To the Members of Asian Oilfield Services Limited
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
1. We have audited the accompanying standalone financial statements of Asian OilfieldServices Limited (the Company') which comprise the Balance Sheet as at 31 March2019 the Statement of Profit and Loss (including Other Comprehensive Income) the CashFlow Statement and the Statement of Changes in Equity for the year then ended and asummary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion section of our report the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 (Act') in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India including Indian Accounting Standards (Ind AS')specified under section 133 of the Act of the state of affairs (_nancial position) of theCompany as at 31 March 2019 and its profit (_nancial performance including othercomprehensive income) its cash _ows and the changes in equity for the year ended on thatdate.
Basis for Qualified Opinion
3. As stated in Note 41 to the standalone financial statements the Company hasnon-current investments of INR 0.31 lakhs in and loans including accrued interest(classified under non-current loans and other non-current financial assets respectively)of INR 333.58 lakhs and INR 17.74 lakhs respectively recoverable from a subsidiarycompany AOSL Petroleum Pte. Limited (APPL) as at 31 March 2019. The net worth of thesubsidiary company has been fully eroded and it has been incurring losses. The accumulatedlosses in the subsidiary company amounts to INR 1443.39 lakhs as at 31 March 2019 andthe auditor of the subsidiary company has determined that a material uncertainty existsas at 31 March 2019 that may cast significant doubt about the subsidiary company'sability to continue as a going concern. However based on the factors described in theaforementioned note management has considered these balances as fully recoverable whichis not in accordance with the requirements of Ind AS 36 Impairment of Assets and Ind AS109 Financial Instruments. In the absence of sufficient appropriate audit evidence tosupport management's assessment as above or any other relevant alternate evidence we areunable to comment upon adjustments if any that may be required to carrying values of theaforesaid balances and the consequential impact if any on the standalone financialstatements.
4. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the rules thereunder and we have ful_lled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.
Key Audit Matters
5. Key audit matters are those matters that in our professional judgment were of mostsignificance 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 awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
6. In addition to the matter described in the Basis for Qualified Opinion section wehave determined the matter described below to be the key audit matter to be communicatedin our report.
|Key audit matter ||How our audit addressed the key audit matter |
|Revenue recognition ||Our audit work included but was not restricted to the following: |
|Revenue for the Company consists primarily of Oilfield services recognised as per the accounting policy described in Note 1(d) to the accompanying standalone financial statements. Refer Note 21 and Note 42 for details of revenue recognised during the year. Ind AS 115 Revenue from Contracts with Customers adopted by the Company with effect from 1 April 2018 requires management to make certain key judgments relating to identifying contracts with customers performance obligations involved in contracts and revisions thereto determining transaction price which involves variable consideration elements allocation of the transaction price to such performance obligations and satisfaction of performance obligations. Basis the evaluation done by the management the Company recognises revenue over a period of time as well as at a point in time based on the different performance obligations identified from Oilfield service contracts. ||1) Understood the revenue and receivable business cycle and assessed the appropriateness of the accounting policy adopted by the company for revenue recognition. |
| ||2) Evaluated design and implementation of the key controls around revenue recognition including controls around contract approvals invoice approval determining the amount of variable consideration and recording of receipt. |
| ||3) Tested operating effectiveness of the above identified key controls over revenue recognition during the year and as at year end. |
| ||4) Assessed the appropriateness of the accounting policy for revenue recognition from Oilfield services in accordance with Ind AS 115 Revenue from Contracts with Customers'. |
|Considering the significance of management judgement involved as mentioned above and the materiality of amounts involved revenue recognition was identified as a key audit matter for the current year audit. ||5) Selected a sample of continuing and new contracts entered with customers and performed following procedures: |
| ||Analysed the contracts and identified distinct performance obligations in these contracts. |
| ||Compared these performance obligations with those identified and recorded by the Company. |
| ||Considered the terms of the contracts to determine the transaction price including any variable consideration. |
| ||Tested sample of revenue disaggregated by service offerings with reference to the performance obligations specified in the underlying contracts. |
| ||6) Performed test of details on a sample of revenue transactions recorded during the year including specific periods before and after the year-end. For the samples selected inspected supporting documents including contracts and related amendments thereto for revisions to performance obligations or price terms daily progress reports and invoices. |
| ||7) Evaluated the appropriateness of the disclosures made in the financial statements for revenue recorded during the year. |
Information other than the Financial Statements and Auditor's Report thereon
7. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
8. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (_nancial position) profit or loss(_nancial performance including other comprehensive income) changes in equity and cash_ows of the Company in accordance with the accounting principles generally accepted inIndia including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
9. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
10. Those Board of Directors are also responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
11. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
12. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
13. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
14. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
15. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
16. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.
17. As required by the Companies (Auditor's Report) Order 2016 (the Order')issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.
18. Further to our comments in Annexure I as required by section 143(3) of the Actwe report that:
a) we have sought and except for the possible effects of the matter described in theBasis for Qualified Opinion section obtained all the information and explanations whichto the best of our knowledge and belief were necessary for the purpose of our audit;
b) except for the possible effects of the matter described in the Basis for QualifiedOpinion section in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books;
c) the standalone financial statements dealt with by this report are in agreement withthe books of account;
d) except for the possible effects of the matter described in the Basis for QualifiedOpinion section in our opinion the aforesaid standalone financial statements comply withInd AS specified under section 133 of the Act;
e) the matter described in paragraph 3 under the Basis for Qualified Opinion sectionin our opinion may have an adverse effect on the functioning of the Company;
f) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2019 from being appointed as a director in terms of section 164(2) of the Act;
g) the qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion section;
h) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 29 May 2019 as per Annexure II expressed a qualified opinion; and
i) with respect to the other matters to be included in the Auditor's Report inaccordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) inour opinion and to the best of our information and according to the explanations given tous:
i. the Company as detailed in note 30 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2019;
ii. except for the possible effects of the matter described in the Basis for QualifiedOpinion section the Company did not have any long-term contracts including derivativecontracts for which there were any material foreseeable losses as at 31 March 2019 ;
iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended 31 March 2019; and
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Rakesh R. Agarwal
Membership No.: 109632
Date: 29 May 2019
Annexure I to the Independent Auditor's Report of even date to the members of AsianOilfield Services Limited on the standalone financial statements for the year ended 31March 2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that: (i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of property plant andequipment.
(b) The Company has a regular program of physical verification of its property plantand equipment under which property plant and equipment are verified in a phased mannerover a period of three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this program certainproperty plant and equipment were verified during the year and no material discrepancieswere noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the headProperty Plant and Equipment') are held in the name of the Company.
(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.
(iii) The Company has granted unsecured loans to four companies covered in theregister maintained under Section 189 of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest.
(b) in relation to a company the schedule of repayment of principal and payment ofinterest has been stipulated wherein the principal amounts and interest are repayable ondemand and since the repayment of such loans has not been demanded in our opinionrepayment of the principal amounts and interest are regular; in relation to a company theschedule of repayment of principal and payment of interest has been stipulated andrepayments the principal amount (one case) and the receipt of interest (one case) are notregular; and in relation to two companies the schedule of repayment of principal andpayment of interest has been stipulated and the principal amount is not due for repaymentcurrently however the receipts of interest (two cases) are not regular.
(c) in relation to a company there is no overdue amount in respect of loans granted;in relation to a company there is no amount which is overdue for more than 90 days inrespect of loans granted; in relation to two companies the total amount which is overduefor more than 90 days in respect of loans granted is as follows -
|Particulars ||Amount (INR in lakhs) ||No. of Cases |
|Principal ||Nil ||Nil |
|Interest ||61.63 ||2 |
|Total ||61.63 ||2 |
There is no amount which is overdue for more than 90 days in respect of the principalamount of the loan granted. In our opinion reasonable steps have not been taken by theCompany for the recovery of the interest amounting to INR 61.63 lakhs which is overduefor more than 90 days.
(iv) In our opinion the Company has complied with the provisions of Section 186 inrespect of investments and loans. Further in our opinion the Company has not enteredinto any transaction covered under Section 185 and Section 186 of the Act in respect ofguarantees and security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's services. Accordinglythe provisions of clause 3(vi) of the Order are not applicable.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax goods and service tax cess and other material statutory dues as applicablehave generally been regularly deposited to the appropriate authorities though there hasbeen a slight delay in a few cases. Undisputed amounts payable in respect thereof whichwere outstanding at the year-end for a period of more than six months from the date theybecame payable are as follows:
Statement of arrears of statutory dues outstanding for more than six months
|Name of the statute ||Nature of the dues ||Amount ||Period to which the amount relates ||Due Date ||Date of Payment |
| || ||(INR) || || || |
|Punjab Labour Fund Act 1965 ||Labour welfare fund ||4192 ||April 2015 to March 2016 ||Various dates ||Not yet paid |
|Punjab Labour Fund Act 1965 ||Labour welfare fund ||420 ||April 2018 to June 2018 ||15 July 2018 ||Not yet paid |
(b) There are no dues in respect of sales-tax service tax duty of customs duty ofexcise and value added tax that have not been deposited with the appropriate authoritieson account of any dispute. The dues outstanding in respect of income-tax on account of anydispute are as follows: Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount ||Amount paid under Protest ||Period to which the amount relates ||Forum where dispute is pending |
| || ||(INR in lakhs) || || || |
|Income Tax Act1961 ||Income tax ||64.43 ||- ||Assessment Year 2008-09 ||Income Tax Appellate Tribunal |
| || ||28.39 ||- ||Assessment Year 2010-11 ||(ITAT) |
(viii) The Company has not defaulted in repayment of loans or borrowings to any bankduring the year. The Company has no loans or borrowings payable to a financial institutionor government and did not have any outstanding debentures during the year.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained.
(x) No fraud by the Company or on the Company by its Officers or employees has beennoticed or reported during the period covered by our audit.
(xi) In our opinion managerial remuneration has been paid and provided by the Companyin accordance with the requisite approvals mandated by the provisions of Section 197 ofthe Act read with Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Rakesh R. Agarwal
Membership No.: 109632
Date: 29 May 2019
Annexure II to the Independent Auditor's Report of even date to the members of AsianOilfield Services Limited on the standalone financial statements for the year ended 31March 2019
Independent Auditor's report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
1. In conjunction with our audit of the standalone financial statements of AsianOilfield Services Limited ("the Company") as at and for the year ended 31 March2019 we have audited the internal financial controls over financial reporting("IFCoFR") of the Company as at that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting ("the Guidance Note") issued by the Institute of Chartered Accountantsof India ("the ICAI"). These responsibilities include the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the orderly and efficient conduct of the Company's business includingadherence to Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India ("the ICAI") and deemed to beprescribed under section 143(10) of the Act to the extent applicable to an audit ofIFCoFR and the Guidance Note issued by the ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate IFCoFR were established and maintained and ifsuch controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
Basis for Qualified opinion
8. According to the information and explanations given to us and based on our auditthe following material weakness has been identified in the operating effectiveness of theCompany's IFCoFR as at 31 March 2019:
The Company did not have sufficient appropriate evidence to support supervisory andreview controls over process of determining (a) carrying value of the Company'snon-current investments in one of its subsidiaries; and (b) recoverability of non-currentloans and other non-current financial assets due from such subsidiary. Absence ofaforesaid assessment in accordance with the accounting principles generally accepted inIndia could potentially result in a material misstatement in the carrying value ofinvestments in subsidiaries and dues from such subsidiaries and consequently could alsoimpact the profit (_nancial performance including other comprehensive income) after tax.
9. A material weakness' is a deficiency or a combination of deficiencies inIFCoFR such that there is a reasonable possibility that a material misstatement of thecompany's annual or interim financial statements will not be prevented or detected on atimely basis.
10. In our opinion except for the possible effects of the material weakness describedabove on the achievement of the objectives of the control criteria the Company has inall material respects adequate internal financial controls over financial reporting andsuch internal financial controls over financial reporting were operating effectively as at31 March 2019 based on the internal control over financial reporting criteria establishedby the Company considering the essential components of internal control stated in theGuidance Note issued by the ICAI.
11. We have considered the material weakness identified and reported above indetermining the nature timing and extent of audit tests applied in our audit of thestandalone financial statements of the Company as at and for the year ended 31 March 2019and the material weakness has affected our opinion on the standalone financial statementsof the Company and we have issued a qualified opinion on the standalone financialstatements.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Rakesh R. Agarwal
Membership No.: 109632
Date: 29 May 2019