The Members of Pioneer Embroideries Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of PioneerEmbroideries Limited (hereinafter referred to as "the Company") whichcomprise the Balance Sheet as at 31st March 2019 the Statement of Profit & Loss(including other comprehensive income) the statement of changes in equity and the CashFlow Statement for the year then ended and a summary of the significant accountingpolicies and other explanatory information (hereinafter referred to as "thestandalone financial statements").
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 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in Indiaincluding Indian Accounting Standards (Ind AS') specified under Section 133 of theAct of the state of affairs of the Company as at 31st March 2019 and its profit itscash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards 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 standalone financial statements Section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
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 described below to be the key audit matters to becommunicated in our report.
|Key Audit Matter ||How our audit Addressed the key audit matter |
|Revenue Recognition (As described in note 2.13 of the Standalone Financial Statements): The revenue recognition by the Company is on satisfaction of performance obligation upon transfer of control of products to customers at an amount that reflects the consideration to which the Company expects to be entitled as sales value for those products. Revenue from sale of goods is recognized net of discounts volume rebates sales return and taxes. Certain terms in sales arrangement relating to timing of transfer of risk and rewards discounts rebates delivery specifications involves significant judgement in determining whether the revenue is recognized in the correct period. ||Performed checks to understand the adequacy and the design of the revenue cycle for all significant components. Tested control in the revenue and trade account receivable cycle over the accuracy and timing of revenue accounted in the financial statements. Considered the appropriateness of the Company's revenue recognition accounting policies. Performed tests of details on a sample basis and verified the underlying sales orders invoice copies terms of delivery motor receipts bill of lading to assess whether revenue recorded is as per the contract. Tested sales transactions around year-end date ensuring revenues were recognized in the correct accounting period. Verified that the revenue for the year are appropriately presented and disclosed in the financial statements. |
Information other than the Standalone Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information 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 material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.
Management's Responsibility for the Standalone Financial 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 standalone 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 theaccounting principles generally accepted in India including the Indian AccountingStandards specified under Section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother 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 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 responsible for overseeing the Company's financial reportingprocess.
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 standalone 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 controls.
Obtain an understanding of internal financial controls relevant to the audit in orderto 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 reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually 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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or 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
1. As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment in terms of sub-section (11) of Section 143 of the Act (hereinafter referred tothe "Order") and on the basis of such checks of the books and records of theCompany as we considered appropriate and according to the information and explanationsgiven to us we give in the Annexure "A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. 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.
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 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 standalone financial statements dealt with by this Report are in agreement withthe books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B".
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. the Company has disclosed the impact if any of pending litigations on itsfinancial position in its financial statements; ii. the Company did not have any long-termcontracts including derivative contracts for which there were any material foreseeablelosses; iii. there is no amount that is required to be transferred to the InvestorEducation and Protection Fund by the Company.
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 standalone financial statements. Hence reporting under thisclause is not applicable.
Annexure "A" to the Independent Auditors' Report
Referred to in Paragraph 1 under Report on Other Legal and Regulatory Requirements ofthe Independent Auditors' Report of even date to the members of Pioneer EmbroideriesLimited on the standalone financial statements for the year ended 31stMarch 2019.
i. In respect of the Company's fixed assets
a) The Company is generally maintaining proper records showing full particularsincluding quantitative details and situation of fixed assets.
b) As explained to us fixed assets according to the practice of the Company arephysically verified by the management in accordance with the phased verification programwhich in our opinion is reasonable having regards to the size of the Company and thenature of its fixed assets. No material discrepancies have been noticed on suchverification.
c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets tothe financial statements are held in the name of the Company except for leasehold landand building acquired pursuant to the scheme of merger having a carrying value of र)48.34 lakhs as at 31st March2019.
ii. The physical verification of inventory excluding stocks with third parties andgoods in transit has been conducted at reasonable intervals by the management. In respectof inventory lying with the third parties these have substantially been confirmed bythem. The discrepancies noticed on physical verification of inventory as compared to bookrecords were not material and have been appropriately dealt with in the books of theCompany.
iii. As per the information and explanation given to us and the records produced beforeus for verification the Company has granted unsecured loans to two companies covered inthe register maintained under Section 189 of the Act.
a) In respect of the aforesaid loans the terms and conditions under which such loanswere granted are not prejudicial to the Company's interest except that these loans areinterest free.
b) As explained to us receipt of principal amount is on demand basis and there is nofixed repayment schedule.
c) There is no overdue amount as these loans are on demand basis.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act in respect ofthe loans investments guarantees and securities except that such loans are giveninterest free.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted deposits in terms of directives issued by the Reserve Bank ofIndia and the provisions of Sections 73 to 76 or any other relevant provisions of the Actand the rules framed there under.
vi. We have broadly reviewed the books of accounts maintained by the Company in respectof products where pursuant to Rules made by the Central Government of India themaintenance of cost records has been prescribe under sub-section (1) of Section 148 of theAct and are of opinion that prima facie the prescribed accounts and records have beenmade and maintained. We have not however made a detailed examination of the records witha view to determine whether they are accurate and complete.
vii. a) According to the information and explanations given to us the Company isgenerally regular in depositing undisputed statutory dues including provident fundemployees' state insurance income-tax sales-tax service tax duty of customs duty ofexcise value added tax cess and other statutory dues with the appropriate authorities.There are no undisputed statutory dues which are in arrears as at 31st March 2019 for aperiod of more than six months from the date they became payable.
b) According to the information and explanations given to us details of dues ofincome-tax or sales-tax or service tax or duty of customs or duty of excise or value addedtax which have not been deposited as on 31stMarch 2019 on account of any dispute aregiven below:
|Particulars ||Year to which the matter pertains ||Forum where matter is pending ||Amount (Rs in lakhs) |
|Duty of excise ||F.Y. 2001-02 ||Commissioner Appeal ||33.58 |
|Income-tax ||Block A.Y. 1999-00 to 2004-05 ||CIT (Appeals) ||49.01 |
|Income-tax ||A.Y. 2002-03 ||CIT (Appeals) ||13.33 |
|Service-tax ||F.Y. 2007-08 to 2010-11 ||Commissioner Appeal ||123.85 |
viii. In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of loans or borrowings to financial institutions andbanks during the year. However there is no overdues as on 31st March 2019. The Companyhas not taken any loans or borrowings from government or through debentures.
ix. In our opinion and according to the information and explanations given to us theCompany did not raise moneys by way of further public offer (including debtinstruments).The term loans have been applied for the purposes for which they wereobtained.
x. According to the information and explanations given to us no fraud by the Companyor any fraud on the Company by its officers or employees has been noticed or reportedduring the year.
xi. According to the information and explanations given to us managerial remunerationhas been paid or provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
xii. In our opinion the Company is not a Nidhi Company.
xiii. According to the information and explanations given to us all transactions withthe related parties are in compliance with Sections 177 and 188 of the Act whereapplicable and the details have been disclosed in the Financial Statements as required bythe applicable Ind AS.
xiv. According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of equity shares or fully or partlyconvertible debentures during the year. Provisions of clause 3 (xiv) of the Order are notapplicable.
xv. According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with themcovered under Section 192 of the Act.
xvi. According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
For S.K. Naredi & Co.
Annexure "B" to the Independent Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Act.
We have audited the internal financial controls over financial reporting of PioneerEmbroideries Limited ("the Company") as of 31st March 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat 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'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
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 Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 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 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 2019 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.