AVG Logistics Limited
Report on the Audit of the Standalone Financial Statements
OPINION
We have audited the accompanying standalone financial statements of AVG Logistics Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (Including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including 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 Companies Act, 2013 ("the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its profit (including other comprehensive income), changes in equity 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 Standards are further described in the Auditor's Responsibilities for the Audit of the standalone 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 ("ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the 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 obtained by us 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 standalone financial statements for the year ended March 31, 2023 (current year). These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
|
1
|
Revenue Recognition
Revenue from these contracts is recognized in
|
Our audit procedures in respect of this area include but are not limited to:
|
| |
accordance with the requirements of Ind AS 115, Revenue from Contracts with Customers (as described in note 2.4 of the standalone financial statements).
The Company has long term contracts with customers,
|
1.
|
Obtained an understanding of the systems, processes and controls implemented by management for recording and computing revenue, and the associated unbilled revenue, unearned and deferred revenue balances;
|
| |
as at the year end, for all incomplete sales orders, revenue is recognized by evaluating the conditions required as per contractual terms i.e., provision of service to customer and acknowledgement of invoice.
|
2.
|
Assessed the appropriateness of Company's accounting policies with respect to Revenue recognition in accordance with IND AS 115 "Revenue from Contracts with Customers";
|
| |
Further, revenue is recognised for the completed performance obligation which are part of the incomplete sales orders.
|
3.
|
Verified accuracy of the revenue recognition by selecting samples on test check basis and checking the underlying contract terms and conditions;
|
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
| |
The criteria for identification of the specific performance obligations covered by the sales order and the allocation of the transaction price to each performance obligation requires specific attention due to the judgement involved in identifying the specific performance obligation and determination of whether the agreed provision of services to customer are completed in regard to each of these obligations, as acknowledged by the customers. There is also estimation uncertainty in assessing the incomplete sales orders at the year end and identifying the completed portions of the performance obligations from these sales orders.
Considering this we have determined Revenue Recognition to be a Key Audit Matter.
|
4. For samples selected on test check basis, evaluated, as to whether performance obligation for revenue recognition is completed as and when the service is rendered to the customer and acknowledged. Further, performed verification of proof of delivery of services completed; 5. Verification of the ageing of the unbilled revenue and testing for the subsequent acknowledgement from the customers; and
6. Verified the completeness and adequacy of disclosure in the standalone financial statements in compliance with Ind AS 115.
|
|
2
|
Allowance for trade receivables
Refer to note 15 to the standalone financial statements with respect to the disclosures of trade receivables.
The Company has trade receivables as at March 31, 2023 amounting to Rs. 13,938.03 lakhs against which the Company has recorded allowance for trade receivables of Rs. 1,624.80 lakhs (PY Rs. 1,427.38 lakhs).
Management creates allowance for trade receivables based on the expected credit loss model. Additionally, the Company assesses the recoverability of all the debit balances including ageing on case to case basis considering the facts and circumstances to decide on adhoc provision required.
We have determined this matter to be key audit matter considering the materiality of the amounts and significant judgements and estimates involved regarding the allowances for trade receivables.
|
Our audit procedures in respect of this are included but not
limited to:
1. Obtained an understanding of the process from the management of the Company and tested design implementation and operating effectiveness of controls over for development and consistency of methodology for the computation of allowance for trade receivables, tested the completeness and accuracy of information used in estimation of the probability of default, loss given default and other key estimates;
2. Recomputed the ageing of the trade receivables on sample basis and traced their balances to standalone financial statements;
3. Verified subsequent recovery of trade receivables by tracing them in the books of accounts and bank statement on test check basis;
4. Tested the management computations arising out of expected credit loss model;
5. Analysing significant judgements and estimates involved around the expected credit loss model including examining the class of receivables on which certain % based on historic trends are applied, and further assessed the adequacy of provisions made for any possible non recoveries ascertaining the risk of recoverability or delayed payments, etc;
6. Assessed the basis of management's judgement regarding specific allowance made against aged balances which are considered to be unrecoverable; and
7. Verified the completeness and adequacy of disclosure in accordance with the requirements of the relevant Ind AS.
|
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
|
3
|
Impairment of assets
|
Our audit procedures in respect of this are included but not
|
| |
Refer to note 2.13 to the standalone financial
|
limited to:
|
| |
statements.
|
1.
|
Obtained an understanding of the systems, processes
|
| |
The Company has a warehouse at Agartala, Tripura having carrying value amounting to Rs. 984.10 lakhs
|
|
and control implemented by management for assessment and recording for impairment of assets;
|
| |
as at March 31, 2023. This warehouse has been
|
2.
|
Assessment of the Company's accounting policies with
|
| |
capitalised in the financial year 2020-21 and has not
|
|
respect to impairment in accordance with Ind AS 36
|
| |
been operational since its capitalisation.
|
|
"Impairment of assets";
|
| |
Since the warehouse is not operational management
|
3.
|
Enquired into the reasons for non-operation of the
|
| |
would need to assess the impairment by using key
|
|
warehouse since capitalization and assessed them for
|
| |
estimates including useful life of the building, its fair
|
|
any impairment indicators;
|
| |
value, and method of computation of the fair value. We have determined this matter to be key audit matter considering the materiality of the amounts
|
4.
|
Obtained the fair valuation report of the management's expert for the fair valuation of the warehouse;
|
| |
and significant judgements and estimates involved
|
5.
|
Involved auditor's expert to assess the appropriateness
|
| |
regarding the impairment of the warehouse.
|
|
of the key assumptions and estimates used by the valuers in determination of the fair value of warehouse (such as, useful life of the building, its fair value, and method of computation of the fair value, discount rates, etc.); and
|
| |
|
6.
|
Assessed the appropriateness of disclosures in accordance with the requirements of Ind AS 36 "Impairment of assets".
|
|
4
|
Lease accounting
|
Our audit procedures in respect of this area include but are
|
| |
Refer to note 2.5 and 48 to the standalone financial
|
not limited to:
|
| |
statements. The Company has taken certain premises
|
1.
|
Obtained an understanding of the processes and control
|
| |
for warehousing and other commercial purposes.
|
|
implemented by management in relation to accounting
|
| |
Pursuant to adoption of Ind AS, the Company w.e.f.
|
|
of leases;
|
| |
April 1, 2021 has used the retrospective approach for transition as per Ind AS 116 (leases), wherein the lease liability has been measured at present value of the remaining lease payments at the date of initial application (i.e., April 1, 2021) and discounted using the incremental borrowing rate at the date of initial application.
|
2.
|
Reviewed the management process in relation to application of key lease terms in lease contracts, reasonableness of the key assumptions used for the purpose of lease accounting, and assessed the appropriateness of the accounting policy in accordance with Ind AS 116 'Leases';
|
| |
As a result of such adoption, Company has recognized lease liability amounting to Rs. 15,322.48 lakhs and Right-of-use asset amounting to Rs. 12,877.70 lakhs as at March 31, 2023. Further during the year, Company has recognised rent expense of Rs. 3,550.97 lakhs, interest expense on lease liability Rs. 1,609.26 lakhs
|
3.
|
Verified the accuracy of the underlying lease data by agreeing a representative sample of leases to original contract or other supporting information, and verified the integrity and arithmetic accuracy of the calculations for each lease sampled through recalculation of the expected Ind AS 116 adjustment;
|
| |
and depreciation on Right-of-use assets Rs. 2,761.55
|
4.
|
Assessed the appropriateness of the assumptions
|
| |
lakhs in the statement of profit and loss for the year
|
|
applied to determine the discount rates for the lease
|
| |
ended March 31, 2023.
|
|
accounting;
|
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
| |
Management has used several judgements like determination of leases, lease term, use of practical expedients and discount rates over each lease contract and have applied estimates during lease accounting. Considering the materiality of the amounts involved, and the significant judgements and estimates used by management in the lease recognition and accounting, this matter has been identified as a key audit matter.
|
5. Assessed the appropriateness of lease rentals and lease escalations used in computations of Right-of-use asset and corresponding lease liability for the entire lease tenure supported by the agreements with the lessor;
6. Assessed the appropriateness of leases excluded from the scope of Ind AS-116 being short term leases or leases for which underlying asset is of low value;
7. Ensured that the accounting treatment including the transition provisions adopted by the Company are in accordance with the provisions of Ind-AS 116; and
8. Assessed the adequacy and appropriateness of the disclosures made in the standalone financial statements is in accordance with the applicable Indian accounting standards.
|
INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
The Company's Board of Directors is responsible for the other information. The other information comprises the annual report but does not include the standalone financial statements and our auditor's report thereon. The annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance under SA 720 'The Auditor's responsibilities Relating to Other Information'.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR STANDALONE FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements
that give a true and fair view of the financial position, financial performance, changes in equity 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. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, the Board of Directors is 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the standalone 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 from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
We give in "Annexure A" a detailed description of Auditor's responsibilities for audit of the standalone financial statements.
OTHER MATTER
The comparative financial information of the Company for the year ended March 31, 2022 and the transition date opening Balance Sheet as at April 1, 2021 included in these standalone financial statements are based on the previously issued standalone financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2021, specified under Section 133 and other relevant provisions of the Act for the year ended March 31,2022 and March 31, 2021 on which we issued an unmodified audit opinion vide our reports dated June 06, 2022 and October 27, 2021 respectively on those standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have also been audited by us.
Our opinion is not modified in respect of the above matter.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in "Annexure B" 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 except that the Company has not maintained
daily back-up of books of accounts and other books and papers maintained in electronic mode in a server physically located in India.
(c) The balance sheet, the statement of profit and loss (including other comprehensive income), the statement of changes in equity and the statement of cash flow dealt with by this report are in agreement with the books of account.
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2023 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 with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure C".
(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 does not have any pending litigations which would impact its financial position.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the investor education and protection fund by the Company.
iv. 1. The Management has represented that,
to the best of it's knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise,
that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
2. The Management has represented,
that, to the best of it's knowledge and belief, no funds have been
received by the Company from any persons or entities, including foreign entities (Funding Parties), with the understanding, whether recorded in
writing or otherwise, as on the date
of this audit report, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
3. Based on the audit procedures
performed that have been considered reasonable and appropriate in the circumstances, and according to the information and explanations provided to us by the Management in this regard
nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) as provided under (a) and (b) above, contain any material mis-statement.
v. The Company has neither declared nor paid any dividend during the year.
vi. As proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company only w.e.f. April 1, 2023, reporting under this clause is not applicable.
3. In our opinion, according to information, explanations given to us, the remuneration paid by the Company to its directors is within the limits laid prescribed under Section 197 of the Act and the rules thereunder.
For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Naresh Anand
Partner
Membership No. 503662
UDIN: 23503662BGXWRU1571
Place: Chandigarh
Date: June 03, 2023
|