Independent Auditors’ Report
To the Members of TRIDENT TEXOFAB LIMITED
Report on the Audit of Financial Statements
We have audited the accompanying financial statements of TRIDENT TEXOFAB LIMITED (the Company), which comprise the Balance sheet as at March 31, 2019, the Statement of Profit & Loss and the Statement of Cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2019, and its profit and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act.
Our responsibilities under those SAs are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to out audit of the financial statements under the provisions of the Act and Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue Recognition
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The key audit matter
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How the matter was addressed in our audit
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Revenue from sale of goods is recognized when
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Our audit procedures included:
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control of the products being sold is transferred to the
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- We assessed the appropriateness of the revenue recognition accounting
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customer and when there are no longer any unfulfilled
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policies, including those relating to rebates and discounts by comparing with
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obligations. The performance obligations in the
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applicable accounting standards.
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contracts are fulfilled at the time of dispatch, delivery
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or upon formal customer acceptance depending on
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- We tested the design, implementation and operating effectiveness of
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customer terms.
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management’s general IT controls and key application controls over the Company’s IT systems which govern revenue recognition, including access
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Revenue is measure at fair value of the consideration
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controls, controls, controls over program changes, interfaces between different
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received or receivable, after deduction of any trade
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systems and key manual interval controls over revenue recognition to assess
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discounts, volume rebates and any taxes or duties
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the completeness of the revenue entries being recorded in the general ledger
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collected on behalf of the government such as goods
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accounting system.
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and services tax, etc. accumulated experience is used
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- We tested the design, implementation and operating effectiveness of controls
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to estimate the provision for discounts and rebates.
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over the calculation of discounts and rebates.
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Revenue is only recognized to the extent that it is
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highly probable a significant reversal will not occur.
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- We performed substantive testing by selecting samples of revenue transactions recorded during the year by verifying the underlying documents, which included
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Rebates and discounts are material and have
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goods dispatch notes and shipping documents.
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arrangements with varying terms which are based
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- We inspected on a sample basis, key customer contracts to identify terms
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on annual contracts or shorter term arrangements.
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and conditions relating to goods acceptance and rebates and assessing the
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In addition the value and timing of promotions for
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Company’s revenue recognition policies with reference to the requirements of the
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products varies from period to period, and the activity
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applicable accounting standards.
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can span over a year end.
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- We performed substantive testing by selecting samples of rebate and discount transactions recorded during the year and comparing the parameters used in the
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There is a risk of revenue being overstated due to
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calculation of the rebate and discounts with the relevant sources documents
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fraud, including through manipulation of rebates and
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(including invoices, schemes and contracts) to assess whether the methodology
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discounts, resulting from pressure the management
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adopted in the calculation of the rebates and discounts was in accordance with
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may feel to achieve performance targets at
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the terms and conditions defined in the schemes and corresponding customer
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the reporting.
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contract.
- We performed cut-off testing for samples of revenue transactions recorded before and after the financial year end dated by comparing with relevant underlying documentation, which included goods dispatch notes and shipping documents to assess whether the revenue was recognized in the correct period.
- We assessed manual journals posted to revenue to identify unusual items.
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Provisions for taxation, litigation and other significant provisions
See note 9 to the financial statements
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The key audit matter
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How the matter was addressed in our audit
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Accrual for tax and other contingencies requires the Management to make judgments and estimates in relation to the issues and exposures arising from a range of matters relating to direct tax, indirect tax, claims, general legal proceedings and other eventualities arising in the regular course of business.
The key judgment lies in the estimation of provisions where they may differ from the future obligations.
By nature, provision is difficult to estimate and includes many variables. Additionally, depending on timing, there is a risk that costs could be provided inappropriately that are not yet committed.
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Our audit procedures included:
- We tested the effectiveness of controls around the recognition of provisions.
- We used our subject matter experts to assess the value of material provisions in light of the nature of the exposures, applicable regulations and related correspondence with the authorities.
- We challenged the assumptions and critical judgments made by management which impacted their estimate of the provisions required , considering judgments previously made by the authorities in the relevant jurisdictions or any relevant opinions given by the Company’s advisors and assessing whether there was an indication of management bias.
- We discussed the status in respect of significant provisions with the Company’s legal team.
- We performed retrospective review of management judgments relating to accounting estimate included in the financial statement of prior year and compared with the outcome.
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Assessment to contingent liabilities relating to litigations and claims
See note 1(j)(iii) to the financial statements
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The key audit matter
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How the matter was addressed in our audit
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The Company is periodically subject to challenges/ scrutiny on range of matters relating to direct tax, indirect tax, further, potential exposures may also arise from general legal proceedings, etc. in the normal course of business.
Assessment of contingent liabilities disclosure requires Management to make judgments and estimates in relation to the issues and exposures. Whether the liability is inherently uncertain, the amounts involved are potentially significant and the application of accounting standards to determine the amount, if any, to be provided as liability, is inherently subjective.
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Our audit procedures included:
- We tested the effectiveness of controls around the recording and re-assessment of contingent liabilities.
- We used our subject matter experts to assess the value of material contingent liabilities in light of the nature of exposures, applicable regulations and related correspondence with the authorities.
- We discussed the status and potential exposures in respect of significant litigation and claim with the Company’s internal legal team including their views on the likely outcome of each litigation and claim and the magnitude of potential exposure and sighted any relevant opinions given by the Company’s advisors.
- We assessed the adequacy of disclosures made.
- We discussed the status in respect of significant provisions with the Company’s legal team.
- We performed retrospective review of management judgments relating to accounting estimate included in the financial statement of prior year and compared with the outcome.
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Other Information
The company’s management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company’s annual report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with out audit of the financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, bases on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management's Responsibility for Financial Statements
The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management and Board of Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing the Company’s financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements 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 high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
- Evaluate the appropriateness of accounting polices used and reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management’s use of the going concern basis of accounting and bases on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statement 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’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charges with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationship and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charges with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in out auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a mater should not be communicated in our report because the adverse consequences of doing so would reasonably be 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) Order, 2016 (“the Order”), issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. 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 best of our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;
d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;
e) On the basis of the written representations received from the directors as on 31st March, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2019 from being appointed as a director in terms of Section 164 (2) of the Act;
f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “ Annexure 2” to this report;
g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigation on its financial position in its financial statements. Refer Note 1.(j).(iii) & (iv) to the financial statements.
(ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
(iii) The company has declared and paid Equity dividend to its shareholders.
Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report of even date
To the Members of Trident Texofab Limited
(i) In respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) As explained to us, physical verification of fixed assets was conducted by the management at reasonable intervals. Having regard to the size of the operation of the company and on the basis of explanation received, in our opinion, no material discrepancies were observed during such verification.
(c) As explained and information provided to us, the title deeds of immovable properties included in property, plant and equipments are held in the name of the company except one property where legal proceedings for transfer in the name of the company is
in progress.
(ii) In respect of its inventories:
(a) As explained and information provided to us, the company has maintained proper records of inventory. Inventory defined in categories of finished goods and raw materials in the company’s custody have been physically verified by the management as at the end of the financial year or after the year end. There is a perpetual inventory system and a substantial portion of the stock has been verified during the year. In our opinion, the frequency of verification is reasonable the procedure of physical verification of stocks followed by the management is adequate in relation to size of the company and the nature of its business.
(iii) The Company has granted unsecured loans to parties covered in the Register maintained under section 189 of the Companies, Act, 2013.
(a) The terms and conditions of the grant of such loans are not prejudicial to the Company’s interest
(b) The repayments or receipts are regular and repayment of principal and payment of interest has been stipulated and repayment and receipts are regular.
(c) There is no overdue of amount.
(iv) In our opinion and according to the information and explanations given to us, provisions of section 186 of the Companies Act, 2013 in respect of investments made have been complied with by the company and the company has also complied with provisions of the section 185 of the Companies Act, 2013.
(v) The Company has not accepted any deposits from public within the meaning of Sections 73 and 74 of the Act and the rules framed there under to the extent notified.
(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013, related to the manufacture of the company’s products, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.
(vii) According to the information and explanation given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income tax, wealth tax, customs duty, excise duty, cess and other material dues applicable to it.
(a) According to the information and explanation given to us, no undisputed amount payable in respect of income tax, sales tax customs duty, cess, excise duty were in arrears, as at 31st March, 2019 for a period of more than six month from the date they become payable.
(b) According to the information and explanations given to us, there are no dues of income tax or sales tax or duty of customs or duty of excise or value added tax which have not been deposited with the appropriate authorities on account of any dispute.
(viii) According to the records of the Company examined by us and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution and banks.
(ix) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, the company has raised ' 2.02 crores through preferential allotment on private placement basis 2,00,000 preference shares @ ' 101.48 per share for the purpose of funding of working capital requirements of the company for business growth and expansion plans and strategies set out by the management. The company has fully utilized the said full amount till 31st March, 2019 for the said stated purpose.
(x) During the course of our examination of the books and records of the Company, carried out in accordance with generally accepted auditing practices in India, and according to the information and explanation given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor we have been informed of any such case by the Management.
(xi) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanation given by the management, we report that the company has paid / provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013.
(xii) In our opinion, the Company is not a nidhi company. Therefore, the provisions of clause (xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanation given by the management, transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013, wherever applicable, and wherever applicable, and the details have been disclosed in the notes to the financial statements, as required in
the notes to the financial statements, as required by the applicable accounting standards.
(xiv) According to the information and explanation given to us and on an overall examination of the balance sheet, the company has made preferential allotment on private placement of 2,00,00C preference shares during the year but not issued any partly convertible debentures during the year under review.
(xv) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanation given by the management, the Company has not entered into any no-cash transaction with directors or persons connected with them.
(xvi) According to the information and explanations given to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.
Report on the Internal Financial Controls under Clause (i) of Sub-Section 3 of Section 143(3)(i) of the Companies Act, 2013 ('the Act”)
To the Members of Trident Texofab Limited
We have audited the financial controls over financial reporting of TRIDENT TEXOFAB LIMITED (“ the Company”) as of March 31, 2019 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors' Responsibility
Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial controls over Financial Reporting (the “Guidance Note”) and the standards on Auditing, issued by lCAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that:
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’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 financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
Place: Surat For Bipinchandra J Modi & Co.
Date: 29th May, 2019 Chartered Accountants
Firm Registration No.:101521W
Sd/-
Dency Kabrawala
Partner
Membership No: 162050
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