To the Members of SHAH ALLOYS LIMITED
Report on the Audit of the Standalone Financial Statements Qualified
We have audited the accompanying standalone financial statements of M/s SHAH ALLOYSLIMITED (''the Company") which comprise the balance sheet as at March 31 2019 andthe statement of profit and loss (including other comprehensive income) statement ofchanges in equity and statement of cash flows for the year then ended and notes to thefinancial statements including a summary of 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 effects of the matter described in the Basis for QualifiedOpinion Section of our report the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 (the Act) in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including Indian Accounting standards (Ind AS) specified under section 133 of theAct of the state of affairs (financial Position )of the Company as at March 31 2019 andits Profits (financial performance including other comprehensive income) its Cash flowsand changes in equity for the year ended on that date.
Basis for Qualified Opinion
1. The Company has not provided for foreign exchange loss in the financial results onthe Principal amount of 10000000 USD and on the Premium amount of 4825500 USD of theForeign Currency Convertible Bonds (FCCB) which had become due for payment on September22 2011 and remain unpaid as at March 31 2019 which constitutes a departure from theIndian Accounting Standard- 21. "The Effects of Changes in Foreign Exchange Rateswhich requires that each foreign currency monetary items should be reported using theclosing rate as at the balance sheet date. Non provision of the foreign exchange loss onthe aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates tothe period from September 23 2011 to March 31 2019. Had the company followed theAccounting Standard and made the provision for foreign exchange loss on the above FCCB forthe year ending on 31.03.2019 then the Profit of the company for the year ending on31.03.2019 would have been lower by Rs. 652.17 lacs and to that extent the liability wouldhave been higher. However the company has not provided for foreign exchange fluctuationon the above FCCB since September 2011 and accordingly the total loss on foreign exchangeworks out to Rs.3057.40 lacs which has not been provided by the company. Thus balance ofReserve and surplus and the current liabilities have been understated by Rs. 3057.40 as on31.03.2019. (Refer Note no 32 of notes forming part of standalone financial statements)
2. For the year ending on 31st March2019 the company has discontinued to make theprovision of interest on loans from banks and financial institutions (excluding on thesettlement entered with ARCs for specific loans which are assigned to them).Had thecompany continued the said practice of making provision of interest on loans from banksand financial institutions for the year ended on 31st March2019 the Profit of the yearwould have been lower by Rs 1305.64 lacs and current liabilities would have been higher tothat extent. (Refer Note no 33 of notes forming part of standalone financial statements)
3. The Company has not assessed the impact of Effective Interest Method to the financecost as per the requirement of lnd AS 109 'Financial Instruments and hence the effect ofthe same if any on the financial results is not identifiable therefore we are unable tocomment upon its impact on the Financial results for the year ended March 31 2019(ReferNote no 43 of notes forming part of standalone financial statements)
4. The Company has not evaluated the provisioning requirement of a loss allowance onits financial assets so as to give impact of impairment if any as per the expected creditloss method as per the requirement of lnd AS 109 'Financial Instruments' and hence theeffect of the same if any on the Financial Results is not identifiable therefore. We areunable to comment upon its impact on the financial results for the year ended March 312019(Refer Note no 44 of notes forming part of standalone financial statements)
We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's 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 (ICAI) together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Material Uncertainty Related to Going Concern
The Company's current liabilities exceeded its current assets as at the previous yearbalance sheet date. These conditions indicate the existence of a material uncertainty thatmay cast significant doubt about the Company's ability to continue as a going concern.However in the view of the management the Company is making sincere efforts for therevival of the Business S the management is confident to recover the losses throughimproved profitability in foreseeable future and therefore the financial results of theCompany have been prepared on a "going concern basis". (Refer Note no 42 ofnotes forming part of 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 financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
Key Audit Matter:
|Description of Key audit Matter ||Our response and results |
|Litigations and claims ||Our audit procedures inter alia included following: |
|(Refer note 38) to the standalone financial statements) The cases are pending with multiple tax authorities like ||- Discussed disputed litigation matters with the company's management. |
|Excise and Service tax and there are claims against the company which have not been acknowledged as debt by the company. In normal course of business financial exposures may arise from pending proceedings and from claims of the customers not acknowledged as debt by the company. Whether a claim needs to be recognized as liability or disclosed as contingent liability in the financial statements is dependent on a number of significant assumptions and judgments. The amounts involved are potentially significant and determining the amount if any to be recognised or disclosed in the financial statements is inherently subjective. ||- Evaluated the management's judgment of tax risks estimates of tax exposures other claims and contingencies. Past and current experience with the tax authorities and management's correspondence/response including on the claims lodged by customers were used to assess the appropriateness of management's best estimate of the most likely outcome of each uncertain contingent liability. |
|We have considered Litigations and claims a Key Audit Matter as it requires significant management judgement including accounting estimates that involves high estimation uncertainty. ||- Critically assessed the entity's assumptions and estimates in respect of claims included in the contingent liabilities disclosed in the financial statements. Also assessed the probability of negative result of litigation and the reliability of estimates of related obligations. Conclusion: Based on the procedures described above we did not find any material exceptions to the management's assertions and treatment presentation S disclosure of the subject matter in the standalone financial statements. |
Emphasis of Matter
1. The Company's current liabilities exceeded its current assets as at the previousyear balance sheet date. These conditions indicate the existence of a material uncertaintythat may cast significant doubt about the Company's ability to continue as a goingconcern. However in the view of the management the Company is making sincere efforts forthe revival of the Business S the management is confident to recover the losses throughimproved profitability in foreseeable future and therefore the financial results of theCompany have been prepared on a "going concern basis". (Refer Note no 42 ofnotes forming part of standalone financial statements)
2. The balance confirmation from the suppliers customers as well as to various loansor advances given have been called for but the same are awaited till the date of audit.Thus the balances of receivables trade payables as well as loans and advances have beentaken as per the books of accounts submitted by the company and are subject toconfirmation from the respective parties(Refer Note no 41 of notes forming part ofstandalone financial statements)
Our opinion is not modified on the above matters.
Information other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report. but does not includethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (financial position)Profit orloss(financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Indian Accounting Standards ('Ind AS') specified under section 133of the Act. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due. to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's 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 error.and 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if; individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements
As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain 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)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statement or if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall 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.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence; and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public 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 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. The remuneration paidto any director is not in excess of the limit laid down under section 197 of the Act. TheMinistry of Corporate Affairs has not prescribed other details under Section 197(16) whichare required to be commented upon by us.
2. As required by the Companies (Auditor's Report) Order 2016 (''the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
3. As required by Section 143(3) of the Act we report that:
a. We have sought and except for the matters described in the Basis for Qualifiedopinion obtained all the information and explanations which to the best of our knowledgeand belief were necessary for the purposes of our audit
b. Except for the possible effects of the matter described in the Basis for Qualifiedopinion paragraph above In our opinion proper books of account as required by law havebeen kept by the Company 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 Statement dealt withby this Report are in agreement with the. books of account.
d. The matter described under the Emphasis of Matters paragraph above in our opinionmay have an adverse effect on the functioning of the Company
e. In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
f. On the basis of written representations received from the directors as on March312019 taken on record by the Board of Directors none of the Directors is disqualifiedas on March 312019 from being appointed as a director in terms of Section 164(2) of theAct.
g. 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".Our report express an unmodified opinion on theadequacy and operating effectiveness of the company's internal financial control overfinancial reporting.
h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014as 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 the standalone Financial Statements ( Refer Note No 38 to the StandaloneFinancial Statements.)
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
ANNEXURE A -TO THE INDEPENDENT AUDIT REPORT OF EVEN DATE TO THE MEMBERS OF SHAH ALLOYSLIMITED ON THE STANDALONE FIANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH 2019
(i) In respect of its Property Plant S Equipments:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant S Equipments on the basis ofavailable information.
(b) As explained to us major portion of Property Plant S Equipments are physicallyverified by the management during the year in accordance with a phased program ofverification adopted by company. in our opinion the frequency of verification isreasonable having regard to the size of the Company and nature of its assets. As informedto us no material discrepancies were noticed on such physical verification.
(c) According to the information and explanation given to us and on the basis of ourexamination of records of the company title deeds of the immovable properties held are inthe name of the company.
(ii) As explained to us inventories(excluding goods in transit and goods lying atport) were physically verified by management at reasonable intervals during the year. Inour opinion the frequency of the verification is reasonable. The discrepancies noticed onverification between the physical stocks and the book records were not material.
(iii) In respect of loans Secured or unsecured granted by the company to thecompanies firms limited liability partnership or other parties covered in the registermaintained u/s 189 of the companies Act 2013:
According to the information and explanations given to us and on the basis of recordsproduced before usthe company has not granted any loan secured or unsecured to thecompanieslimited liability partnership or firms or other parties covered in the registermaintained u/s 189 of the companies Act2013 and hence sub-clause (a)S(b) S (c) ofparagraph 3 of companies auditor's report order 2016 are not applicable to the company.
(iv) According to the information and explanations given to us the company has notmade any investment or given any loans during the year under review Accordingly paragraph3(iv) of the Order is not applicable.
(v) The Company has not accepted any deposits from the public.
(vi) We have broadly reviewed the books of accounts maintained by the company pursuantto the rules made by the Central Government of India for the maintenance of Cost recordsspecified under section 148 of Companies Act 2013 and are of the opinion that prima faciethe prescribed accounts S records have been made and maintained. We have however not madea detailed examination of the cost records with a view to determine whether they areaccurate or complete.
(vii) In respect of Statutory dues
(a) According to the information and explanation given to us and on the basis ofexamination of the records of the Company amounts deducted/ accured in the books ofaccounts in respect of undisputed statutory dues including provident fund ESICincome-tax sales tax Goods S Service Tax service tax duty of customs duty ofexcise value added tax cess and other statutory dues have been generally regularlydeposited during the year with the appropriate authorities.
According to the information and explanation given to us no undisputed amounts payablein respect of provident fund ESIC income-tax Goods S ServIce Tax service tax duty ofcustoms duty of excise cess and other statutory dues were resaid dues were outstandingas at 31st March2019 for a period of more than six months from the date of becomingpayable
b) On the basis of records produced before us for our verification and according to theinformation and explanations given to us the details of disputed dues that have not beendeposited as on 31st March 2019 on account of matters pending before the appropriateauthorities are as under:
|Sr. no ||Name of the statue ||Nature of Dues ||Financial year to which it relates ||From where the dispute is pending ||Amount under dispute not yet deposited (Net of Payments) (in Rs lakhs.) |
|1 ||Custom Service tax and Excise ||Service tax ||January 2005 to July 2011 ||The Commissioner of Central Excise Ahmedabad III ||51.58 |
|2 ||Custom Service tax and Excise ||Service tax ||April 2012 to October 2012 ||Custom Excise and Service Tax Appellate Tribunal Ahmedabad ||23.43 |
|Sr. no ||Name of the statue ||Nature of Dues ||Financial year to which it relates ||From where the dispute is pending ||Amount under dispute not yet deposited (Net of Payments) (in Rs lakhs.) |
|3 ||Custom Service tax and Excise ||Service tax to March 2013 ||November 2012 ||The Addl. Commissioner of Central Excise Ahmedabad III ||1.71 |
|4 ||Custom Service tax and Excise ||Service tax ||2013-14 ||The Joint Commissioner of Central Excise Ahmedabad III ||1.48 |
|5 ||Custom Service tax and Excise ||Service tax ||November 1997 to June 1998 ||Gujarat High Court ||25.43 |
|6 ||Custom Service tax and Excise ||Excise duty ||September 2010 to Dec. 2013 ||Custom Excise and Service Tax Appellate Tribunal Ahmedabad ||1909.76 |
|7 ||Custom Service tax and Excise ||Service tax ||Dec. 2014 to May 2015 ||The Dy Commissioner of Central Excise Division Kalol Ahmedabad III ||0.87 |
|8 ||Custom Service tax and Excise ||Service tax ||June 2015 to Dec. 2015 ||The Asst. Commissioner of Central Excise S CGST Div.Kalol ||5.75 |
|9 ||Custom Service tax and Excise ||Service tax ||January 2016 to July 2016 ||The Asst. Commissioner of Central Excise S CGST Division Kalol ||1.22 |
|10 ||Custom Service tax and Excise ||Service tax ||August 2016 to June 2017 ||The Asst. Commissioner of Central Excise S CGST Division Kalol ||1.83 |
(viii) Consequent upon the sanction of the restructuring package given under CDRmechanism by banks and financial institutions the company was requiredto start repayingthe loans sanctioned by banks/institutions and debentures holders from June 2011 onwardshowever the company has made default in repaying the dues as per the terms stipulated inCDR Rework Proposal. The amount and the period of default in respect of term loan Nonconvertible Debentures Funded interest term Loans Interest Payable on the saidfacilities are as under :
|NAME OF THE BANK/FINANCIAL INSTITUTIONS ||NATURE OF FACILITY ||AMOUNT OF DEFAULT AS AT 31-03-2019 (Rs in lacs) ||PERIOD OF DEFAULT (No. of days ) |
|HDFC BANK ||Term Loan ||1171.54 ||1-2831 |
| ||Funded Interest Term loan ||449.41 ||1-1916 |
| ||Interest Payable ||877.89 ||1-2892 |
|INDIAN OVERSEAS BANK ||Non convertible Debenture ||979.17 ||1-2831 |
| ||Funded Interest Term loan ||684.15 ||1-1916 |
| ||Interest payable ||311.33 ||1-3165 |
|LIC OF INDIA ||TERM LOAN ||629.39 ||1-2831 |
| ||Funded Interest Term loan ||370.01 ||1-1916 |
| ||Non convertible Debenture ||7833.33 ||1-2831 |
| ||Interest Payable ||51.58 ||1-3196 |
Moreover the company in September 2006 has raised us $10 million through unsecuredzero coupon foreign currency convertible bonds (FCCB) due on 22 September 2011.on fullconversion of FCCB the FCCB will be converted into 2641143 equity shares of Rs10 eachat a premium of Rs 165 per share at the option of bondholders at any time before thematurity of bonds. On conversion capital will increase by Rs264.11 Lakhs and share premiumby Rs 4357.58 Lakhs. If bonds are not converted the company will have to repay the bondsat premium and in us$. The bonds were convertible into equity shares at the option of bondholders at any time on or after 20thsept 2006 and upto and including 8th September 2011.And hence as on 31st march 2019 this conversion option with bond holders is not being ineffect. The company has provided the premium till 22nd Sept 2011 which has been adjustedagainst security premium in accordance with section 52 of Companies Act 2013.
However the company has defaulted in repayment of foreign currency convertible bond(FCCB) dues on its maturity. The default is subsisting since2746 days.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 of the Order is not applicable.
(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.
(xi) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 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.
(xiv) According to the information and explanations given 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.
Annexure B to the Independent Auditor's Report of Even Date to the Members of SHAHALLOYS LIMITED on the Standalone Financial Statements of the year ended on 31st March 2019Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
In conjunction with our audit of the standalone financial statements of M/s SHAH ALLOYSLIMITED ("the Company") as at and for the year ended 31st March 2019 We haveaudited the internal financial controls over financial reporting of the company as of thatdate. Management's Responsibility for Internal Financial Controls
The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued 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 the company's business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act. Auditor's' 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 Standards on Auditing issued by ICAI and deemed to be prescribed under section143(10) of the Act to the extent applicable to an audit of internal financial controlsover financial reporting and the Guidance Note issued by ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 issued by theICAI.
| ||For Parikh & Majmudar |
| ||Chartered Accountants |
| ||FR No. 107525W |
| ||Sd/- |
| ||[C.A (Dr) Hiten M. Parikh] |
|Place:Ahmedabad ||PARTNER |
|Date: 30/05/2019 ||Membership No. 40230 |