To the members of Escorts Limited
Report on the audit of the standalone financial statements Opinion
1. We have audited the accompanying standalone financial statements of Escorts Limited (`the Company') which comprise the Balance Sheet as at 31 March 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of the significant and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (`Act') in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India statements of the current period including Indian Accounting Standards (`Ind AS') specified under section 133 of the Act of the state of affairs (financial statements as a whole position) of the Company as at 31 March 2019 and its profit(financial performance including other comprehensive income) its cash flows and the changes in equity for the year ended on that date
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act.
Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (`ICAI') together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the rules thereunder and we have fulfilled our other ethical accounting policies responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
4. Key audit matters are those matters that in our professional judgment were of most significance in our audit of the . standalone financial
These matters were addressed in the context of our audit of the standalone financial in forming our opinion thereon and we do not provide a separate opinion on these matters.
5. We have determined the matter described below to be the key audit matter to be communicated in our report.
|Key audit matter||How our audit addressed the key audit matter|
|Revenue recognition||Our audit procedures related to revenue recognition included but were not limited to the following:|
|We refer to the Company's significant accounting policies in note |
|2.2(a) and the revenue related disclosures in note 48 (i) of the standalone financial statements.||a) assessed the design and operating effectiveness of Company's controls (including the automated controls) around revenue recognition (including rebates / discounts);|
|Owing to the multiplicity of the Company's products volume of sales transactions size of distribution network and varied terms of contracts with customers in line with the requirements of the Standards on Auditing revenue is determined to be an area involving significant risk and hence requiring significant auditor attention. Further Ind AS 115 Revenue from Contracts with Customers effective from 1 April 2018 requires management to make certain key judgements such as identification of distinct performance obligations in contracts with customers (such as after sales maintenance services and product warranties) determination of transaction price for the contract factoring in the consideration payable to customers (such as rebates and discounts) and selection of a method to allocate the transaction price to the performance obligations.||b) assessed the appropriateness of Company's identification of performance obligations in its contracts with customers its determination of transaction price including allocation thereof to performance obligations and accounting policies for revenue recognition in accordance with the accounting principles laid down in Ind AS 115;|
|c) scrutinized sales ledgers to verify completeness of sales transactions;|
|d) on a sample basis tested the revenue recognised including testing of cut off assertion as at the year end. Our testing included tracing the information to agreements price lists invoices proof of dispatches/deliveries (as the case may be) and approved incentives/discounts schemes;|
|This matter is considered to be of most significance given the extent of industry knowledge and skills needed to apply audit procedures to address the matter and evaluate the results of those procedures.|
|e) tested the appropriateness of accruals for various rebates and discounts as at the year-end;|
|f) assessed the revenue recognised with substantive analytical procedures including review of price quantity and product mix variances and analysis of discounts at customer level;|
|g) circularised balance confirmations to a sample of customers and reviewed the reconciling items if any; and|
|h) tested the related disclosures made in notes to the standalone financial statements in respect of the revenue from operations.|
Information other than the Standalone Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the standalone financial statements and our auditor's report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibility is to read the other information identified above when it becomes available and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report if we conclude that there is a material misstatement therein we are required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the standalone financial statements
7. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs (financial position) profit or loss (financial performance including other comprehensive income) changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Ind AS specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements view and are free from material misstatement whether due to fraud or error.
8. In preparing the standalone financial management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of the Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
11. As part of an audit in accordance with Standards on Auditing we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls 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 management's 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 that give may cast true and fair significant doubt on to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the financial statements or if such disclosures are statements inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant any significant deficiencies identify during our audit.
13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
15. As required by section 197(16) of the Act we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 (`the Order') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure I a statement on the matters specified paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure I as required by section 143(3) of the Act we report that:
a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose 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 standalone financial statements dealt with by this report are in agreement with the books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken on record by the Board of Directors none of the directors is disqualified as on31 March 2019 from being appointed as a director in audit findings including terms of section 164(2) of the Act; in internal control that we
f) 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 the standalone financial statements of the Company for the year ended on that date and our report dated 7 May 2019 as per Annexure II expressed an unmodified opinion;
g) with respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) in our opinion and to the best of our information and according to the explanations given to us:
i. the Company as detailed in note 34 to the standalone financial statements has disclosed the impact of pending litigations on its financial position as at 31 March 2019;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2019;
iii. there has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2019;
iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were in applicable for the period from 8 November 2016 to 30 December 2016 which are not relevant to these standalone financial statements. Hence reporting under this clause is not applicable.
For Walker Chandiok & Co LLP
Firm Regn No. 001076N/N500013
Membership No.: 512752
Date: 7 May 2019
Annexure I to the Independent Auditor's Report of even date to the members of Escorts Limited on the standalone financial statements for the year ended 31 March 2019
Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit and to the best of our knowledge and belief we report that:
(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed are verified in a phased manner over a period of three years which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this program certain fixed assets were verified during the year and no material discrepancies were noticed on such verification
(c) The title deeds of all the immovable properties (which are included under the head `Property plant and equipment') are held in the name of the Company.
(ii) In our opinion the management has conducted physical verification of inventory at year and discrepancies noticed on physical verification have been properly dealt with in the books of account.
(iii) The Company has granted unsecured loan to a company covered in the register 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 prima facie prejudicial to the Company's interest;
(b) the schedule of repayment of principal has been stipulated wherein the principal amounts are repayable on demand and the repayment/receipts of the principal amount and the interest are regular;
(c) there is no overdue amount in respect of loan granted to such company.
(iv) In our opinion the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of loans investments guarantees and security.
(v) In our opinion the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordingly the provisions of clause 3(v) of the Order are not applicable. under which fixed assets
(vi) 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 sub-section (1) of Section 148 of the Act in respect of Company's products/services and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
(vii) (a) The Company is regular in depositing undisputed statutory dues including provident fund employees' intervals during the state insurance income-tax goods and services tax duty of customs cess and other material statutory dues as applicable with the appropriate authorities. Further no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they become payable.
(b) The dues outstanding in respect of income-tax sales-tax service-tax duty of customs duty of excise and value added tax on account of any dispute are as follows:
Statement of Disputed Dues
|Name of the statute||Nature of dues||Amount (Rs. )||Amount paid under Protest (Rs. in crores)||Period to which the amount relates||Forum where dispute is pending|
|Haryana Local Area||Local Area||52.80||39.90||2000-2008||High Court|
|Development Tax 2000||Development Tax|
|Sales Tax Acts||Sales Tax||5.62||0.25||1988-2012||High Court|
|Sales Tax Acts||Sales Tax||11.97||1.02||1992-2015||Appellate Tribunal|
|Sales Tax Acts||Sales Tax||58.13||4.67||1997-2017||Appellate authority till Commissioner level|
|Central Excise Act 1944||Excise Duty||19.65||-||2013-2015||CESTAT|
|Central Excise Act 1944||Excise Duty||448.83||50.68||2004-2016||CESTAT|
|Central Excise Act 1944||Excise Duty||1.12||0.02||1992-2015||Appellate authority till Commissioner level|
|Finance Act 1994||Service Tax||1.69||0.01||2005-2012||CESTAT|
|Finance Act 1994||Service Tax||1.81||1.13||2007-2015||Appellate authority till Commissioner level|
|Income Tax Act 1961||Income Tax||22.67||2.50||2006-2017||CIT (Appeals)|
|Income Tax Act 1961||Income Tax||1.41||-||2008-2016||ITAT|
|The Customs Act 1962||Custom Duty||6.97||6.97||2007-2008||CESTAT|
viii) The Company has not defaulted in repayment of loans or borrowings to any bank or financial institution or government during the year. The Company did not have any outstanding debentures during statements the year. etc. as required
(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments).
In our opinion the term loans were applied for the purposes for which the loans were obtained though idle funds which were not required for immediate utilisation were invested in liquid investments payable on demand.
(x) No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been provided by the Company in accordance with the requisite approvals mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions of clause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act where applicable and the requisite details have been disclosed by the in the financial applicable Ind AS.
(xiv) During the year the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions with the 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 Reserve Bank of India Act 1934.
For Walker Chandiok & Co LLP
Firm Regn No. 001076N/N500013
Membership No.: 512752
Date: 7 May 2019
Annexure II to the Independent Auditor's Report of even date to the members of Escorts Limited on the standalone financial statements for the year ended 31 March 2019
Independent auditor's report on the Internal Financial Controls under clause (i) of sub-section 3 of Section 143 of the Companies Act 2013 (`the Act')
1. In conjunction with our audit of the standalone financial statements of Escorts Limited (`the Company') as at and for the year ended 31 March 2019 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 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 (`the Guidance Note') issued by the Institute of Chartered Accountants of India (`ICAI').
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 the Company's business including adherence to the Company's 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.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI and deemed to be prescribed under Section 143(10) of the Act to the extent applicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. 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 IFCoFR were established and maintained and if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining an understanding of IFCoFR 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 auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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 regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's IFCoFR include 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 authorisations 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 company'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 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 IFCoFR to future periods are subject to the risk that the IFCoFR may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
8. In our opinion the Company has in all material respects adequate internal financial controls over financial reporting and such controls were operating effectively as at 31 March 2019 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 issued by the ICAI.
For Walker Chandiok & Co LLP
Firm Regn No. 001076N/N500013
Siddharth Talwar Partner
Membership No.: 512752
Date: 7 May 2019