TO THE MEMBERS OF RESTILE CERAMICS LIMITED
Report on the audit of the Financial Statements
We have audited the accompanying Financial Statements offiRESTILE CERAMICS LIMITED("the Company") which comprise the Balance Sheet as at March 31 2019 theStatement of Profit and Loss Statement of Changes in Equity and Statement of Cash fiowsfor the year then ended and a summary of the significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effect of the matters described in the Basis for qualifiedopinion paragraph the aforesaid Ind AS financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2019 and its loss for the year ended on that date.
Basis for Opinion
The Company has generated negative operating cash fiows incurred substantial operatinglosses and significant deterioration in value of assets used to generate cash fiows all ofwhich indicate existence of material uncertainty in the Companys ability to continueas a going concern for a reasonable period of time. The attached financial statements donot include any adjustments that might result had the above uncertainties been known.
The Companys building is carried in the books at a value of Rs. 711.30 lakhs asat March 31 2019. Independent valuation of the same during the earlier year had indicatedimpairment in value of Rs.376.20 lakhs which ought to be recognized in the Statement ofProfit and Loss. However the Company has represented that under the rehabilitation schemesanctioned by BIFR in 2002 a reserve of Rs.754.44 Lakhs had been created (upon capitalreduction) towards adjustment of possible impairment in value of Property plant andEquipment and that steps are being initiated to adjust the impairment in value against thereserve with the approval of appropriate authorities. Consequently the said impairment invalue of Building has not been recognized in the Financial Statements. We conducted ouraudit in accordance with the Standards on Auditing (SAs) specified under section 143(10)of the Companies Act 2013. Our responsibilities under those Standards are furtherdescribed in the Auditors Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ourqualified opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These 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.
|Key Audit Matter Description ||Response to Key Audit Matter |
|A. Revenue Recognition ||Principal Audit Procedures |
|Reference may be made to note 3.2 of significant accounting policies and note 3 to the financial statements of the Company. ||Audit procedures relating to revenue comprised of test of controls and substantive procedures including the following: |
|During the year on account of adoption of new revenue standard Ind AS 115 Revenue from contracts with customer there have been changes in revenue recognition policy with regards to timing of recognition and related disclosures. ||i. We assessed whether the policy of recognizing revenue was in line with Ind AS 115. |
| ||ii. We performed procedures to assess the design and internal controls established by the management and tested the operating effectiveness of relevant controls related to the recognition of revenue. |
|Revenue recognition is inherently an area of audit risk which we have substantially focused on mainly covering the aspects of cut off. ||iii. Selected a sample of contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation reperformance and inspection of evidence in respect of operation of these controls. |
|Considering the above impact of Ind AS 115 and cut- off are key audit matters. || |
| ||iv. We have tested on a sample basis whether specific revenue transactions around the reporting date has been recognised in the appropriate period by comparing the transactions selected with relevant underlying documentation including goods delivery notes customer acknowledgement/proof of acceptance and the terms of sales. |
| ||v. We have also validated subsequent credit notes and sales returns up to the date of this Report to ensure the appropriateness and accuracy of the revenue recognition. vi. We tested journal entries on a sample basis to identify any unusual or irregular items. |
| ||vii. We also considered the adequacy of the disclosures in Companys financial statements in relation to Ind AS 115 and were satisfied they meet the disclosure requirements. |
| ||Conclusion |
| ||Based on the procedures performed above we did not find any material exceptions with regards to adoption of Ind AS 115 and timing of revenue recognition. |
|B. Inventory valuation ||Principal Audit Procedures |
| ||Our audit procedures comprised of the following: |
|Reference may be made to note 3.10 of significant accounting policies and note 14 to the financial statements of the Company. || |
|Under Ind AS 2 Inventories materials and other supplies held for use in production are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. The valuation of raw material and other supplies held for production have been an area of our focus in view of loss incurred and the inability to have operating margins. The valuation of finished goods has also been focused upon in view of the production of goods having ceased and the passage of time that has lapsed. Valuation of Inventory in accordance with Ind AS 2 has thus been considered as a key audit matter. ||1. We have verified the maintenance of Stock Records with respect to Raw materials and Finished Goods and Inventory has being verified physically by management at year end and no material discrepancies have been reported that need to be dealt within the books of accounts. |
| ||2. We have selected a sample of items of Raw materials and other supplies held for production to check whether the rate per unit adopted for valuation is refiective of the last purchase rate (Realizable price). Similarly the rate per unit of various finished goods have been checked on a sample basis as to whether they refiect the net sale price (Realizable price). |
| ||Conclusion: |
| ||Based on the procedures performed above we have concluded that management has complied with the requirements of IND AS 2 "Inventories". |
|C. Non-Payment/belated payment of Statutory Dues ||Principal Audit Procedures |
|Company has not paid/paid belatedly various Undisputed Statutory dues including Income Tax and applicable Value Added Tax. ||We have performed the following list of audit procedures. |
| ||1. Obtained details of payment of various statutory dues to be paid by company. |
|Payment of statutory dues regularly and within time refiects on the health of the company apart from the need for us to report on issues of non-compliance to members. We have therefore considered payment of statutory dues as a key audit matter. ||2. Evaluated the design of internal controls relating to compliance with statutory dues. |
| ||3. Verified that whether company has been regular in payment of statutory dues. |
| ||Conclusion |
| ||Based on the above procedures performed we noted that |
| ||a. The payment of statutory dues depended upon availability of funds and is being paid with applicable interest and delays noted are disclosed elsewhere in this report. |
| ||b. The company has to make with respect to AP VAT amounting Rs.18 lakhs and Income Tax amounting Rs. 2.70 lakhs. |
Information other than the Financial Statements and Auditors Report thereon
The Companys Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Boards Report including Annexures and ShareholdersInformation but does not include the financial statements and our auditors reportthereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Companys Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthe financial statements that give a true and fair view of the financial positionfinancial performance changes in equity and cash fiows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompanys 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 Board of Directors are also responsible for overseeing the Companys financialreporting process.
Auditors Responsibilities 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 auditors report that includes our opinion. Reasonable assurance is ahigh level of assurance but is not a guarantee that an audit conducted in accordance withSAs 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 infiuence 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 scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompanys ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditors report. However future events or conditions may cause theCompany to cease to continue 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 financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be infiuenced. 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors 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 Section143 (3) of the Companies Act 2013 we report that:
(a) We have sought and obtained all the information and explanations which to thebest of 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 bythe Company so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss Statement of Changes inEquity and the Statement of Cash Flows dealt with by this report are in agreement with thebooks of account.
(d) In our opinion the aforesaid Financial Statements comply with the IndianAccounting Standards prescribed under Section 133 of the Act read with the relevant rulesissued thereunder.
(e) On the basis of the written representations received from the Directors asonfiMarch 31 2019 taken on record by the Board of Directors none of the Directors isdisqualified as on March 312019 from being appointed as a director in terms ofSection164(2) of the Companies Act 2013.
(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 "A". Our report expresses a modified opinion on theadequacy and operating effectiveness of the Companys internal financial controlsover financial reporting.
(g) With respect to the other matters to be included in the Auditors Reportin accordance with requirements of section 197(16) of the Act as amended: In our opinionand to the best of our information and according to the explanations given to us noremuneration other than applicable sitting fees has been paid by the Company to itsdirectors during the year which is in accordance with and not in excess of the limits laiddown under the said section.
(h) With respect to the other matters to be included in the Auditors Reportin accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in ouropinion and to the best of our information and according to the explanation given to us: i.The Company has disclosed the impact of pending litigations on its financial positionin its Financial Statements. (Refer Note 27) ii. The company did not have anylong-term contracts including derivative contracts for which there were any materialforeseeable losses as at March 312019. iii. There were no amounts which wererequired to be transferred to the Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditors Report) Order2016 ("theOrder") issued by the Central Government in terms of Section 143(11) of the Act wegive in "Annexure B" a statement on the matters specified in paragraphs 3 and 4of the Order.
For M.S. Krishnaswami & Rajan
Registration No. 01554S
Membership No. 26453
Date: May 04 2019
ANNEXURE "B" TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements section of our report of even date on the accounts of RESTILE CERAMICSLIMITED ("the Company") for the year ended March 31 2019)
(i) In respect of its fixed assets:
(a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets. The same however needs to beupdated.
(b) The fixed assets are being physically verified under a phased programme ofverification which in our opinion is reasonable having regard to the nature and value ofits assets and no material discrepancies have been noticed on such verification carriedout during the year in terms of the phased programme.
(c) On the basis of documents of title produced to us and the information andexplanations produced to us we are of the opinion that the title deeds of immovableproperties of the Company are held in its name.
(ii) The inventories have been physically verified by management at the year-endand no material discrepancies have been reported that needs to be dealt with in books ofaccounts.
(iii) The Company has not granted any loans secured or unsecured to companiesfirms Limited Liability Partnerships or other parties covered in the Register maintainedunder Section 189 of the Companies Act 2013 (iv) The Company has not granted anyloans made investments provided guarantees and security covered under provisions ofsection 185 and 186 of the Companies Act 2013.
(v) According to information and explanations given to us the Company has notaccepted any deposits from the public during the year and accordingly the provisions ofClause 5 of paragraph 3 of the Order are not applicable to the Company.
(vi) In our opinion and according to the information and explanations given to usthe requirement for maintenance of cost records pursuant to the Companies (Cost Recordsand Audit) Rules 2014 specified by the Central Government of India under section 148 ofthe Companies Act 2013 are not applicable to the Company.
(vii) According to the information and explanations given to us and the books ofaccount examined by us in respect of statutory dues: (a) Delays were noticed indepositing undisputed statutory dues including provident fund employees stateinsurance income tax Goods and Service tax and other statutory dues with theappropriate authorities during the year. The arrears of statutory dues outstanding formore than six months as at March 31 2019 are:
|Nature of Dues || |
Amount (Rs. Lakhs)
|Sales Tax ||18.00 |
|Income Tax ||2.70 |
We are informed that the delays were caused due to financial constraints.
(b) There are no dues of income tax service tax excise duty goods and servicestax cess and customs duty which have not been deposited on account of any dispute.
(viii) There are no loans or borrowings from financial institution governmentbanks or in the form of debentures.
(ix) There are no monies raised during the year by way of public offer or furtherpublic offer (including debt instruments) and term loans and hence reporting under clause3(ix) of the order is not applicable to the company.
(x) To the best of our knowledge and belief and according to the information andexplanations given to us no fraud by the Company and no material fraud on the Company byits officers or employees has been noticed or reported during the year. (xi) In ouropinion and according to the information and explanations given to us the Company has notpaid/ provided managerial remuneration and hence reporting on the compliance by thecompany with the provisions of Section 197 read with Schedule V to the Companies Act 2013does not arise.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) ofParagraph 3 of the Order is not applicable to the Company.
(xiii) In our opinion and according to the information and explanations given to usthe Company has complied with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
(xiv) During the year the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures and hence reportingunder clause (xiv) of paragraph 3 of the Order is not applicable to the Company. (xv) Inour opinion and according to the information and explanations given to us the Company hasnot entered into any noncash transactions during the year with its directors or personsconnected with him and hence provisions of section 192 of the Companies Act 2013 are notapplicable.
(xvi) The Company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934.
For M.S. Krishnaswami & Rajan
Registration No. 01554S
Membership No. 26453
Date: May 04 2019