To the Members of MRO-TEK Realty Limited
(formerly known as "MRO-TEK Limited")
Report on the Audit of the Financial Statements
We have audited the financial statements of MRO-TEK Realty Limited("the Company") which comprise the Balance Sheet as at March 312020 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date andnotes to the financial statement including a summary of the significant accountingpolicies and other explanatory information (hereinafter referred to as "the financialstatements").
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 the loss and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the financial statements in accordance withthe Standards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (ICAI) together with the independence requirements thatare relevant to our audit of the financial statements under the provisions of the Act andthe Rules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAi's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on the financial statements.
Emphasis of Matters
1. We draw attention to Note 43 of the financial statements regardingpreparation of the financial results on going concern basis and the reasons stated thereinthough the net worth of the Company is eroded due to continuous losses. The accuracy ofassumption of going concern is dependent upon various initiatives taken by the Company inrelation to saving cost optimize revenue management opportunities and diversificationinto other streams of business and the Company's ability to generate cash flows in futureto meet its obligations.
2. We draw your attention to Note 44 to the financial statementsresults which explains the uncertainties and the management's assessment of the financialimpact due to the lock-downs and other restrictions and conditions related to the COVID-19pandemic situation for which a definitive assessment of the impact in the subsequentperiod is highly dependent upon circumstances as they evolve. Further our attendance atthe physical inventory verification done by the management was impracticable under thecurrent lock-down restrictions imposed by the government and we have therefore relied onthe related alternative audit procedures to ensure the existence and condition ofinventory at year end.
Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|1. Inventory Management || |
|We refer to financial statements' note no 2.10 accounting policy and disclosure on inventories. At the balance sheet date the value of inventory is to Rs 22.14 crores representing 33.66% of total assets and 1401% of total equity. ||Audit Procedures Our audit approach consisted testing of the design and operating effectiveness of the internal controls as follows: |
|Inventories were considered as key audit matter due to size of the balance and because inventory valuation involves management judgement. || Accessing the compliance of Company's accounting policy over inventory with applicable standards. |
|According to financial statements' inventories are valued at lower of the lower of cost or net realisable value. || Evaluated the design of internal controls relating to assessing the inventory management and valuation process and practices |
| || Selected samples and tested the operating effectiveness of the key control. |
| || Assessing the analyses and assessment made by management with respect to slow and obsolete stock. |
| || We have assessed the adequacy of the Company's disclosures related to inventories |
Information Other than the Financial Statements and Auditor's ReportThereon
The Company's Board of Directors is responsible for the preparation ofthe other information. The other information comprises the information included in theManagement Discussion and Analysis Board's Report including Annexures to Board's ReportBusiness Responsibility Report Corporate Governance and Shareholder's Information butdoes not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained during the course of our audit or otherwise appears to be materiallymisstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for orev entinaand detecting frauds and other irregularities:
selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the 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 is responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the FinancialStatements
Our objectives are to obtain reasonable assurance about whether thefinancial 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 financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment 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 financial controls relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould 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 in terms of Section 143(11) ofthe Act we give in "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2) As required by Section 143(3) of the Act based on our audit wereport that:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income Statement of Changes in Equity and the Statement of Cash Flow dealtwith by this Report are in agreement with the relevant books of account.
d) In our opinion the aforesaid financial statements comply with theInd AS specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
e) On the basis of the written representations received from thedirectors as on March 312020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed asa director in termsof Section 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B". Our report expresses anunmodified opinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over financial reporting.
g) With respect to the other matters to be included in the Auditor'sReport in accordance with the requirements of section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to theexplanations given to us the remuneration paid by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act.
h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:
i) the Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements -Refer Note 33 to the financial statements.
ii) The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.
iii) There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
(Referred to in paragraph 1 under 'Report on Other Legal and RegulatoryRequirements' section of our report to the Members of MRO-TEK Realty Limited of even date)
(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The fixed assets are physically verified during the year by theManagement during the year. In our opinion the frequency of such verification isreasonable having regards to the size of the Company and the nature of it's fixed assets.No material discrepancies were noticed on such physical verifications.
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties included in the fixed assets are held in the name of the Company.
(ii) The inventory has been physically verified by the managementduring the year. In our opinion the frequency of such verification is reasonable. Inrespect of stocks lying with third parties at the year-end written confirmations havebeen obtained. The discrepancies noticed on verification between the physical stocks andthe book records were not material and have been dealt with in books of account.
(iii) According to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms limitedliability partnerships or other parties covered in the register maintained under Section189 of the Companies Act 2013 ('the Act'). Accordingly paragraphs 3 (iii) (a) (b) and(c) of the Order are not applicable to the Company
(iv) In our opinion and according to the information and explanationgiven to us the Company has complied with the provisions of Section 185 and 186 of theAct with respect to loans and investments made.
(v) In our opinion and according to the information and explanationsgiven to us the Company has not accepted deposits as per the directives issued by theReserve Bank of India and the provisions of Sections 73 to 76 or any other relevantprovisions of the Act and the rules framed there under. Accordingly paragraph 3(v) of theOrder is not applicable to the Company.
(vi) The Central Government has not prescribed the maintenance of costrecords under Section 148(1) of the Act for any of the products manufactured/servicesrendered by the Company.
(vii) (a) According to the information and explanations given to us andon the basis of our examination of the records of the Company amounts deducted/accrued inthe books of account in respect of undisputed statutory dues including Provident fundEmployees' State Insurance Income-tax Goods and Service tax duty of customs duty ofexcise value added tax cess and other material statutory dues have generally beenregularly deposited during the year with the appropriate authorities.
(b) According to the information and explanations given to us thereare no dues of Income-tax Sales tax Service tax GST Duty of customs Duty of exciseand Value added tax as at 31 March 2020 which have not been deposited with theappropriate authorities on account of any dispute except as provided below:
|Name of the Statute ||Nature of dues ||Amount (Rs in Lacs) ||Period to which amount relates ||Forum where the dispute is pending |
|Central Excise Act 1944 ||Central Excise Duty ||46690550/- ||FY2010- 11 ||Customs Excise & Service Tax Appellate Tribunal Bangalore |
(vii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in repayment of dues to the banker. The Companydid not have any outstanding debentures and loans from financial institutions andGovernment during the year end.
(viii) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not raised anymoneys by way of initial public offer or further public offer (including debt instruments)and has not obtained any term loans during the year. Accordingly paragraph 3(ix) of theOrder is not applicable to the Company.
(ix) During the course of our examination of the books and records ofthe Company carried out in accordance with the generally accepted auditing practices inIndia and according to the information and explanations given to us we have neither comeacross any instance of material fraud by the Company or on the Company by its officers oremployees noticed or reported during the year nor have we been informed of any such caseby the Management
(x) In our opinion and according to the information and explanationsgiven to us the Company has paid/provided managerial remuneration in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.
(xi) In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi company and the Nidhi Rules 2014 are notapplicable to it. Accordingly paragraph 3(xii) of the Order is not applicable to theCompany.
(xii) According to the information and explanations given to us andbased on our examination of the records of the Company transactions with the relatedparties are in compliance with Sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby applicable Ind AS.
(xiii) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly paragraph 3(xiv) of the Order is not applicableto the Company.
(xiv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not entered intoany non-cash transactions with directors or persons connected with them. Accordinglyparagraph 3(xv) of the Order is not applicable to the Company.
(xv) In our opinion and according to the information and explanationsgiven to us the Company is not required to be registered under Section 45-IA of theReserve Bank of India Act 1934. Accordingly paragraph 3(xvi) of the Order is notapplicable to the Company.
(Referred to in paragraph 2(f) under 'Report on Other Legal andRegulatory Requirements' section of our report to the Members of MRO-TEK Realty Limited ofeven date)
Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financialreporting of MRO-TEK REALTY LIMITED ("the Company'') as of March 31 2020 inconjunction with our audit of the financial statements of the Company for the year endedon that date. Management's Responsibility for Internal Financial Controls The Board ofDirectors of the Company 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 respective 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 internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlssystem over financial reporting of the Company.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or im proper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to theexplanations given to us 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.