To The Members of RESONANCE SPECIALTIES LIMITED
Report on the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of RESONANCESPECIALTIES LIMITED ("the Company") which comprise the Balance Sheet as atMarch 31 2019 and the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Accounting Standards prescribed under section 133 of theAct read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 and its profit (including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.
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 bethe key audit matters to be communicated in our report.
|Key audit matter ||Auditor's response |
|1 Revenue Recognition ||Our audit procedures among other things included the following: |
|Revenue is recognized upon transfer of control of promised goods to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods. Revenue is measured based on transaction price which is the consideration adjusted for rebates discounts and incentives as also estimated sales returns. Revenue is one of the key profit drivers and therefore accounting of revenue is considered as a key audit matter. ||1. Considered the appropriateness of the Company's accounting policies regarding revenue recognition |
| ||2. Testing controls automated and manual around dispatches/ deliveries/shipments inventory reconciliations and process of confirmation of receivable balances testing for cut-offs and analytical review procedures. |
| ||3. Assessed the disclosures in accordance with the requirements of Ind AS 115 on "Revenue from Contracts with Customers". |
|[Refer Notes III(f) to the financial statements] || |
|2 Evaluation of uncertain tax positions ||Our audit procedures among other things included the following: |
|The company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. ||(a) Obtained details of completed tax assessments and demands during the year ended march 31 2019 from management. |
| ||(b) We involved our internal tax experts to challenge the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. |
| ||(c) Our internal tax experts also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. |
| ||(d) We considered the effect of new information in respect of uncertain tax positions as at 31st March 2019 to evaluate whether any change was required to management's position on these uncertainties |
|3 Valuation of inventories ||We have reviewed the stock records and held discussion with the management. We verified arithmetical accuracy of valuation records/ Company'sreports. |
|Inventory forms a significant part i.e. 23% of the total assets. Inventory comprises of Raw Materials Finished Goods Stock in process and Stores and Spares. The Company has complex product manufacturing process and thus the overhead absorption over each process is quite complex and more particularly to have the basis of absorption. The Company has worked out the overhead absorption cost rate based on the consumption of material and apply the same for all other overheads. Due to significance of arriving at the overhead absorption rate for the valuation of inventories it is considered to be a key audit matter. Refer notes III(g) to the standalone financial statements. ||For a sample of inventory items we have verified that the weighted average cost calculation by the system in case of inventory is appropriate. |
|4 Related Party Transactions ||We have read the approvals obtained from audit committee board of directors and shareholders. |
|Determination of transaction price for related party transactions is a key audit matter considering the significance of the transaction value and the significant judgments involved in determining the transaction value. Refer notes 37 of the standalone financial statements. || |
| ||We have assessed the disclosures in accordance with Ind AS 24 "related party disclosures". |
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 materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Management and Board of Directors are responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance total comprehensive income cash flows andchanges in equity of the Company in accordance with the Indian Accounting Standards (IndAS) and other accounting principles generally accepted in India. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and 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 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 SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(1)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company 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 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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 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 disclosure 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 the Companies (Auditor's Report) Order 2016 ("theorder") issued by the Central Government of India in term of sub- section (11) of thesection 143 of the Act we give in the Annexure A a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act based on our audit 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 Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards prescribed under section 133 of the Act read with Act readwith Rule 7 of the Companies (Accounts) Rules 2014.
e) On the basis of the written representations received from the directors of theCompany as on March 31 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2019 from being appointed as a director in termsof Section 164(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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - refer note no.38 to the statements.
ii. The Company has made provision as required under the applicable law or Indianaccounting standards in for material foreseeable losses if any on long-term contractsincluding derivative contracts. iii. There has been no delay in transferring amountsrequired to be transferred to the Investor Education and Protection Fund by the Company.
For V.R.BHABHRA & CO.
(Firm's Registration No. 112861W)
VIMAL R .BHABHRA
(Membership No. 046043)
Date: 29th May 2019
Annexure A to the Independent Auditors' Report
(Referred to paragraph (9) under Report on other legal and regulatoryrequirements' of our report of even date to the member of resonance specialties limited onthe Ind AS financial statements for the year ended March31 2019)
i. In respect of Fixed Assets :
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. b. The fixed assets have beenphysically verified by the management in a phased manner designed to cover all items overa period of three years which in our opinion is reasonable having regard to the size ofthe Company and the nature of its business. Pursuant to the program a portion of fixedasset has been physically verified by the management during the year and no materialdiscrepancies between the books records and the physical fixed asset have been noticed.
c. The title deeds of immovable properties are held in the name of the company.
ii. In respect of Inventories :
a. We are informed that the inventory has been physically verified by the managementduring the year. In our opinion the frequency of verification is reasonable.
b. In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventory followed by the management are reasonableand adequate in relation to size of the Company and nature of its business.
c. On the basis of our examination of the records of inventory we are of the opinionthat the Company is maintaining proper records of inventory. We are informed that thediscrepancies noticed on verification between the physical stocks and the book recordswere not material in relation to the operations of the Company.
iii. The company has not granted any loans secured or unsecured to companies firmsor other parties covered in the register maintained under section 189 of the CompaniesAct 2013. Accordingly the provisions of clause 3(iii) (a) to (c) of the order are notapplicable to the company and hence not commented upon.
iv. 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 act 2013in respect of loan investments guarantees and security.
v. According to the information and explanations given to us the company has notaccepted any deposits from the public and hence the directives issued by the Reserve bankof India and the provisions of Section 73 to 76 or any other relevant provisions of theAct and Companies (Acceptance of deposit) Rule 2015 with regard to the deposits acceptedfrom the public are not applicable.
vi. We have broadly reviewed the books of account and records maintained by the Companypursuant to the rules prescribed by the Central Government of India the company isrequired to maintain cost records as specified under section 148(1) of the Companies Act2013 in respect of its products. We have broadly reviewed the same and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained. Thecontents of these accounts and records have not been examined by us.
vii. In respect of statutory dues:
a. According to the information and Explanation given to us and records of the Companyas produced and examined by us in our opinion there have been some delays in depositingundisputed statutory dues in respect of Provident Fund Income-tax Sales-taxService-tax Excise Duty Goods and Services Tax cess and any other statutory dues withthe appropriate authorities.
b. According to the information and explanations given to us and the records of theCompany examined by us there are no dues of income tax Sales Tax Wealth Tax Servicetax Custom Duty Excise Duty Goods and services Tax or cess which have not beendeposited on account of any dispute except as mentioned below:
|Name of statute ||Nature of the Dues ||Amount ||Pending before ||Nature of Dispute |
| || ||(Rs.in lakhs) || || |
|Central Excise Act ||Excise duty ||63.81 ||Joint Commissioner ||Common input matter of INH for the period of December 2002 to October 2006 order pass by the joint commissioner central excise thane. Against which company file appeal before the commissioner (appeals) and order was passed in favor company against which Department has filed appeal to Appellate Tribunal as per the order of the Appellate Tribunal case was remanded back to adjudicating authority. Pending outcome of the same is considered as contingent liability in the current year. |
|Central Excise Act ||Excise duty ||32.23 ||Appellate Tribunal (CESTAT) ||Inadmissible CENVAT credit taken for the period February 2007 to March 2010 order pass by assistant commissioner Central Excise. Against which company has file Appeal to Commissioner of (appeals) the order was in the favor of the department. The company has filed appeal to Appellate Tribunal (CESTAT). Pending outcome of the same is considered as contingent liability in the current year. |
viii. Based on our audit procedures and according to the information and explanationsprovided to us by the management we are of the opinion that the Company has not defaultedin repayment of dues to financial institution and bank.
ix. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not raised moneys by way of initial public offeror further public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.
x. Based upon the audit procedures performed and the information and explanations givenby the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during the year.
xi. According to the information and explanation given to us and based on ourexamination of the records of the company the company has paid and provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovision of Section 197 read with schedule V to the act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
xiii . According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards and Companies Act 2013.
xiv . According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For V R BHABHRA & CO.
Vimal R. Bhabhra
Membership No: - 046043
Date: 29th May 2019
Annexure B to the Independent Auditors' Report
(Referred to in paragraph 5(f) of the Independent Auditors' Report of even date to themembers of Resonance Specialties Limited on the financial statements for the year endedMarch 31 2019)
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013
We have audited the internal financial controls over financial reporting of ResonanceSpecialties Ltd. ("the Company") as of March 31 2019 in conjunction with ouraudit of the 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 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 deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. 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 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 judgement 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company; controlsover financial
(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 authorizations of management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized 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 evaluationoftheinternalfinancial over financial reporting tofuture periods are subject to the risk that the internal financial control over financialreporting may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial financialreporting and such controls system over internal reporting wereoperating financial effectively as at March 31 2019 based on the internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For V R BHABHRA & CO.
Vimal R. Bhabhra
Membership No: - 046043
Date: 29th May 2019