To The Members of
PARAGON FINANCE LIMITED
Report on the Audit of the Financial Statements
We have audited the accompanying financial statements of Paragon Finance Limited ("theCompany") (CIN: L65921WB1986PLC040980) which comprise the Balance Sheet as at 31stMarch 2020 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Cash Flow Statement for the year then endedand a summary of the significant 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 financial statements give the information required by theCompanies Act 2013 (the '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 ('Ind AS') specified under section 133 of the Act of the state ofaffairs (financial position ) of the Company as at March 31 2020 and its profit(financial performance including other comprehensive income) changes in equity and itscash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the independence requirements that are relevant to our audit ofthe financial statements under the provisions of the Act and the Rules made 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 obtainedis sufficient and appropriate to provide a basis for our audit opinion on the financialstatements.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the financial statements of the current period. There 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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
1) Transition to Indian Accounting Standards ("Ind AS")
The Company has adopted Ind AS notified under section 133 of the Companies Act 2013("the Act") read with the Companies (Indian Accounting Standards) Rules 2015from April 01 2019 and the effective date of such transition is April 01 2018. Ind ASare new and complex accounting standards which require considerable judgment andinterpretation in its implementation. Further Ind AS 101 ("First-time Adoption ofIndian Accounting Standards") allows two categories of exceptions to the first-timeadopters which mainly include prohibition to retrospective application of certainrequirements of Ind AS and exemption from some requirements of Ind AS. We consider thistransition and the required disclosure to be a key audit matter because new accountingpolicies have been developed by the Company to comply with these standards and judgment.Note for "Significant Accounting Policies" First-time adoption of Ind AS"Fair value measurement" and "Risk management" to the Ind AS FinancialStatements provide detailed information on the significant policies critical judgment andestimation along with details of exemptions applied from certain requirements under Ind ASbased on which these Financial Statements are prepared.
2) Impact of COVID - 19
Due to outbreak of pandemic Covid - 19 and consequent country wide lockdown enforced bygovernment of India. Due to this we could not carry out normal audit procedures byvisiting the client office and audit was carried out using '' Work from Home"approach. This is considered as Key Audit Matter since alternate audit procedures wereperformed for carrying out audit.
Due to "work from home" approach adopted we performed following alternativeaudit procedures:
Installation of Virtual Private Network on laptops of team members
Various data and confirmation were received either electronically through emailor through data sharing on drive.
For various audit procedures reliance was placed on scanned copies of originaldocument shared with us electronically.
Interview/ discussion with client via video conferencing / call conferencing andother verbal communications.
Principal Audit Procedures
We have performed the following audit procedures in order to obtain sufficient auditevidence:
(i) Assessed the Company's process to identify the impact of adoption and transition tothe new accounting standards
(ii) Evaluated the design of internal controls and tested the operating effectivenessof key internal controls around the process of preparation of Financial Statements
(iii) Reviewed the exemptions availed by the Company from certain requirements underInd AS
(iv) Obtained an understanding of the governance over the determination of keyjudgments
(v) Evaluated and tested the key assumptions and judgments adopted by management
(vi) Assessed the disclosures made against the relevant Ind AS and
(vii) Determined the appropriateness of the methodologies and models used along withthe responsibility of the outputs.
Information other than the Financial Statement and Auditor's Report thereon
The Company's Board of Directors are responsible for the other information. The otherinformation comprises the information included in the Company's annual report but doesnot include the financial statements and our auditors' report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these 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 Indian Accounting Standards (Ind AS) specified under Section 133 ofthe Act. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the financial statement management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
The Company's management is responsible to make a detailed assessment (to the extentpossible based on the information available) of the impact of COVID19 on the itemscomponents of the Financial statements including disclosures in the financial statement.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibility for the Audit of the Financial Statements
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 with theSAs will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of the users taken on thebasis of these financial statements.
As a part of an audit in accordance with SAs we exercise professional judgement andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and to obtain audit evidence that is sufficient and appropriate to providea basis 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 the audit inorder to design audit procedures that are appropriate in the circumstances. Under Section143(3) (i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained upto 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 presentations 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.
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 disclosures 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.
Report on Other Legal and Regulatory Requirements
1. 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.
2. As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of sub-section (11) of section 143 of the Act [hereinafterreferred to as the Order] we give in the Annexure 'A'a statement on the matters specifiedin paragraphs 3 and 4 of the order.
3. 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 ourknowledge 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 faras 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 the IndianAccountingStandards (Ind AS) specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors and takenon record by the Board of Directors none of the directors is disqualified as on 31stMarch 2020 from being appointed as a director in terms of Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in 'Annexure B' and.
(g) With respect to the matter to be included in the Auditors' Report under section197(16):
In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provision of Section 197 of the Act.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigation and its impact onfinancial position in the financial statement.
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection fund by the Company.
ANNEXURE - A TO AUDITORS' REPORT
The Annexure referred to in paragraph 1 of Our Report of even date to the members ofParagon Finance Limited on the accounts of the company for the year ended March 312020.
1) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Fixed Assets.
b) All the assets have not been physically verified by the management during the yearbut there is a regular program of verification which in our opinion is reasonable havingregard to the size of company and the nature of its assets. No materials discrepancieswere noticed on such verification.
c) According to the information and explanations given to us and on the basis of ourexamination of the records of the company the Title Deeds of Immovable properties areheld in the name of the Company.
2) According to the information and explanations given to us The Company does not haveany Inventory. Therefore the provisions of Clause (ii) of paragraph 3 of the CARO 2016are not applicable to the Company.
3) In respect of the loans secured or unsecured granted by the Company to CompaniesFirms Limited Liability Partnership or other parties covered in the register maintainedpursuant to provision of section 189 of the Companies Act 2013-
a) The Terms and Conditions of the loans granted are not prejudicial to the interest ofthe Company.
b) In our opinion and according to the information and explanations given to us thereceipt of the Principal amount and interest are regular.
c) In respect of the said loans and interest thereon there are no overdue amounts.
4) In our opinion and according to the information and explanation given to us theCompany has complied with the provisions of section 185 and 186 of the Companies Act2013 in respect of Loans Investments Guarantees and Security.
5) According to the information and explanations given to us the Company has notaccepted any deposit from the public and hence the directives issued by the Reserve Bankof India and the provisions of section 73 74 75 & 76 of the Act and the Companies(Acceptance of Deposit) Rules 2015 with regard to the deposits accepted from the publicare not applicable. Therefore Clause 3(v) of the CARO 2016 is not applicable to theCompany.
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) a) The company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income tax salestax wealth tax service tax duty of custom duty of excise value added tax cess andother material statutory dues applicable to it. According to the information andexplanations given to us no undisputed amounts payable in respects of the aforesaid dueswere outstanding as at 31st March 2020 for a period of more than six months from thedate they became payable.
b) Details of dues of Income Tax Sales Tax duty of Custom Wealth Tax Service Taxduty of Excise Value Added Tax and Cess which have not been deposited as on 31st March2020 on account of dispute are given below :
|Name of Statute ||Nature of Dues ||Amount in Rs. ||Period ||Forum where dispute is pending |
|Finance Act 1. 1994 ||Service Tax ||2681414/- ||A. Y. 2003-08 ||Commissioner of Service Tax - Kolkata |
|Income Tax . Act 1961 ||Income Tax ||1256340/- ||A.Y. 2013-14 ||CIT (Appeal) - 21 / Kolkata |
|Income Tax . Act 1961 ||Income Tax ||615010/- ||A.Y. 2014-15 ||CIT (Appeal) - 21 / Kolkata |
8) According to the records of the company examined by us and the information andexplanations given to us we are of the opinion that the company has not defaulted inrepayment of dues to financial institutions banks and debenture holders.
9) The company has not raised any money by way of initial public offer or furtherpublic offer and Term Loan have been applied for the purposes for which they were raised.
10) In our opinion and according to the information and explanation given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the year.
11) According to the information and explanation given to us and based on ourexamination of the records of the Company the Managerial Remuneration paid by the Companyhas been paid or provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Companies Act.
12) The Company is not a Nidhi Company. Therefore the provisions of clause 3(xii) ofthe Order are not applicable to the Company.
13) According to the information and explanations given to us and based on ourexamination of records of the Company transactions with the related parties are incompliance with Section 177 and 188 of companies Act 2013 where applicable and thedetails have been disclosed in the Financial Statements as required by the applicableaccounting standards.
14) According to the information and explanations given to us by the management thecompany has not made any preferential allotment or private placement of shares or fully orpartly convertible debentures during the year under review. Accordingly the provisions ofClause 3(xiv) of the Order are not applicable to the Company.
15) According to the audit procedure performed and the information and explanationsgiven to us by the management the company has not entered into any non-cash transactionswith directors or persons connected with him. Accordingly the provisions of Clause 3(xv)of the order are not applicable to the Company.
16) According to the audit procedures performed and the information and explanationgiven to us by the management the company is registered under Section 45-IA of theReserve Bank of India Act 1934.
ANNEXURE - B TO AUDITORS' REPORT
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 ParagonFinance Limited ("the Company") as of 31st March 2020 in conjunctionwith our audit of financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('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 includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement 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 prov ide 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 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.
|For AGARWAL MAHESWARI & CO. ||Chartered Accountants |
| ||Firm Reg. No.: 314030E |
|Place: Kolkata || |
|Dated: 30thday of June 2020 ||[CA. APURVA MAHESWARI] |
| ||Partner |
| ||Membership No. 304538 |