company consideringthe essential components of internal financial controls stated in the Guidance Note issuedby the ICAI.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 009410
Place : Ludhiana
Date : 20 May 2019