To the Members of
SURYAVANSHI SPINNING MILLS LIMITED
Report on the Audit of the Financial Statements Qualified Opinion
We have audited the financial statements of SURYAVANSHI SPINNING MILLS LIMITED ("thecompany") which comprise the Balance Sheet as at March 31 2019 the Statement ofProfit and Loss (including other comprehensive income) the Statement of Changes in Equityand the Statement of Cash Flows for the year ended on that date and a summary of thesignificant accounting policies and other explanatory information (herein after referredto as "the financial statements")
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 para the afore said Ind As financial statements give the information required bythe Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standard) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2019 the loss (including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.
Basis for Qualified Opinion
i) The company did not provide interest on working capital loans and term loans withSBI and Andhra Bank amounting to Rs.680.74 Lakhs for the year under review and Rs. 1283.51Lakhs up to 31st March 2019 from the date of account became NPA. In the absence ofstatement of account the above amount has been arrived at as per calculation made by thecompany.
ii) Substantial amount of statutory dues related to Income tax Employee's providentfund Employee state insurance act and professional tax amounting to Rs.15496629/-have become overdue and remain unpaid interest penalty if any in respect of the same hasremained unascertained and unaccounted for.
Consequent to the above loss for the year and Liabilities as at 31st March 2019 wasunderstated and Shareholders funds are overstated to this extent.
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under Section 143(10) of the Act. Our responsibilities underthose standards are further described in the Auditors responsibility for the Audit ofFinancial Statements section of our report. We are independent of the company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit offinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our qualified audit opinion on the financialstatements.
Material Uncertainty Related to Going Concern
We draw attention to note no. 43 of the financial statements with regard to the Companyhas recorded accumulated losses of Rs. 2555.12 lakhs as at 31st March 2019 resulting incomplete erosion of net worth and current liabilities exceed current assets by Rs. 2367.86Lakhs. Further there were lower cash inflows from existing business activities and theCompany has defaulted in payment of dues to banks/ Financial Institutions and could notcomply with the terms of sanction and /or repayment schedule of the lending institutionsand banks. Banks have issued notices under SARFAESI Act. These conditions indicate theexistence of material uncertainty that may cast significant doubt about the Company'sability to continue as a Going Concern. However the accompanying financial have beenprepared on "Going Concern" basis for the reasons stated in the said note.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
We draw attention to the following matters in the notes to the financial statements
i) Note No 41 of the financial statements relating to non-provision of interest fordelay in payment to MSME suppliers.
ii) Note No. 44 of financial statements relating to confirmation of balances inrespect of trade receivables and trade payables.
Our opinion is not qualified in respect of these matters.
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. Inaddition to the matter described in the Basis for Qualified Opinion section and MaterialUncertainty Related to Going concern section of our report we have determined the mattersdescribed below to be the key audit matters to be communicated in our report.
|Key Audit Matters ||Auditor's Response |
|Evaluation of uncertain tax positions ||Principal audit procedures |
|The Company has material uncertain tax posi- tions including matters under dispute which in- volves significant judgment to determine the pos- sible outcome of these disputes ||Our audit procedures include the following substantive procedures: |
| || Obtained understanding of key uncertain tax positions; and |
| || We along with our internal tax experts - |
|Refer to Notes: no 40 (d) to the Financial Statements || evaluated the Design and tested the operating effectiveness of controls around the assessment of the matter; |
| || Read and analysed select key correspondences external legal opinions / consultations by management for key uncertain tax positions; |
| || Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and |
| || Assessed management's estimate of the possible outcome of the disputed cases; |
| ||Assessed the appropriateness of disclosures made under the head Contingent Liabilities' in the financial Statements. |
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 identified above and in doing so consider whether the otherinformation is materially inconsistent with the financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
When we read the Annual report if we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
Management's Responsibility for the Financial Statements:
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income cash flows and changes inequity of the Company in accordance with the Indian Accounting Standards (Ind AS)prescribed under Section 133 of the Companies Act 2013 read with relevant rules issuedthere under and other accounting principles generally accepted in India.
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 the 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 offinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the company or to cease operations orhas no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess..
Auditor's Responsibility 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 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 Standalone 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 controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany 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 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 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 the Companies (Auditor's Report) Order2016 ("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 in theparagraph 3 and 4 of the Order to the extent applicable.
2) As required by Section 143(3) of the Companies Act2013 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 except for the indeterminate effects of the matters referred to inBasis for Qualified opinion paragraph above proper books of account as required by lawhave been 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 Cash Flow Statement dealt with by thisReport are in agreement with the books of account
d) Except for the matters referred to in Basis for Qualified opinion paragraph abovein our opinion the aforesaid financial statements comply with the Indian AccountingStandards (Ind AS) prescribed under Section 133 of the Companies Act 2013 read with Rule7 of Companies (Accounts) Rules 2014.
e) on the basis of written representations received from the directors as on 31stMarch2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March2019 from being appointed as a director in terms of Section164(2) of the Act
f) with respect to the adequacy of internal financial controls over financial reportingof the Company and the operating effectiveness of such controls refer to our separatereport in "Annexure B".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the 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:
h) No managerial remuneration was paid during the year under review. Accordinglyreporting under requirements of section 197 doesn't apply.
i) 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 no 39 (b) to(g) of financial 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 required to be transferred to theInvestor Education and Protection Fund by the Company.
| ||for K.S.RAO & CO. |
| ||Chartered Accountants |
| ||Firm's Regn No. 003109S |
| ||(M.NAGA PRASADU) |
|Place: Hyderabad ||Partner |
|Date : 30.05.2019 ||Membership No. 231388 |