The Members of Zee Entertainment Enterprises Limited Report on the Audit of theStandalone Financial Statements
We have audited the accompanying standalone financial statements of Zee EntertainmentEnterprises Limited (the Company) which comprise the Balance Sheet as at 31 March 2020the Statement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement the Statement of Changes in Equity for the year then ended and a summary ofsignificant policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion section below 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 Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended (Ind AS) and other accounting principles generally accepted in India ofthe state of affairs of the Company as at 31 March 2020 and its profit comprehensiveincome its cash flows and the changes in equity for the year ended on that date.
Basis for Qualified Opinion
We draw attention to Note 35 of the standalone financial statements. This Note interalia states regarding the Letter of Comfort (LOC) issued in May 2016 by the Company toYes Bank Limited (Bank) in connection with a borrowing by Living Entertainment Limited(LEL) a related party from the said Bank confirming among other matters to supportATL Media Limited (ATL) a wholly owned subsidiary of the Company by way of infusion ofequity/debt for meeting various requirements of ATL including honouring a Put Optionentered into by ATL with LEL which was renewed on 29 July 2019 to be valid until 30December 2026 to purchase 64.38% of the issued share capital held by LEL in VeriaInternational Limited (VIL) another related party of the Company at the exercise priceof $52.50 Millions (Rs. 3927 Millions) as at 31 March 2020 which was assigned by LEL infavour of Axis Bank Limited DIFC branch the security trustee for the benefit of theBank to secure the said borrowing by LEL. In view of the alleged defaults by LEL inrepaying its dues to the Bank and ATL also not settling the amount called by the Bankunder the Put Option subsequent to the year-end the Bank filed a plaint in the Hon'bleamong other matters seeking an interim application with a main prayer that the aforesaidLOC is a guarantee given by the Company. The Hon'ble High Court has refused the ad-interimrelief sought by the Bank. The Bank has preferred an appeal against the Order and theCompany is contesting the Bank's claim in the Hon'ble High Court. Consequently theManagement has not considered the LOC as a financial guarantee and since the matter issub-judice has not accounted for any liability in respect of the LOC and the aforesaidcontention of the Bank.
In view of the confirmation given by the Company in the LOC issued to the Bank to fundATL through debt/equity such LOC partakes the character of an executory contract underInd AS 37 on Provisions Contingent Liabilities and Contingent Assets' which needsto be assessed for any onerous commitment. In the absence of sufficient appropriate auditevidence we are unable to determine if accounting the LOC is an onerous commitment andwhether any adjustment is required to be made in this regard in the books of account andon compliances required with the provisions of the Companies Act 2013 Foreign ExchangeManagement Act (FEMA) SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (as amended) in relation to the issue of LOC and its consequential impact on ourreporting responsibilities under the Companies Act 2013.
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 Responsibility for the Audit of the Standalone FinancialStatements section of our report. We are independent of total the Company in accordancewith the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI)together with the ethical requirements that are relevant to our audit of the standalonefinancial 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 ICAI's Code of Ethics. We believe that the audit evidence obtained by us issufficient and appropriate to provide a basis for our qualified opinion on the standalonefinancial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
Court of Bombay on the grounds
|Key Audit Matters ||Auditor's response |
|Goodwill Impairment assessment as at 31 March 2020: ||Principal audit procedures performed: |
|The standalone financial statements reflect goodwill aggregating Rs. 1881 Million recognised mainly on acquisitions and allocated to the following cash generating units (CGUs): ||Our procedures consisted of understanding the Management's methodology and key assumptions and included performance of the following audit procedures: |
|1. Online Media Business (Rs. 1260 Millions (net of impairment of Rs. 1355 Millions)); and || Evaluated the design and operating effectiveness of internal controls relating to review of goodwill impairment testing performed by the Management; |
|2. Regional channel in India (Rs. 621 Millions). ||Validating impairment models through testing of the mathematical accuracy and verifying the application of the key input assumptions; |
|We considered this as key audit matter due to the significance of the balance of goodwill and because of the Company's assessment of the fair value less cost of disposal (FVLCD) and value-in-use (VIU) calculations of the CGU which involve significant since the prior period; judgements about the valuation methodology future performance of business including likely impact on account of lockdowns due to spread of COVID-19 pandemic and discount rate applied to future cash flow projections. ||Understanding the underlying process used to determine the risk adjusted discount rates; |
|Refer Note 7 of the standalone financial statements. ||Assessing the appropriateness of significant Validating the cash flow forecasts with reference to historical forecasts and actual performance to support any significant to the business. Review of the factors considered by the Management on the business projections on account of lockdowns due to spread of COVID-19 pandemic; |
| ||Working with auditor's valuation experts to benchmark the discount rates and perpetual growth rates applied by the Company for the purposes of computing VIU; |
| ||We have also engaged auditor's valuation experts to assist us in evaluating the FVLCD determined by the Company. The valuation experts independently evaluated revenue multiple used in determination of FVLCD. |
|Audit of transactions involving payment of advance for movie rights acquisitions: ||Principal audit procedures performed: |
|The Company pays advances for acquiring movies from aggregators sub-agents of aggregators and production houses. During the year the Company paid advances to such aggregators and production houses (including conversion of unsecured interest-free deposits given to such aggregators to advances) for acquiring rights of movies on the basis of Memorandum of Understanding (MOU) and/or agreements entered into with the respective aggregators or production houses. ||Read the minutes of the meetings of the Risk Management Committee wherein the approval policy for advance payments for movie content has been defined; |
We considered this as key audit matter on account of the value of such movie advances and changes to assumptions the risks associated with non- performance. In addition there was a material weakness which was identified in respect of the controls over the payment of advances to agencies (sub- expected future changes agents) of aggregators for movie library acquisition in the previous year.
| Evaluated the design and operating effectiveness of internal controls relating to authorization of movie advances and adherence to the approval policy framed by the Company; |
| ||Obtained supporting documents for the samples of movie advances paid during the year which includes the MOU/agreement executed between the Company and aggregators and production houses stating business rationale for the advance payments; |
| ||Checked appropriate approvals for the advance payments and adherence to the approval policy; |
| ||Checked if refunds were received from sub-agents due to non-fulfilment of their obligations stated in the MOUs for which termination letters were obtained by the Management; |
|Refer note 51 of the standalone financial statements. ||Verified the computation and receipt of interest charged to sub-agents per the terms of the MOU on refund of movie advances; |
| || For the samples selected obtained direct confirmation from the aggregators and the production houses confirming the outstanding balances as at the year-end including identification of the films against which the advances were given and the manner of utilisation of the advances by such aggregators where considered necessary in our professional judgement. |
|Recoverability of long overdue receivables from two customers (and their group companies): ||Principal audit procedures performed: |
|The Company has receivables aggregating Rs. 6600 Millions (net of allowance for doubtful debts) from two customers (and their group companies) which include amounts which are long overdue as at 31 March 2020. || Evaluated the design and operating effectiveness of internal controls relating to the assessment of recoverability of receivables and determination of the provision for expected credit loss; |
|We considered this as key audit matter on account of risk associated with long outstanding receivables from these customers the Company's assessment of the recoverability ||Verified the completeness and accuracy of data considered for ageing analysis and assessment of recoverability of receivables and determination of the provision for expected credit loss; |
|of these receivables and consequent determination of provision for expected credit loss which requires significant Management estimates and judgments. ||Obtained the payment plan agreed by the Company (approved by the Board of Directors) with the two customers and checked if the collections were in line with the agreed payment plan; |
|Specific factors considered by the Management include credit worthiness of these customers adherence to the payment plan agreed by the Company with these customers including ageing analysis. || Evaluated whether the provision for expected credit loss recorded by the Company is appropriate considering specific factors like credit worthiness of these customers and adherence to the payment plan agreed with the Company; |
|Refer note 48 d (ii) of the standalone financial statements. ||Obtained direct confirmations from the two customers as at the year-end for the outstanding balances. |
|Valuation of investment in Optionally Convertible Debentures (OCDs) of a subsidiary as at 31 March 2020: ||Principal audit procedures performed: |
|The standalone financial statements reflect investments in Optionally Convertible Debentures (OCDs) in a subsidiary with a carrying value of Rs. 1555 Millions. These OCDs are accounted at fair value through profit and loss account. ||Our procedures consisted of understanding the Management's methodology and key assumptions and included the following audit procedures: |
|We considered this as key audit matter due to the amount of balance of OCD fair value loss recorded during the year and the Company's assessment of the fair value calculations of the OCD. This assessment involve judgements about the fair valuation methodology appropriate market multiples percentage of discount of the value arrived due to specific risk and operational factors applicable to the subsidiary to compute fair value. The valuation is performed by an independent valuer engaged by the Company. || Evaluated the design and operating effectiveness of internal controls relating to Management's review of fair value determined by the independent valuer; |
| || Validate impairment models through testing of the mathematical accuracy and verifying the application of the input assumptions; |
| ||Engaged auditor's valuation expert to assist us in evaluating the fair valuation determined by the Company. The valuation expert independently evaluated revenue multiple and percentage of discount of the value arrived used in determination of fair value. |
|Matter of litigation relating to Letter of Comfort (LOC) issued by the Company to Yes Bank Limited: ||Principal audit procedures performed: |
|The Company had in May 2016 issued a Letter of Comfort (LOC) to Yes Bank Limited in connection with a borrowing by Living Entertainment Limited (LEL) a related party from the said Bank confirming among other matters to support ATL Media Limited (ATL) a wholly owned subsidiary of the Company by way of infusion of equity/debt for meeting various requirements of ATL including honouring a Put Option entered into by ATL with LEL to purchase 64.38% of the issued share capital held by LEL in Veria International Limited (VIL) another related party of the Company which was assigned by LEL in favour of the Bank to secure the said borrowing by LEL. The exercise price of the Put Option is $52.50 Millions (Rs. 3927 Millions) as at 31 March 2020. Subsequent to the year-end the Bank filed a plaint in the Hon'ble High Court of Bombay on the grounds among other matters seeking an interim application with a main prayer that the aforesaid LOC is a guarantee given by the Company. The Management has not considered the LOC as a financial guarantee and since the matter is sub-judice has not accounted for any liability in respect of the LOC and the aforesaid contention of the Bank. ||Circulated direct balance confirmations requests to the bankers of the Company including Yes Bank Limited for balances as at 31 March 2020; |
|We considered this as key audit matter on account of the amount of the claims the matter being sub-judice and due to any other consequential impacts. ||Perused the legal opinions obtained by the Management from various lawyers based on which the Management has concluded that LOC is not in the nature of guarantee; |
|This matter is also a subject matter of qualification included in the Basis of Qualified Opinion section above. ||Perused the briefs for the legal opinions provided by the Management to the lawyers; |
|Refer note 35 of the standalone financial statements. || Independently obtained a legal opinion from an external law firm to evaluate the Management's assertion that the LOC is not in the nature of a guarantee on the Put Option; |
| ||Considered if the LOC met the requirements of an executory contract and if so whether it could be onerous in nature requiring a provision under Ind AS 37 on Provisions Contingent Liabilities and Contingent Assets'. |
|Transaction involving fixed deposit of the Company placed with a Bank and the Bank's adjustment of the fixed deposit against dues of related parties: ||Principal audit procedures performed: |
|A Bank during the month of July 2019 had prematurely and as represented by the Management unilaterally adjusted the amount of the fixed deposit of Rs. 2000 Millions which was maturing on 10 September 2019 against the dues of certain related parties (promoter group companies). These related parties have subsequently during the year paid the amount of Rs. 2000 Millions along with interest thereon aggregating Rs. 25 Millions to the Company which have been adjusted by the Company against the said fixed deposit. ||Obtained direct confirmation from the Bank as at 31 March 2019 to identify if the Bank had confirmed any lien against the fixed deposit; |
| || Based on the register of charges and minutes of the meeting of the Board of Directors evaluated whether a lien existed on these fixed deposits; |
| ||Communicated with the Audit Committee during the quarters ended 30 September 2019 and 31 December 2019 about the transaction and requested them to initiate steps to understand the reasons from the Bank for adjusting the fixed deposit against dues of certain related parties; |
|Subsequent to the year-end the Company has resolved the matter with the Bank and both the parties have mutually agreed and documented the understanding confirming the aforesaid adjustment concluding the communication/documentation for this matter. ||Perused the legal advice received by the Management from external counsel for the possible course of action available for the Company and understood the subsequent steps taken by the Management in this regard including their communication with the Bank expressing their non- acceptance of the adjustment of the fixed deposit amount by the Bank and seeking information regarding the basis on which the Bank initiated such action; |
|Considering the significance of the matter this has been viewed as a key audit matter. || Tested the amounts received from the related parties in whose favour the Bank had adjusted the fixed deposit Perused through the communication received from these related parties in this regard; |
|Refer note 50 of the standalone financial statements. ||Perused through the documentation for the understanding between the Company and the Bank in relation to the aforesaid adjustment. Further understood the legal enforceability of the said documentation based on legal advice obtained by the Management; |
| ||Perused through the report of the investigation performed by Management auditor which was presented to the Audit Committee and taken on record and discussed with the Management auditor to understand the nature and extent of such work performed. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises of information included in the ManagementDiscussion and Analysis Directors' Report including Annexures to the Directors' ReportCorporate Governance and Shareholders' Information but does not include the standaloneand consolidated financial statements and our auditor's reports thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's 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 financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively ensuring the accuracy and completeness of the accounting recordsrelevant to the preparation and presentation of the standalone financial statement thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the standalone financial statements Management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessManagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate tonot detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal financial 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 opinionon whether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the 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'sconcern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the standalone financialstatements or if such disclosures are inadequate to modify our opinion. Our conclusionsare based on the audit evidence obtained up to the date of our auditor's report. Howeverfuture events or conditions may cause the Company to cease to continue as a goingconcern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant including any significantdeficiencies in internal 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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's 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 Section 143(3) of the Act based on our audit we report that:
a) We have sought and except for the matter described in the Basis for QualifiedOpinion section above obtained all the information and explanations which to the best ofour knowledge and belief were necessary for the purposes of our audit.
a basis for our opinion. The risk of
b) Except for the possible effect of the matter described in the Basis forQualified Opinion section above in our opinion proper books of account as required bylaw have been kept by the Company.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.
d) Except for the possible effects of the matter described in the Basis for QualifiedOpinion section above in our opinion the aforesaid standalone financial statementscomply with the Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164 (2) of the Act. ability to continue as a going
f) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion section above.
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 A'. Our report expresses a qualified opinion on theadequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting for the reasons stated therein.
h) 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 opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
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 as amended inour opinion and to the best of our information and according to the explanations given tous: audit findings that we identify during
i. Except for the possible effect of the matter described in the Basis of QualifiedOpinion section above the Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements;
ii. Except for the possible effect of the matter described in the Basis of QualifiedOpinion section above provision has been made in the standalone financial statements asrequired under the applicable law or accounting standards for material foreseeablelosses if any on long-term contracts including derivative contracts;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued bythe Central Government in terms of Section 143(11) of the Act we give in AnnexureB' a statement on the matters specified in paragraphs 3 and 4 of the Order.
ANNEXURE A' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(g) under Report on Other Legal and RegulatoryRequirements' of our report of even date) Report on the Internal Financial Controls OverFinancial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act2013 (the Act)
We have audited the internal financial controls over financial reporting of ZeeEntertainment Enterprises Limited (the Company) as of 31 March 2020 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to respective Company's policies the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial informationas required under the Act.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the Guidance Note') issued by the ICAI and the Standards on Auditingprescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls. 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 over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is appropriate to provide a basis for ourqualified audit opinion on the Company's internal financial controlssystem . reportingover financial
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any 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.
Basis for Qualified Opinion
According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified in the Company's internal financialcontrols over financial reporting as at 31 March 2020: We draw attention to Note 35 of thestandalone financial statements regarding the Company issuing a Letter of Comfort (LOC) toYes Bank Limited confirming among other matters to support ATL Media Limited its whollyowned subsidiary by infusing equity/debt for meeting all its working capitalrequirements debt requirements business expansion plans honoring the Put Option takeor pay agreements and guarantees. The Company's financial reporting process did not havecontrols to identify the issuance of such LOC and assessing if it could be in that natureof an executory contract which may be onerous requiring adjustment in the books of accountunder Ind AS 37 Provisions Contingent Liabilities and Contingent Assets'.
A material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.
In our opinion to the best of our information and according to the explanations givento us except for the possible effect of the material weakness described in Basis forQualified Opinion paragraph above on the achievement of the objectives of the controlcriteria the Company has maintained in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively of 31 March 2020 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note issued by the ICAI.
We have considered the material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit and of the standalonefinancial statements of the Company for the year ended 31 March 2020 and this materialweakness has affected our opinion on the said standalone financial statements of theCompany and we have issued a qualified opinion on the standalone financial statements ofthe Company.
ANNEXURE B' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
Report on Companies (Auditor's Report) Order 2016 (the Order) issued by the CentralGovernment in terms of Section 143(11) of the Companies Act 2013 (the Act) of ZeeEntertainment Enterprises Limited (the Company)
(i) In respect of its fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) Some of the fixed assets were physically verified during the year by the Managementin accordance with a programme of verification which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals. According to the informationand explanations given to us no material discrepancies were noticed on such verification.
c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed / transfer deed /conveyance deed provided to us we report that the title deeds comprising all theimmovable properties of land and buildings which are freehold are held in the name of theCompany as at the balance sheet date. In respect of immovable properties of land andbuildings that have been taken on lease and disclosed as fixed asset in the financialstatements the lease agreements are in the name of the Company where the Company is thelessee in the agreement.
(ii) As explained to us the nature of the inventories of the Company are such thatclause (ii) of paragraph 3 of the Order is not applicable to the Company.
(iii) The Company has not granted any loans secured or unsecured to companies firmsor other parties covered in the Register maintained under Section 189 of the Act.
(iv) We refer to the matter described in the Basis for Qualified Opinion section of ouraudit report the outcome of which is inconclusive as on date of this report. Read withthe above in our opinion and according to the information and explanations given to usthe Company has complied with the provisions of Sections 185 and 186 of the Act in respectof grant of loans making investments and providing guarantees and securities asapplicable.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted deposits from the public during the year. Therefore theprovisions of clause 3(v) of the Order are not applicable to the Company.
(vi) The maintenance of cost records has been specified by the Central Government underSection 148(1) of the Act. We have broadly reviewed the cost records maintained by theCompany pursuant to the Companies (Cost Records and Audit) Rules 2014 as amendedprescribed by the Central Government under sub-Section (1) of Section 148 of the Act andare of the opinion that prima facie the prescribed cost records have been madeand maintained. We have however not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.
(vii) According to the information and explanations given to us in respect of statutorydues:
a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Investor Education and Protection Fund Employee StateInsurance Income-tax Wealth-tax Sales tax Service tax/Goods and Service Tax Customsduty Excise duty Cess and any other material statutory dues applicable to it with theappropriate authorities.
b) There were no undisputed amounts payable in respect of Provident Fund InvestorEducation and Protection Fund Employee State Insurance Income-tax Wealth Tax SalesTax Service Tax/Goods and Service Tax Customs Duty Excise Duty Cess and other materialstatutory dues in arrears as at 31 March 2020 for a period of more than six months fromthe date they became payable.
c) Details of dues of Income-tax Sales Tax Service Tax/Goods and Service Tax CustomsDuty Excise Duty and Value Added Tax which have not been deposited as on 31 March 2020on account of disputes are given below:
|Name of Statute ||Nature of Dues ||Forum where Dispute is Pending ||Period to which the Amount Relates ||Amount Unpaid (Rs. Millions) |
|The Central Excise Act 1944 ||Service Tax ||Customs Central Excise and Service Tax Appellate ||F.Y. 2006-07 ||312 |
| || || ||F.Y. 2007-08 ||148 |
| || ||Tribunal ||F.Y. 2011-12 ||4 |
| || || ||F.Y. 2012-13 || |
| || ||Additional Commissioner of Service Tax Mumbai ||F.Y. 2012-13 ||39 |
| || || ||F.Y. 2013-14 || |
| || || ||F.Y. 2014-15 || |
| || || ||F.Y. 2015-16 ||51 |
| || || ||F.Y. 2016-17 || |
|The Income Tax Act 1961 ||Income Tax ||Income Tax Appellate ||F.Y. 2008-09 ||3* |
| || ||Tribunal || || |
*pertains to erstwhile ETC Networks Limited merged with the Company
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to banks. TheCompany does not have any loans from the financial institutions and Government and has notissued any debentures.
(ix) The Company has not raised moneys by way of initial public offer further publicoffer (including debt instruments) or term loans and hence reporting under clause 3 (ix)of the Order is not applicable.
(x) We refer to the matter described in the Basis for Qualified Opinion section of ouraudit report the outcome of which is inconclusive as on date of this report. Read withthe above to the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersemployees has been noticed or reported during the year.
(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
(xii) The Company is not a Nidhi Company and hence reporting under clause 3(xii) of theOrder is not applicable.
(xiii) We refer to the matter described in the Basis for Qualified Opinion section ofour audit report the outcome of which is inconclusive as on date of this report. Readwith the above in our opinion and according to the information and explanations given tous the Company is in compliance with Section 177 and 188 of the Act where applicablefor all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reportingunder clause 3(xiv) of the Order is not applicable to the Company.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or directors of its holding subsidiary or associate company or personsconnected with them 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 the ReserveBank of India Act 1934.