TO THE MEMBERS OF SHARP INDIA LIMITED
Report on the audit of the financial statements
1. We have audited the accompanying financial statements of Sharp India Limited("the Company") which comprise the balance sheet as at March 31 2020 and thestatement of Profit and Loss (including Other Comprehensive Income) statement of changesin equity and statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements 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 principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 and total comprehensive income(comprising of loss and other comprehensive income) changes in equity and its cash flowsfor the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 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 together with the ethicalrequirements 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
4. We draw your attention to Note 32 to the financial statements which states that theCompany has accumulated losses as at March 31 2020 and has also incurred losses duringthe current year. These events along with the other matters set out in the aforesaid Noteindicate that a material uncertainty related to going concern exists. However thefinancial statements have been prepared using the going concern basis of accounting inview of the support letter received from Sharp Corporation Japan the holding company forfinancial and operational support until March 31 2021.
Our opinion is not modified in respect of this matter.
Key audit matters
5. 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. Inaddition to the matter described in the Material Uncertainty Related to Going Concernsection we have determined the matters described below to be the key audit matters to becommunicated in our report.
KEY AUDIT MATTER
Assessment of impairment to carrying amount of property plant and equipment ('PPE')
Refer note 4 to the financial statements.
The net carrying value of property plant and equipment as of March 31 2020 is Rs.582.60 lakhs.
The Company has accumulated losses aggregating to Rs. 8048.45 lakhs its net-worth haseroded and its total liabilities exceed its total assets as at March 31 2020. Furtherthe Company has ceased its manufacturing activities since the last 5 years. The abovefactors indicate a potential impairment of the carrying values of the Property Plant andEquipment.
The Management considered the entire plant as a cash generating unit ('CGU') and hadinvolved an external valuation firm (management expert) for valuation of PPE. Therecoverable value has been determined as the fair value less costs of disposal and isdependent on the valuation methodology adopted and the inputs into the valuation model.Factors such as prevailing market conditions individual nature conditions and locationdirectly impact the fair value.
Based on the valuation exercise carried out by the Company the management determinedthat the recoverable value is higher than the carrying value and therefore no impairmentcharge is warranted.
We focused on this area as the inputs to the valuation model are dependent onManagement judgement and the significance of the amount of PPE to the financialstatements.
How our audit addressed the key audit matter
Our procedures in relation to the assessment for the impairment testing of PPE includedthe following:
a) Assessed and tested the design and operating effectiveness of the Company's controlsover the impairment assessment.
b) Evaluated the Company's accounting policy in respect of impairment assessment ofPPE.
c) Evaluated whether the assessment of CGU was consistent with our knowledge of theCompany's operations.
d) Assessed the competency and capabilities of the external valuer engaged by themanagement.
e) Read the valuer's terms of engagement and assessed the objectivity and scope oftheir work.
f) We assessed the valuation methodology adopted by the valuer and the reasonablenessand the source of the assumptions considered such as per unit rate of land.
g) Evaluated the adequacy of disclosures made in the financial statements.
On the basis of the above procedures performed we did not find any material exceptionsto the management's assessment of impairment of property plant and equipment.
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Board's report but does not includethe financial statements and our auditor's report thereon. The Board's report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the Board's report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance andtake appropriate action as applicable under the relevant laws and regulations.
Responsibilities of management and those charged with governance for the financialstatements
7. 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 financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Accounting Standards specified under section 133 of theAct This responsibility also includes maintenance of adequate accounting records inaccordance 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.
8. 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 theCompany's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
9. 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.
10. 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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
??Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
??Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
??Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
11. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
12. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
13. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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
14. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
15. As required by Section 143(3) of the Act we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
d. In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act.
e. On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
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".
g. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note 14 and 30 to the financialstatements;
(ii) The Company did not have any long-term contracts including derivative contractsfor which 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 during the year ended March 31 2020.
(iv) The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2020.
16. The Company has paid/provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.
For Price Waterhouse Chartered Accountants LLP Firm Registration Number:012754N/N500016
Membership Number 109846 UDIN:20109846AAAADE1232
Date : June 26 2020
Annexure A to Independent Auditors' Report
Referred to in paragraph 13(f) of the Independent Auditors' Report of even date to themembers of Sharp India Limited on the financial statements for the year ended March 312020
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financialstatements of Sharp India Limited ("the Company") as of March 31 2020 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
2. 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.
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
5. 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 systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 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.
For Price Water house Chartered Accountants LLP Firm Registration Number:012754N/N500016
Membership Number 109846 UDIN:20109846AAAADE1232
Date : June 26 2020
Annexure B to Independent Auditors' Report
Referred to in paragraph 14 of the Independent Auditors' Report of even date to themembers of Sharp India Limited on the financial statements as of and for the year endedMarch 31 2020
i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets of the Company have been physically verified by the Managementduring the year and no material discrepancies have been noticed on such verification. Inour opinion the frequency of verification is reasonable.
(c) The title deeds of immovable properties as disclosed in Note 4 on fixed assets tothe financial statements are held in the name of the Company.
ii. The physical verification of inventory have been conducted at reasonable intervalsby the Management during the year. The discrepancies noticed on physical verification ofinventory as compared to book records were not material and have been appropriately dealtwith in the books of accounts.
iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company.
iv. The Company has not granted any loans or made any investments or provided anyguarantees or security to the parties covered under Section 185 and 186. Therefore theprovisions of Clause 3(iv) of the said Order are not applicable to the Company.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.
vi. The Central Government of India has not specified the maintenance of cost recordsunder sub-section (1) of Section 148 of the Act for any of the products of the Company.
vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues in respect of provident fund employees' state insurance incometax goods and service tax and other material statutory dues with the appropriateauthorities though there has been a slight delay in a few cases. Also refer note 30 to thefinancial statements regarding management's assessment on certain matters relating toprovident fund.
(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 and goods and service tax whichhave not been deposited on account of any dispute. The particulars of dues of sales tax asat March 31 2020 which have not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs.) ||Period to which the amount relates ||Forum where the dispute is pending |
|Central Sales Tax Act 1956 ||CST Payable on completion of assessment ||11195295 ||April 2013 to March 2014 ||Joint Commissioner of Sales tax (Appeals) |
viii. As the Company does not have any loans or borrowings from any financialinstitution or bank or Government nor has it issued any debentures as at the balancesheet date the provisions of Clause 3(viii) of the Order are not applicable to theCompany.
ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans.
Accordingly the provisions of Clause 3(ix) of the Order are not applicable to theCompany.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. The Company has paid/provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.
xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act.
xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.
xv. The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
For Price Waterhouse Chartered Accountants LLP Firm Registration Number:012754N/N500016
Membership Number 109846 UDIN:20109846AAAADE1232
Date : June 26 2020