INDEPENDENT AUDITORS REPORT
The Members of
PRATIBHA INDUSTRIES LIMITED Report on the Financial Statements
We have audited the accompanying standalone financial statements of PRATIBHAINDUSTRIES LIMITED ("the Company") which comprises the Balance Sheet as atMarch 31 2018 the Statement of Profit and Loss the Cash Flow Statement for the yearthen ended and a summary of significant accounting
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters in section 134(5)of the Companies Act 2013 ("the Act") with respect to the preparation of thesestandalone financial statements that give a true and fair view of the financial theCompany in accordance with the accounting principles positionfinancial generally acceptedin Indiaincluding the Accounting Standards specified under Section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014. This responsibility also includes themaintenance of adequate accounting records in accordance with the provision of the Act forsafeguarding of the assets of the Company and for preventing and detecting the frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of internal financial that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder.
Because of the matters described in the Basis for Disclaimer of Opinion paragraphhowever we were not able to obtain sufficient appropriate audit evidence to provide abasis for an audit opinion.
Basis for Disclaimer of Opinion
1. The company has accumulated losses and its net worth is fully eroded. It hasincurred net loss during the current year as well as previous years and its currentliabilities exceeded its current assets as at the balance sheet date. It is unable torepay its debts statutory obligations and pay salaries apart from otherobligations/commitments. Its scheme of Strategic Debt Restructuring has failed as thelenders have not accepted its proposal. All these indicate a material uncertainity thatmay cast significant doubt upon the Companys ability to continue as a Going Concern.The Management is optimistic about finding resolution and believes it will be able tocontinue its business accordingly the standalone financial results are prepared on agoing concern basis.
2. Inventory of Work in Progress (WIP) includes certain contractual claimamounting to Rs. 36.91 Crores. These amounts have been ascertained by the management basedon their estimates. No formal submission of these claims has been made to clients. WIPalso includes certain claims amounting to Rs. 170.33 Crores which are though submitted butnot yet approved by respective clients. The amounts of these claims are subject to changepost submission/approval from clients. In absence of any communication from clients wecannot confirm the amount of this WIP. The consequential impact if any on the standalonefinancial statements is therefore not ascertainable.
3. The management has not provided us with the Cost to Completion and consequentprofitability/ and or losses on projects which are pending execution. In absence of thesedetails it is not possible for us to ascertain whether the WIP has been valued and statedcorrectly or not. The consequential impact if any on the standalone financial statementsis therefore not ascertainable
4. The company has not provided for interest on various loans from Banks to theextent of Rs. 220.42 Crores. To that extent interest expense interest liability and lossfor the year ended March 31 2018 are understated. The management is of the view thatsince the status of all loans has become NPA interest will be waived off by the Banks andhence no provision is required.
5. Many clients of the company have en-cashed Bank Guarantee on account ofvarious reasons. Balance of Rs. 353.67 Crores is shown as recoverable as asset in Balancesheet and no provision against the same has been made. To that extent loss and reservesare understated and Assets are overstated. Management is of the opinion that these amountswill be recovered in due course from respective parties and there is no need for anyprovision.
6. Many clients of the company have withheld around Rs. 142.88 Crores on accountof various reasons. The amount is outstanding since long. This is shown as refundable fromClients and no provision against the same has been made. In absence of communication withclient and proper documentations we are unable to determine any possible impact thereofon the loss for the year. Management is of the opinion that these amounts will berecovered in due course from respective parties and there is no need for any provision.
7. Many loan accounts having aggregate balance of Rs. 271.78Crores are notconfirmed due to non-availability of statement / confirmation from respective Banks. Inthe absence of sufficient appropriate audit evidence we are unable to determine anypossible impact thereof on the loss for the year and on the balance of cash and cashequivalent and Borrowed Funds.
8. The Company has not made provision against Investment of Rs. 1 Crore and Loansgiven of Rs. 94.73 Crores to its wholly owned subsidiary M/s. Prime Infrapark PrivateLimited. The networth of the subsidiary company has fully eroded and its ConcessionAgreement has been terminated by DMRC.
9. The Company has not made provision against Investment of Rs. 0.01 Crore andLoans given of Rs. 73.47 crores to its subsidiary M/s. Bhopal Sanchi Tollways PrivateLimited. Its Concession Agreement has been terminated by NHAI. The subsidiary company haslodged claim and the matter is under arbitration.
10. The company has not provided audited financial statements of its wholly ownedsubsidiary M/s. Pratibha Holdings (Singapore) Pte. Ltd and associate company M/s. SaudiPratibha Industries LLC. In absence of these details we can not comment on anyrequirement for provision for diminution in value of investments.
11. Balance confirmation of trade Receivables Loans and Advances deposits andtrade payables are not received from third parties. These balances are subject toconfirmations and consequent adjustments if required. In absence of balanceconfirmations financial impact on standalone financial statements is not ascertainable.
12. As per the requirements of Rule 4 of Companies (cost records and audit)Amendment Rules 2016 the company has not conducted cost audit of its records.
13. During the year Company unilaterally wrote back certain liabilitiesamounting to Rs. 76.44 Crores. The management is of the opinion that based on theiranalysis of balances and due to various reasons these balances were not payable and hencewritten back. In absence of proper documentation financial impact on standalone financialstatements is not ascertainable.
14. The company has not made provision for Expected Credit Loss on receivablesand other financial assets as required under IND AS 109.
15. There are many statutory dues amounting to Rs.94.91 Crores which are pendingto be deposited with appropriate government authorities. The company has not madeprovision for interest on these dues on account of delay in depositing them. Since themanagement has not estimated overall liability on account of interest financial impact onstandalone financial statements is not ascertainable.
16. During the year three independent directors have resigned from the Board. Asa result composition of Board of Directors Audit Committee Nomination & RemunerationCommittee and Stakeholders Relationship Committee are not in compliance with theprovisions of Section 149(4) Section 177 & Section 178 respectively.
Because of the significance of the matters described in the Basis for Disclaimer ofOpinion paragraph we have not been able to obtain sufficient appropriate audit evidenceto provide a basis for an audit opinion. Accordingly we do not express an opinion on thestandalone financial statements.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 we give in the Annexure "A" a statementon the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by section 143(3) of the Act we report that: a. As described in the Basisfor Disclaimer of Opinion paragraph we sought but were unable to obtain all theinformation and explanations which to the best of our knowledge and belief were necessaryfor the purpose of our audit; b. Due to the possible effects of the matter described inthe Basis for Disclaimer of Opinion paragraph we are unable to state whether proper booksof account as required by law have been kept by the Company so far as appears from ourexamination of those books;
c. the Company has not appointed a person other than Companies auditor for audit ofaccounts of branch offices under Section 143(8); hence clause (c) of sub-section (3) ofsection 143 is not applicable;
d. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Balance Sheet Statement of Profitand Loss and Cash Flow Statement dealt with by this Report are in agreement with the booksof account;
e. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the aforesaid financial statementscomply with the the Act read with Rule 7 of the Companies (Accounts) Rules 2014;
f. the matters described under the Basis for Disclaimer of Opinion paragraph readfurther with para i a iv v vii a and viii of our report in Annexure "A" andpara 5 & 6 of Annexure "B" attached hereto in our opinion may have anadverse effect on the functioning of the Company;
g. On the basis of written representations received from the directors as on 31 March2018 taken on record by the Board of Directors none of the directors are disqualified ason 31 March 2018 from being appointed as a director in terms of Section 164(2) of theAct. As per their declaration M/s Pratibha Industries Ltd. has defaulted in repayment ofDeposit received from Public. Based on legal opinion taken by them this doesntattract disqualification of directors.
h. the qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Disclaimer of Opinion paragraph above.
i. with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls we give ourseparate Report in "Annexure B".
j. with respect to the other matters included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit &Auditors) Rules2014 in ouropinion and to our best of our information and according to the explanations given to us :
a. As detailed in Note No. 36to the Standalone Financial Statements the Company hasdisclosed the impact of pending litigations on its standalone financial position;
b. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Company has made provision asrequired under the applicable law or accounting standards for material foreseeablelosses if anyon long-term contracts including derivative contracts;
c. There has been delay of 9 days in transferring the Unpaid Dividend amounting to Rs.53630 of FY 2010-11.
For Ramanand & Associates
ICAI Firm Registration Number.: 117776W
Membership. No.: 103975
Date: 11th September 2018
Annexure "A" to the Independent Auditors Report
The Annexure referred to in our report to the members of PRATIBHA INDUSTRIES LIMITED(The Company) on the standalone financial statements for the year ended 31 stMarch 2018. We report that: i. In respect of its fixed assets:
a. The Company has maintained records showing particulars including quantitativedetails and situation of fixed assets. However location of assets is not updated inrecords.
b. As explained to us all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable havingregard to the size of the Company and nature of its assets. We are informed that nomaterial discrepancies were noticed on such physical verification.
c. According to the information and explanations given to us the title deeds ofimmovable properties recorded as fixed assets in the books of account are held in the nameof the company.
ii. In respect of inventories
a. According to the information and explanation given to us the physical verificationof inventory has been conducted at reasonable intervals by the management during the year.However we could not observe inventory verification in the absence of intimation from themanagement in this regard.
b. As per the information and explanation given to us no material discrepanciesbetween physical inventory and book records were noticed on physical verification. Asregards inventory in the nature of Work in Progress reference is invited to para 2 &3 under Basis for Disclaimer of Opinion of our report.
iii. According to information and explanations given to us the Company has grantedunsecured loans to parties covered in the register maintained under Section 189 of theCompanies Act 2013. In respect of these loans;
a. In our opinion and as per information and explanation given to us terms andconditions of grant of such loans are prejudicial to the companys interest.
b. the terms of repayment of the principal amount and the payment of the interest havenot been stipulated and hence we are unable to comment as to whether receipt of theprincipal amount and the interest are regular and
c. in the absence of stipulated terms and conditions we are unable to comment as towhether there is any overdue amount for more than ninety days and whether reasonable stepshave been taken by the Company for recovery of the principal amount and interest
iv. In our opinion and according to the information and explanations given to us inrespect of loans investments guarantees and security provisions of section 185 hasbeen complied with. However it has given interest free unsecured loans covered undersection 186 of the Companies Act 2013 which is in non-compliance of provisions of section186(7).
v. The Company has accepted deposits from the public. As per our verification ofrecords and information & explanations given to us except the provisions ofsection 73(3) and 74(3)the company has complied with the provisions of sections 73 to76 or any other relevant provisions of the Act and the rules framed there-under whereapplicable.
As per information & explanations given to us as per the requirements ofsection 73(3)the company has failed to repay the amount of deposits & interestthereon on maturity. Further the order has been passed by Company Law Board undersection 74 (2) of the Companies Act 2013. As per the requirement of the order andsection 74 (3) of the Act the company has failed to repay deposits amounting to Rs.199120000 and interest thereon amounting to Rs. 93173942. Further directivesissued by the Reserve Bank of India are not applicable to the company.
vi. We have broadly reviewed the books of accounts maintained by the Company pursuantto the rules prescribed by the Central Government under Section 148(1) of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. We have however not made a detailed examination of therecords with a view to determine whether they are accurate or complete.
vii. In respect of statutory dues: a. According to information and explanations givento us and on the basis of our examination on test check basis undisputed statutory duesincluding Provident Fund Employees State Insurance Income Tax Sales Tax WealthTax Service Tax duty of Customs Duty of Excise Value Added Tax Goods & ServiceTax Cess and other material statutory dues have not been regularly deposited with theappropriate authorities and there have been significant delays in payment of statutorydues.
According to the information and explanations given to us undisputed amounts payablein respect thereof which were outstanding as at March 31 2018 for a period of more thansix months from the date of becoming payable are as follows:
|Nature of Dues ||Amount (Rs) ||Period to which amount relates ||Due Date |
|Property Tax ||449600 ||2015-16 ||31-12-2016 |
|Provident Fund ||21482252 ||2015-16 ||till 15/04/2016 |
|Provident Fund ||31647364 ||2016-17 ||till 15/04/2017 |
|Provident Fund ||8231464 ||April 17 to August 17 ||till 15/09/2017 |
|Employee State insurance corporation ||706934 ||2015-16 ||till 21/04/2016 |
|Employee State insurance corporation ||6951197 ||2016-17 ||till 21/04/2017 |
|Employee State insurance corporation ||2655240 ||April 17 to August 17 ||till 21/09/2017 |
|Profession Tax ||3005280 ||2015-16 ||till 30/04/2016 |
|Profession Tax ||2732288 ||2016-17 ||till 30/04/2017 |
|Profession Tax ||324548 ||April 17 to August 17 ||till 30/09/2017 |
|Maharashtra Welfare Labour Fund ||91680 ||2015-16 ||till 31/01/2016 |
|Maharashtra Welfare Labour Fund ||114979 ||2016-17 ||till 31/01/2017 |
|Maharashtra Welfare Labour Fund ||4815 ||Jun-17 ||31-07-2017 |
|Service Tax ||55023053 ||2014-15 ||Till 31/03/2015 |
|Service Tax ||128595644 ||2015-16 ||Till 31/03/2016 |
|Service Tax ||148076466 ||2016-17 ||Till 31/03/2017 |
|Service Tax ||32677884 ||April 17 to August 17 ||Till 05/09/2017 |
|Excise Duty ||1259894 ||Nov-16 ||05-12-2016 |
|Customs Duty ||57257530 ||16-17 ||31-03-2017 |
|Tax Deducted At Source ||15559913 ||Upto Mar-16 ||Till 30/04/2016 |
|Tax Deducted At Source ||107830552 ||2016-17 ||Till 30/04/2017 |
|Tax Deducted At Source ||23081290 ||April 17 to August 17 ||Till 07/09/2017 |
|Tax Collected At Source ||48843 ||2016-17 ||Till 30/04/2017 |
|Tax Collected At Source ||15619 ||April 17 to August 17 ||Till 07/09/2017 |
|Value Added Tax ||51044136 ||Upto Mar-16 ||Till 21/04/2016 |
|Value Added Tax ||24741892 ||2016-17 ||Till 21/04/2017 |
|Value Added Tax ||4157347 ||Apr17-Jun17 ||Till 21/07/2016 |
|CGST ||4983886 ||Jul17-Aug17 ||Till 20/09/2017 |
|SGST ||4983885 ||Jul17-Aug17 ||Till 20/09/2017 |
|IGST ||190267 ||Jul17-Aug17 ||Till 20/09/2017 |
b. According to the information and explanations given to us dues that have not beendeposited by the Company on account of disputes are as follows:
|Nature of the dues ||Amount (Rs.) ||Period to which the amount relates ||Forum where dispute is pending |
|Value Added Tax ||107790909 ||2005-06 to 2009-10 ||Joint Commissioner (Appeal) Mumbai |
|Value Added Tax ||19526625 ||2011-12 ||Asst Commercial Tax Officer Goa |
| || || ||Asst Commissioner Deptt of Trade & Taxes |
|Value Added Tax ||69162059 ||April 2012-March 2015 ||Delhi |
|Value Added Tax ||39147672 ||2010-11 ||Joint Commissioner (Appeal) I Mumbai |
|Value Added Tax ||61263484 ||2011-12 ||Dy Commissioner (Appeal) I Mumbai |
|Value Added Tax ||111241103 ||2012-13 ||Joint Commissioner of Sales Tax (Appeals) |
| || || ||Add Commissioner Grade-II Appeal -I |
|Value Added Tax ||2406185 ||2011-12 ||Meerut |
| || || ||Add Commissioner Grade-II Appeal -I |
|Value Added Tax ||46139603 ||2013-14 ||Meerut |
| || || ||Special Commissioner I - Dept of Trade and |
|Value Added Tax ||65390998 ||2014-15 ||Taxes New Delhi |
| || || ||Special Commissioner I - Dept of Trade and |
|Value Added Tax ||245782945 ||2015-16 ||Taxes New Delhi |
|Central Sales Tax ||21466427 ||2010-11 ||Joint Commissioner (Appeal) I Mumbai |
|Central Sales Tax ||35955801 ||2011-12 ||Dy Commissioner (Appeal) I Mumbai |
|Central Sales Tax ||23799475 ||2012-13 ||Joint Commissioner of Sales Tax (Appeals) |
|Service Tax ||3687253 ||2007-10 ||CESTAT Kolkata |
|Service Tax ||9965877 ||2009-10 ||CESTAT Dadar |
| || || ||In the process of filing appeal to CESTAT |
|Service Tax ||50362887 ||2013-14 ||Mumbai |
|Service Tax ||24542444 ||2016-17 ||Commissioner (Appeals) Mysore |
|Excise Duty ||2426682 ||2005-07 ||CESTAT Kolkata |
|Custom Duty ||6689106 ||2014-15 ||CIU Mumbai |
|Income Tax ||169946249 ||AY 2000-01 to AY 2008-09 ||Mumbai High Court |
|Income Tax ||1243812562 ||AY 2006-07 to AY 2013-14 ||ITAT Mumbai |
viii. In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of following dues to the financial institutions andbanks during the year which were paid before the Balance Sheet date.
|Name of Bank/ FI ||No. of Instalments ||Total Amount of Defaults ||Range of Delay (in days) |
|BMW Financial Services ||11 ||1165340 ||8 to 27 |
|Daimler Financial Services ||11 ||1794134 ||7 to 57 |
|Kotak Mahindra Bank ||9 ||2363739 ||12 to 91 |
|Yes Bank ||33 ||2797387 ||34 to 92 |
The Company has defaulted in repayment of following dues to thefinancialinstitutionsand banks during the year which were not paid as at the Balance Sheet date:
|Name of Bank/ FI ||No. of Instalment ||Total Amount of Defaults ||Range of Delay |
|Allahabad Bank ||8 ||249200000 ||90-730 |
|Bank of Baroda ||1 ||50000000 ||424 |
|Bank Of Maharashtra ||8 ||1000000000 ||59-700 |
|Central Bank Of India ||4 ||127125000 ||30-303 |
|Export Import Bank Of India ||5 ||1210000000 ||364-729 |
|Kotak Mahindra Bank ||2 ||599232 ||146-177 |
|BMW Financial Services ||1 ||111855 ||30 |
|Daimler Financial Services ||2 ||347572 ||29-57 |
Further company has not issued debentures. ix. According to the information andexplanation given to us and on the basis of our examination on test check basis we are ofthe opinion that the Company has used term loans for the purposes for which they wereraised. During the year the company has not raised money by way of initial public offeror further public office (including debt instrument). x. According to the information andexplanation given to us no fraud by the company or on the Company by its officers oremployees has been noticed or reported during the year.
xi. According to the information and explanation given to us and on the basis of anoverall examination of books of accounts of the Company no managerial remuneration hasbeen paid or provided during the year.
xii. According to the information and explanation given to us the company is not aNidhi Company. Therefore provisions of clause 3(xii) of the order are not applicable tothe company.
xiii. According to the information and explanation given to us transactions enteredinto by the company with the related parties are in compliance with sections 177 and 188of Companies Act 2013 and the details have been disclosed in the Financial Statementsetc. as required by the applicable accounting standards;
xiv. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.
xv. According to the information and explanation given to us the company has notentered into any non-cash transactions with directors or persons connected with him duringthe year.
xvi. According to the information and explanation given to us the company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
For Ramanand & Associates
Firm Regn. No.: 117776W
M. No.: 103975
Date: 11th September 2018
Annexure "B" to the Independent Auditors Report
[Referred to under Report on Other Legal and Regulatory Requirements in theIndependent Auditors Report of even date to the members of PRATIBHA INDUSTRIESLIMITED on the standalone financial statements for the year ended 31 st March 2018]
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
1. We have audited the internal financial controls over financial reporting PratibhaIndustries Limited ("the Company") as of March 31 2018 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
2. Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on internal control over financial reporting criteria establishedby the Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India. These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to companys 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.
3. Auditors Responsibility
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 to the extent applicable toan audit of internal financial controls both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial was established and maintainedand 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 assessing therisk that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditors judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis forour Adverse opinion on the Companys internal financial controls system overfinancial reporting.
4. Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingincludes those policies and procedures that (1) pertain to the maintenance of recordsthat 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 andexpenditure 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.
5. Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the of collusion or improper management override of controlsmaterial misstatements due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.
According to the information and explanations given to us and based on our audit wehave identified following material weaknesses that has not been identified as a materialweakness in Managements assessment:
a) The Company did not have an appropriate internal control system for preparingdebtors ageing and making provision for bad debts. This could potentially result in nonbooking of bad debts.
b) The Company did not have an appropriate internal control system for obtainingexternal balance confirmation on periodic basis. This could potentially result ininaccurate assets & liabilities disclosed in the books of accounts.
c) The Company did not have an appropriate internal control system for reviewingcomputation of Work in Progress (WIP) Cost to Completion and estimated profitability ofall projects regularly. This could potentially result in inaccurate disclosure of WIP andconsequent profitability.
d) The company did not have an appropriate internal control system for reconcilingbalances of foreign vendors in INR and applicable foreign currency. This could potentiallyresult in inaccurate translation of foreign currency balance in INR balance on Balancesheet date.
e) The company did not have an appropriate internal control system over updation ofaccounts on timely basis. Booking of many entries are delayed on account of delayedreceipt of records. There is lack of coordination between different divisions of thecompany. These all could potentially result in misstatement of financial statements.
f) The company did not have an appropriate internal control system of maintaining BankFD register tracking maturity of FDs and accounting for interest on timely basis. Thiscould potentially result in reporting FD and interest balance on Balance sheet date.
g) The company did not have an appropriate internal control system of checking theinterest levied by Lenders. This could potentially lead to overcharging by Lenders andincrease in Finance Cost of the company.
h) The company did not have an appropriate internal control system ofcalling Quotationsfrom more than one Vendor while placing order. This could potentially lead to inefficientprocurement and increased cost.
i) The company did not have mechanism to track booking of expenses against advancespaid. This could potentially lead to unauthorised payment and non-adjustment of advanceagainst corresponding liability.
In our opinion because of the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas not maintained in all material respects adequate internal financial controls overfinancial reporting and such internal financial controls over financial reporting were notoperating effectively as of March 31 2018 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. We haveconsidered the material weaknesses identified and reported above in determining thenature timing and extent of audit tests applied in our audit of the March 31 2018standalone financial statements of the Company and our aforesaid report and opinion onInternal Financial Control over Financial Reporting should be read in conjunction with ourreport of even date issued on the standalone financial statements of the Company.
For Ramanand & Associates
ICAI Firm Registration Number: 117776W
Membership Number: 103975
Date: 11th September 2018