TO
THE MEMBERS OF
GARG FURNACE LIMITED
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of Garg Furnace Limited
("the Company"), which comprise the Balance Sheet as at March 31, 2021, 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 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 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, 2021, and total comprehensive loss
(comprising of loss and other comprehensive loss), 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 specified under section 143(10) of the Act (SAs). 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 ofthe current period. These matters
were addressed in the contextof our auditof 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
| S. No. Key Audit Matter |
Auditors Response |
| 1- Allowance for Credit Losses as per Ind AS 109 on ‘Financial Instruments: |
Principal Audit Procedures: |
| The Company determines the allowance for credit losses on the following basis: - |
Our audit procedures related to the allowance for credit losses for trade receivables
included the following, among others: |
|
We tested the effectiveness of controls over the : - |
| a) Historical loss experience, which is adjusted to reflect current and estimated
future economic conditions. |
a) Development of the methodology for the allowance for credit losses, including
consideration of the current and estimated future economic conditions. |
| b) Consideration of Current and anticipated future economic conditions relating to the
industries the Company deals with and the countries in which its suppliers and customers
are situated. |
b) Completeness and accuracy of information used in the estimation of probability of
default and |
| c) Consideration of credit reports and other related credit information for its
customers to estimate the probability of default in future. |
c) Computation of the allowance for credit losses in accordance with Ind AS 109. |
| d) For the current year, estimates of possible effect from the pandemic relating to
COVID-19. |
For a sample of customers: |
| We identified allowance for credit losses as a key audit matter because of possible
effects of COVID-19 pandemic. |
We tested the input data such as credit reports and other credit related information
used in estimating the probability of default by comparing them to external and internal
sources of information. |
| (Refer Note 2 and Note 43(b)(iii) of the Financial Statements.) |
|
| 2- Derecognition of carrying value of property, plant and equipment: |
Principal Audit Procedures: |
| Property, plant and equipment totaling 1425.33 lakhs (2019-20: 1865.29 lakhs) as
disclosed in Note 3 represent significant balances recorded in the statement of financial
position. The Company describes the significant accounting policies in respect of
property, plant and equipment in Note 2 to the financial statements. |
Our audit procedures related to derecognition of carrying value of property, plant and
equipment included the following, among others: |
| The derecognition of carrying amount of property, plant and equipment is done on i)
disposal; or ii) when no future economic benefits are expected from its use or disposal |
a) We have evaluated the analysis made by the management in determination of carrying
value of property, plant and equipment to be derecognized and ensure that these are
consistent with the principles of Ind AS 16 on Property, Plant and Equipment. |
| This requires significant judgement of the management to determine whether any future
economic benefit is expected from use or disposal of property, plant and equipment. |
b) We assessed whether indicators of derecognition existed as at 31 March 2021 based
on our knowledge of the business and the industry. |
| During the year the management has derecognised carrying amount of property, plant and
equipment amounting to 315.13 lakhs in the financial statements as no future economic
benefits are expected from its use or disposal (refer note no. 32). |
c) We tested the effectiveness of controls in place over the property, plant and
equipment and evaluated the appropriateness of accounting policies laid down in this
regard, performed tests of details on carrying amount derecognized and its disposal
proceeds, if any. In performing these substantive procedures, we assessed the judgements
made by management including its decision that no future economic benefit are expected to
flow from use or disposal of these properly, plant and equipment |
| Since judgment of the management is required to determine derecognition of carrying
value of property, plant and equipment, we have considered it to be a key audit matter. |
d) We tested the mathematical accuracy and computation of the carrying value of
property, plant and equipment derecognised by using the same input data used by the
Company. |
|
We found managements assessment in determining the carrying value of the property,
plant and equipment to be reasonable. |
Other Information
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, Business
Responsibility Report, Corporate Governance and Shareholders Information, but does not
include the Financial Statements and our auditors report thereon. The other information
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 in the audit, or otherwise appears to be materially
misstated.
When we read the other information, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to those charged with
governance and describe actions applicable in the applicable laws and regulations.
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in section
134(5) of the Act with respect to the preparation of these financial statements that give
a true and fair view of the financial 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 also 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 our audit procedures 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
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 Companies Act, 2013, 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 ability of
the Company 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 safeguard.
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 Companies (Auditors Report) Order, 2016 (‘the Order) issued by
Central Government of India in terms of sub-section (11) of section 143 of the Act, we
give in ‘Annexure A, 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, based on our audit, 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 (including Other Comprehensive
Income/ Loss), 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 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 the written representations received from the directors as on 31st
March 2021 taken on record by the Board of Directors, none of the directors is
disqualified as on March 31, 2021 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 B". Our report expresses an unmodified opinion on
the adequacy and operating effectiveness of the Companys internal financial controls over
financial reporting.
g) With respect to the other matters 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, as amended 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 36
ii. The Company did not have any long-term contracts including derivative contracts for
which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts, required to be transferred, if
any, to the Investor Education and Protection Fund by the company.
ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 1 under Report on Other Legal and Regulatory Requirements
section of our report to the Members of Garg Furnace Limited of even date)
On the basis of such checks, as, we considered appropriate, and, according to the
information and explanations given to us during the course of our audit, we report that:
1. In respect of Fixed Assets:
a) The Company is maintaining proper records showing full particulars Including
quantitative details and situation of fixed assets.
b) The Company has a regular program of physical verification of the fixed assets at
reasonable intervals. In accordance with this program, certain fixed assets were verified
during the year, and, no material discrepancies were noticed on such verification.
However, the Company has derecognised carrying amount of property, plant and equipment
amounting to 315.13 lakhs in the financial statements as no future economic benefits are
expected from its use or disposal.
c) The Company has all the original title deeds of immovable properties in its own
name.
2. The inventory has been physically verified by the management during the year. In our
opinion, the frequency of verification is reasonable, and, the discrepancies noticed on
physical verification of inventory were not material.
3. The Company has not granted any loans, secured or unsecured, to Companies, firms or
other parties covered in the register maintained under Section 189 of the Act. Therefore,
the provisions of Clause 3(iii), (iii)(a), (iii)(b) and (iii)(c) of the said Order are not
applicable to the Company.
4. According to the information and explanations given to us,
a. during the year, the Company has not given any loans, any guarantees or provided any
securities, therefore the Company has complied with the provisions of the Section 185 of
the Act.
b. the Company has complied with the provisions of Section 186 of the Act in respect of
the loans and investments made, and guarantees and security provided by it.
5. The Company has not accepted any deposits from the Public. Therefore, the provisions
of Clause 3(v) of the said Order is not applicable to the Company.
6. 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 of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed
accounts and records have been made and maintained. We have, however, not made a detailed
examination of such records with a view to determine whether they are accurate or
complete.
7. (a) According to the information and explanations given to us and the records of the
Company examined by us, in our opinion, the Company is generally regular in depositing the
undisputed statutory dues including provident fund, employees state insurance, income
tax, goods and services tax, sales tax, service tax, excise duty, customs duty, value
added tax, cess and other material statutory dues with the appropriate authorities, the
extent of the arrears of outstanding statutory dues as on the last day of the financial
year concerned for a period of more than six months from the date they became payable are
as follows:
| Sr. No Name of the Statute |
Nature of the Dues |
Amount (in Rs.) |
Period to which amount relates |
| 1. The Punjab Labour Welfare Fund Act, 1965 |
Punjab Labour Welfare Fund |
174409/- |
Upto the year 2020-21 |
| 2. Punjab State Development Tax Act, 2018 |
Professional Tax |
3000/- |
2019-20 |
(b) According to the information and explanations given to us and the records of the
Company examined by us, there are no dues of income-tax, cess, goods and services tax,
sales tax, service tax, value added tax, customs duty and excise duty which have not been
deposited on account of a dispute.
8. In our opinion and according to the information and explanations given to us, the
Company has not defaulted in repayment of loans or borrowing to a financial institution,
government, Bank or dues to debenture holders.
9. In our opinion, and according to the information and explanations given to us, the
Company has not raised any money by way of initial public offer or further public offer
(Including Debt instruments) and term loans.
10. During the course of our examination of the books and records of the Company
carried out in accordance with the generally accepted auditing practices in India, and
according to the information and explanations given to us, we have, neither, come across
any instance of fraud by the Company, or, any fraud on the company by its officers or
employees, noticed or reported during the year, nor, have we been informed of such case by
the management.
11. The Company has paid/provided for managerial remuneration in accordance with the
requisite approvals mandated by the provisions of section 197 read with Schedule V to the
Act.
12. The Company is not a Nidhi Company. Therefore, the provision of clause 3(xii) of
the said Order is not applicable to the Company.
13. The Company has entered into transactions with related parties in compliance with
the provisions of sections 177 and 188 the Act. The details of such related party
transactions have been disclosed in the financial statements as required by Ind AS-24
Related Party Disclosures.
14. According to the information and explanations given to us and based on our
examination of the records, the Company has not made any preferential allotment or private
placement of shares or fully or partly convertible debentures during the year. .
Therefore, the provisions of Clause 3(xiv) of the said Order are not applicable to the
Company
15. In our opinion, and according to the information and explanations given to us, the
Company has not entered into any non-cash transaction with directors or persons connected
with them. . Therefore, the provisions of Clause 3(xv) of the said Order are not
applicable to the Company.
16. In our opinion, and 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. Therefore, the provisions of Clause 3(xvi) of the said Order are not applicable
to the Company.
ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 2(f) under Report on Other Legal and Regulatory
Requirements section of our report to the Members of Garg Furnace Limited of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of
Sub-section 3 of Section 143 of the Act
We have audited the internal financial controls over financial reporting of Garg
Furnace Limited ("the Company") as of March 31, 2021 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 Board of Directors of the Company 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 respective 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 Companies Act, 2013.
Auditors Responsibility
Our responsibility is to express an opinion on the internal financial controls over
financial reporting of the Company 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") issued by the Institute of Chartered Accountants
of India and the Standards on Auditing prescribed under Section 143(10) of the Companies
Act, 2013, to the extent applicable to an audit of internal financial controls. 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 auditors judgement, 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 internal financial controls system over
financial reporting of the Company.
Meaning of Internal Financial Controls Over Financial Reporting
A companys 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 companys 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
companys assets that could have a material effect on the financial statements.
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, to the best of our information and according to the explanations given
to us, 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, 2021, 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.
|
For and on behalf of Ashwani & Associates |
|
Chartered Accountants |
|
Firm Registration Number: 000497N |
|
by the hand of |
|
Arvind Jain Partner |
| Place: Ludhiana |
Membership No.: 097549 |
| Dated: June 30th, 2021 |
U Dl N :21097549AAAACU3852 |
+91-9892691696
