Electronics Mart India Limited
Report on the Audit of the Standalone Financial Statements
OPINION
1. We have audited the accompanying standalone financial statements of Electronics Mart India Limited (‘the Company’), which comprise the Standalone Balance Sheet as at 31st March 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Standalone Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a material accounting policy information and other explanatory information.
2. 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 (‘Ind AS’) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2024, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
BASIS FOR OPINION
3. We conducted our audit in accordance with the Standards on Auditing 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 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 we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTER
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements 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.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key Audit Matters
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How our Audit Addressed the Key Audit Matter
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Revenue recognition — Incentive income:
1. Refer note 2(o) for the accounting policy and note 21 for
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Our audit procedures relating to revenue recognition included, but were not limited to the following:
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the relevant disclosures in the accompanying standalone financial statements.
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i)
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Enquired with management to understand and reconfirm our understanding of the accounting policy adopted by the Company,
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2.
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Pursuant to the terms of the arrangement with vendors, the Company is entitled for income in the form of incentives; computation thereof is based on the terms and conditions as specified in the scheme documents, duly issued by its
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and the process followed by the Company for estimating the amount of incentive income, during the current year, in accordance with the requirements of applicable accounting standards.
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vendors. During the year ended 31st March 2024 the Company has accrued incentive income aggregating to ' 2,504.02 million [FY 31st March 2023'2,925.25 million].
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ii)
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Evaluated the design and tested the operating effectiveness of Company’s key manual controls over computation of incentive income.
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3.
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Accrual and measurement of such incentive income, especially as on balance sheet date, is a complex process due to volume of the schemes, significant estimates and
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iii)
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Recomputed, on a sample basis, incentive income as measured and recorded by management in accordance with the terms and conditions laid out in the relevant scheme document.
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judgments towards expected volume of sales covering the scheme periods, assessing the Company’s ability to comply with other terms and conditions of underlying schemes
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iv)
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On a sample basis, verified the incentive income accounted with the communication received from vendors accepting such claims.
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and the manual process being applied for computation of incentive income.
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v)
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On a sample basis, tested management reconciliation for closing accruals with the confirmation provided by the relevant vendors.
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Key Audit Matters
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How our Audit Addressed the Key Audit Matter
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4.
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Considering the volume and significance of manual
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vi)
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With respect to accruals for on-going schemes as at 31st March
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intervention and the degree of judgment involved, we have
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2024, examined historical incentive accruals together with
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identified recognition of such incentives as a key audit
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our understanding of current year developments to form an
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matter, as this involved significant auditor attention for the
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expectation of the incentive accrual as at year-end and compared
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current year audit.
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this expectation against the actual accruals. Further, we also performed retrospective review to evaluate the precision with which management makes estimates including the subsequent receipt of such income.
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vii)
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Assessed adequacy of disclosures made in the financial statements in accordance with the requirements of applicable accounting standards.
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Valuation of inventories:
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Our
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audit procedures relating to valuation of inventories
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Refer note 2(l) for accounting policies and note 10 for
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included, but were not limited to the following:
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1.
2.
3.
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i)
ii)
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Enquired with management to understand and reconfirm our understanding of the accounting policy adopted by the Company, and the process followed for valuation of inventories including the process to estimate and accrual of rebate/discount, in accordance with the requirements of applicable accounting standards.
Evaluated the design and tested the operating effectiveness of
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the related disclosures in the accompanying standalone financial statements.
Inventories as at 31st March 2024 comprises of Stock-in-
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trade aggregating to ' 9,692.76 million, carried at net of adjustment towards realisable value (‘NRV) and provision
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for slow moving inventory.
The inventory of stock in trade is also subject to appropriate
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adjustments towards purchase rebate/discount, which
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Company’s key manual controls over:
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are linked and are subject to compliance with the terms and conditions specified under various schemes offered
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o
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Valuation of inventories; and
Accruals of rebate and discount having impact on the carrying
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o
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by vendors. Accrual of such rebate/discount in respect
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value of inventories
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of schemes having a validity period extending beyond the financial year is a complex manual activity, as accruals
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iii)
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Tested the purchase prices of closing stock of inventories on a
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of rebate/discount under such schemes is dependent on
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sample basis and performed recomputation of weighted average
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estimation of value and volume of inventories expected to
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cost considered for valuation as at year end.
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be purchased during the period covered by the underlying
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iv)
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Recomputed, on a sample basis, rebate/discount as measured
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schemes.
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and recorded by management in accordance with the terms and
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4.
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Assessment of net realizable values of inventory of stock
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conditions laid out in the relevant scheme documents.
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in trade, involve estimation of future selling price together
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v)
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On a sample basis, tested management reconciliation for closing
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with assessment of incentives, if any, in the form of
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accruals with the confirmation provided by the respective
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compensation for lower realization.
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vendors.
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5.
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Considering the significance of carrying value of
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vi)
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Tested the inventory ageing on a sample basis from underlying
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inventories to the overall balance sheet, significant manual
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source documents and examined the historical trend of obsolete
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efforts to assess the value of closing stock after considering
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inventory together with our understanding of current year
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impact of incentives and detailed assessment of provision
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developments to form an expectation of the reasonableness of
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required relating to net realizable values and the judgements
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managements provision for slow moving inventory.
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applied for determining the allowance for slow moving inventory, we have identified valuation of the inventories as a key audit matter for current year’s audit
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vii)
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On sample basis, tested management’s estimate of ‘net realisable value’ of inventory based on expected future selling prices by verifying the sale prices of inventory sold near to and subsequent to year end.
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viii)
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Assessed the adequacy of the disclosures made in the standalone financial statements in accordance with the requirements of the accounting standards.
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INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR’S REPORT THEREON
6. The Company’s Board of Directors are responsible for the other information. The other information comprises the information included in 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.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE STANDALONE FINANCIAL STATEMENTS
7. The accompanying standalone financial statements have been approved by the Company’s Board of Directors. The Company’s Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under Section 133 of the Act and other accounting principles generally accepted in India. 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. 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.
9. The Board of Directors is also responsible for overseeing the Company’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
10. 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 Standards on Auditing 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 financial statements.
11. As part of an audit in accordance with Standards on Auditing, specified under Section 143(10) of the Act 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 fraud is higher than for one 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 policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of Board of Directors’ use of the going concern basis of accounting and, based 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 statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern; and
• 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.
12. We communicate with those charged 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.
13. 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 relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
14. From the matters communicated with those charged 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 our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter 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
15. As required by Section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under Section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor’s Report) Order, 2020 (‘the OrdeF) issued by the Central Government of India in terms of Section 143(11) of the Act we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
17. Further to our comments in Annexure I, as required by Section 143(3) of the Act based on our audit, we report, to the extent
applicable, 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 purpose of our audit of the accompanying standalone financial statements;
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 for the matters stated in paragraph 17(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended).
c) The standalone financial statements dealt with by this report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under Section 133 of the Act;
e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2024 from being appointed as a director in terms of Section 164(2) of the Act;
f) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 17(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended)]
g) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31st March 2024 and the operating effectiveness of such controls, refer to our separate report in Annexure II wherein we have expressed an unmodified opinion; and
h) 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 (as amended), in our opinion and to the best of our information and according to the explanations given to us:
i. the Company, as detailed in note 34 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31st March 2024;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31st March 2024;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31st March 2024;
iv. a. The management has represented that, to the best of its knowledge and belief, as disclosed in note 40(i) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any persons or entities, including foreign entities (‘the intermediaries’), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (‘the Ultimate Beneficiaries’) or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 40(ii) to the standalone financial statements, no funds have been received by the Company from any persons or entities, including foreign entities (‘the Funding Parties’), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether 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
c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under subclauses (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended 31st March 2024.
vi. As stated in note 41 of the standalone financial statements and based on our examination which include test checks, except for instances mentioned below the Company, in respect of financial year commencing on 01st April 2023, has used an accounting software for maintaining its books of account which have a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with other than the consequential impact of the exception given below:
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Nature of Exception noted
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Details of Exception
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Instances of accounting software for maintaining books of account which did not have a feature of recording audit trail (edit log) facility
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The software used for recording accounting transactions did not have a feature of recording audit trail (edit log) facility
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Instances of accounting software for maintaining books of account for which the feature of recording audit trail (edit log) facility was not operated throughout the year for all relevant transactions recorded in the software
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1) The audit trail (edit log) feature is not enabled at the application level for software used for recording sale transactions to log any changes made to the mode of receipt (tender changes) for the period 01st March 2024 to 31st March 2024 by the Company.
2) The audit trail feature was not enabled at the data base level to log any direct data changes in the software used for maintenance of inventory records and details of wholesale revenue by the Company.
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For Walker Chandiok & Co LLP
Chartered Accountants
Firm’s Registration No.: 001076N/N500013
Sanjay Kumar Jain
Partner
Membership No.: 207660 UDIN: 24207660BKERHR9452
Place: Hyderabad Date: 27th May 2024
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