Bella Casa Fashion & Retail Ltd Auditors Report.
To the Members of
Bella Casa Fashion & Retail Limited
Report on the Audit of the Financial Statements
We have audited the accompanying Financial Statements of Bella Casa Fashion & Retail Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by 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 the 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 31,2019, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013 ("the act"). Our responsibilities under those Standards are further described in the Auditors 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 (ICAI) together with the independence requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the 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. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key Audit Matter||How the matter was addressed in our audit|
|1.First time adoption of Indian Accounting Standards (Ind AS)||We have performed the following procedures in respect of transition to Indian accounting standard as adopted in India:|
| In compliance of the regulatory requirement in India, the company is required to prepare its financial statements in accordance with Companies (Indian Accounting Standards) Rules, 2015 (Amended) (Refer to as "Ind AS") as issued by Ministry of Corporate Affairs wide notification dated 16th February, 2015.|| Assessed the appropriateness of the implementation of Ind AS in accordance with the Ind AS 101 - First time adoption of Indian Accounting Standards.|
| Assessed the appropriateness of the accounting policies adopted.|
| For all periods up to and including the period for the year ended 31st March, 2018 the company prepared and published its Audited financial statements in accordance with Companies Accounting Standards Rules, 2006 (Amended) (Refer to as" Indian GAAP").|| Evaluated the GAAP differences identified by the companys management.|
| Examined the adjustments (including calculation and recording) made to various balances and transactions to bring them in line with Ind AS.|
| Accordingly, the company has adopted Ind AS from 1st April, 2018. Hence, the financial statements for the year 2018-19 are prepared in compliance with Ind AS.|| Assessed the appropriateness of disclosures made in relation to transition impact from Indian GAAP to Ind AS.|
| Assessed the appropriateness of exceptions to retrospective application of other Ind AS and exemptions availed by the company from full retrospective application of certain Ind AS, in preparing the financial statements.|
| We considered this as a Key Audit Matter since the first time adoption of Ind AS has significant impact on the financial statements from the recognition, measurement and disclosure perspective.|
|Refer to Note No. 42 For the details of transition and reconciliation adjustments between AS and Ind AS.|
|2. Valuation of Inventories||Our audit procedure:|
| The net carrying value of inventory as on 31st March, 2019 constitutes 49.07 % of Total Assets of the company.|| We have performed the Inventory Physical Stock Count on sample basis as at 31st March, 2019. We attended inventory counts at location, which is selected based on financial significance and risk and we performed the following procedures at each site:|
| Sales in the industry can be extremely volatile with consumer demand changing significantly (Seasonal) based on current trends. As a result, there is a risk that the carrying value of inventory exceeds its net realizable value.||(i) Selected a sample of inventory items and compared the quantities we counted to the quantities recorded.|
|Hence, we determined the valuation of inventories as a key audit matter.||(ii) Observed a sample of managements inventory count procedures to assess compliance with Companys policy, and|
|Related Disclosures:||(iii) Made inquiries regarding obsolete inventory items and inspected the condition of items counted.|
|Please refer to Point 5 of Significant accounting policies for details of the accounting policies of inventories and Note No. 7 for relevant disclosures of inventories of the independent auditors report.|| We have also evaluated a selection of controls over inventory existence across the company.|
| Examining the Companys historical trading patterns of inventory sold at full price and inventory sold below full price, together with the related margins achieved for each product lines in order to gain comfort that stock has not been sold below cost.|
| Evaluating the rationality of the inventory policies such as the policy of provision for inventory valuation and obsolescence and understanding whether the valuation of inventory was performed in accordance with the Companys policy.|
| Inspecting the post period sales situation and evaluating the net realizable value of measurement applied on aging inventory in order to verify the evaluation accuracy of the estimated inventory allowance by the Company and|
| Assessing whether the disclosures of provision for inventory valuation and obsolescence were appropriate.|
|3. Trade Receivables||Our audit procedure:|
| The recoverability of trade receivables and the level of provisions for doubtful debts are considered to be a significant risk due to the pervasive nature of these balances to the financial statements, and the importance of cash collection with reference to the working capital management of the business.|| Assessed the design and implementation of key controls around the monitoring of recoverability.|
| At 31st March, 2019 the trade receivables balances (net of provisions) consist of 36.75% of the total amount of assets of the company. Since the Trade receivables constitute the substantial part of the assets of the company, they are determined as the key audit matters.|| Discussed with the management regarding the level and ageing of trade receivables, along with the consistency and appropriateness of receivables provisioning by assessing recoverability with reference to cash received in respect of trade receivables.|
| In addition, we have considered the Companys previous experience of bad debt exposure and the individual counter-party credit risk.|
| Tested these balances on a sample basis through agreement to post period end invoicing and cash receipt.|
|Related Disclosures: Please refer to Point 19 of Significant accounting policies for details of the accounting policies of accounts receivable and Note No. 8 for relevant disclosures of accounts receivable of the independent auditors report.|| The accuracy and completeness was verified through, cutoff test, analytical reviews and balance confirmation.|
| Analyzing the aging schedule of trade receivable, past collection records, industry boom and concentration of customers credit risk.|
|4. Revenue Recognition||Our audit procedure:|
| Revenue is an important measure used to evaluate the performance of the Company. There is a risk that the revenue is presented for amounts higher than what has been actually generated by the Company. Consequently, we considered revenue recognition to be a significant key audit matter.|| Assessing the design, implementation existence and operating effectiveness of internal control procedures implemented as well as test of details to ensure accurate processing of revenue transactions.|
| Inspecting underlying documentation for any book|
| The Companys revenue are recognized based on passage of title to goods which generally coincides with delivery and acceptance and on transfer of all significant risk and rewards of ownership to the buyer.||entries which were considered to be material or met other specified risk-based criteria on a sample basis.|
|Related Disclosures:|| Inspecting the key terms and conditions of agreements with major customers on a sample basis to assess if there were any terms and conditions that may have affected the accounting treatment of the revenue recognition.|
|Refer Point 10 of Significant accounting policies for details of the accounting policies of Revenue Recognition and Note No. 24 for relevant disclosures of Revenue Recognition of the independent auditors report.|| The accuracy and completeness of revenue was verified through, cut-off test, analytical reviews and balance confirmation.|
Information Other than the Financial Statements and Auditors Report Thereon
The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Corporate Governance and Shareholders Information, but does not include the financial statements and our auditors report thereon. The other information as identified above is expected to be made available to us after the date of this auditors report.
Our opinion on the 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 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 financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
When we read the other information as identified above, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Managements Responsibility for the Financial Statements
The Companys 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 of these financial statements that give a true and fair view of thefinancial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS 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 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 is responsible for assessing the Companys 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.
The Board of Directors are responsible for overseeing the Companys financial reporting process.
Auditors 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 auditors 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 financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism 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 financial controls 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 system 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 managements 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 Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors 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 auditors 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.
Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
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. 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.
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 auditors 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
1) As required by the Companies (Auditors Report) Order, 2016("the order) issued by the Central Government in terms of Section 143(11) of the act, we give in "Annexure I" a statement on the matters specified in paragraph 3 and 4 of the Order.
2) As required by section 143(3) of the Act, based on our audit we report:
(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;
(b) In our opinion and to the best of our information and according to the explanations given to us, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.
(d) In our opinion, the aforesaid financial statements comply with the Ind AS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
(e) On the basis of written representations received from the directors, as on March 31,2019 and taken on record by the Board of Directors, none of the Directors are disqualified as on March 31,2019, 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 Annexure II to this report.
(g) With respect to the other matter to be included in the Auditors Report in accordance 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 explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
(h) With respect to the other matters to be included in the Auditors 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 litigations on its financial position in its financial statements. (Refer Note No. 41).
ii. The Company did not have any long term contracts including derivative contracts, for which there were any material foreseeable losses.
iii. There are no amounts which are required to be transferred to the Investor Education and Protection Fund by the Company.
For Kalani & Company
Chartered Accountants (FRN: 000722C)
Membership No.- 108170
Date: 27th May, 2019
ANNEXURE 1 TO THE INDEPENDENT AUDITORS REPORT
The Annexure referred to in paragraph (1) of Report on other Legal and Regulatory Requirements of our Independent Auditors Report of even date to the members of the Bella Casa Fashion & Retail Limited, Jaipur on the Financial statements for the year ended on 31st March, 2019, we report that:
(i) a) The Company has generally maintained proper records showing full particulars, including quantitative details and situation offixed assets (Property, Plant and Equipments).
b) As explained to us, the fixed assets (Property, Plant and Equipments) have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the company and nature of its assets. No material discrepancies were noticed on such physical verification.
c) Based on our verification and according to information and explanations given to us, the title deeds of immovable properties are held in the name of the company except for the I and II Floor of building premises constructed on the land situated at Plot No. E-103, EPIP, Sitapura Industrial Area, Jaipur, the land appurtenant thereto is owned to M/s Gupta Exports, a firm in which Companies Promoters are partners and such land has been taken by company on lease.
(ii) As per the information and explanation given to us, the Companys management has carried out physical verification of inventory at regular intervals. No material discrepancies were noticed on such physical verification.
(iii) The Company has not granted any loans, secured or unsecured to any companies, firms, limited liability partnership or other parties covered in register maintained under section 189 of the Companies Act, 2013 hence reporting under (iii)(a), (iii)(b) and (iii)(c) is not applicable.
(iv) The Company has not granted any loans or given any guarantee and security covered under section 185 of the Act. In respect of investments made, Company has complied with the provisions of section 186 of Act.
(v) The company has not accepted deposits from the public within the meaning of Sections 73 to 76 of the Companies Act, 2013 and the rules made there under, hence this clause is not applicable.
(vi) We have broadly reviewed the accounts and records maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Companies Act, 2013 read with Companies (Cost Records & Audit) Rules, 2014 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view to determine whether they are accurate and complete.
(vii) a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of accounts in respect of undisputed statutory dues including provident fund, employee state insurance, income tax, sales tax, service tax, goods & service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities and there are no undisputed dues outstanding as on 31st March 2019 for a period of more than six months from the date they became payable.
b) According to the information and explanations given to us, there are no unpaid dues of income tax, sales tax, service tax, Goods & Services Tax duty of customs, duty of excise or value added tax under dispute.
(viii) Based on examination of books of accounts and information and explanation given to us, the Company has not defaulted in repayment of loans or borrowings to a financial institution or bank. Company has not issued any debentures, hence nothing is due to debenture holders.
(ix) According to the information and explanations given to us the company has not raised money by way of initial public offer or further public offer and the money raised by the company by way of term loan have been applied for the purpose for which they were obtained.
(x) According to the information and explanations given to us and on the basis of our examination of the records of the Company, no material fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year.
(xi) The managerial remuneration has been paid in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act.
(xii) The company is not a Nidhi Company, hence reporting under this clause is not applicable.
(xiii) The Company has complied with the provisions of Section 177 and 188 of the Act w.r.t. transactions with the related parties, wherever applicable. Details of the transactions with the related parties have been disclosed in the financial statements as required by the applicable Indian Accounting Standards.
(xiv) Company has made allotment of equity shares through convertible warrants during the year under audit. Such allotment was made in compliance with provisions of section 42 of the Companies Act, 2013 and other applicable provisions including SEBI (ICDR) Regulations, 2009. According to the information and explanations given to us and on the basis of our examination of the records of the Company the funds so received on such allotment has been utilized for the purposes for which it was raised.
(xv) The company has not entered into any non-cash transactions with directors or persons connected with him as covered under section 192 of Companies Act, 2013.
(xvi) According to the information and explanations given to us, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, provision of clause 3(xvi) of the order is not applicable to the company.
For Kalani & Company
Chartered Accountants (FRN: 000722C)
Membership No.- 108170
Date: 27th May, 2019.
Annexure "II" forming part of Independent Auditors Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act").
We have audited the internal financial controls with reference to financial statements of Bella Casa Fashion & Retail 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.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internal financial controls with reference to financial statements 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 companys 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 Act.
Our responsibility is to express an opinion on the Companys internal financial controls with reference to financial statements 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 ICAI 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 with reference to financial statements 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 with reference to financial statements 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 auditors 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 Companys internal financial controls with reference to financial statements.
Meaning of Internal Financial Controls over Financial Reporting
A companys internal financial controls with reference to financial statements 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 companys internal financial controls with reference to financial statements 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 unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Inherent Limitations of Internal financial controls with reference to financial statements
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.
In our opinion, the Company has, in all material respects, an adequate internal financial controls with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at March 31, 2019, based on the internal financial controls with reference to financial statements 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.
|Date: 27th May, 2019|
|For Kalani & Company|
|Chartered Accountants (FRN: 000722C)|
|Membership No.- 108170|