Report on the audit of Financial Statements Opinion
We have audited the accompanying financial Statements of Alkyl Amines Chemicals Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (including Other Comprehensive Income), Cash Flow Statement and the Statement of Change in Equity for the year then ended 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, 2023, the profit and total comprehensive income, its cash flows and changes in equity 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 Auditor’s 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 ICAI’s 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.
|
Sr. No.
|
Key Audit Matter
|
Auditor Response
|
|
1
|
Litigations - Contingencies
|
Audit Procedures
|
| |
The Company has litigations in respect of certain direct and indirect tax and other litigations. In this regard, the Company has recognised provisions and has disclosed contingent liabilities (to the extent not provided for) as at March 31, 2023.
Significant management judgment is required to assess these matters and to determine the probability of material outflow of economic resources and whether a provision should be recognised or a disclosure should be made. Where considered relevant, the management judgement is also supported with legal advice in these cases.
We focused on this area as the ultimate outcome of matters are uncertain and the positions taken by the management are based on the application of judgement, related expert advice including those relating to interpretation of laws and regulations.
Refer to Note 2(i)(c) and 35A to the Financial Statements.
|
Our audit procedures involved the following:
• testing the effectiveness of controls around the recording and re-assessment of contingent liabilities;
• discussing with management the status and recent developments of these matters, including their views on the likely outcome of each litigation and claim;
• performing our assessment of the underlying calculations supporting the provisions or other disclosures made in the financial statements;
• evaluating the management’s assessment of these matters and monitoring changes in the disputes with reference to subsequent orders passed, in order to establish the appropriateness of the provisions / disclosures;
• Obtaining information’s from the Company’s tax consultants to confirm the facts and circumstances and assessment of the likely outcome.
• evaluating management’s assessment of the matters that are not disclosed, as the probability of material outflow is considered to be remote by the management; and
• assessing the adequacy of the Company’s disclosures.
|
|
2
|
Provision for Expected Credit Losses (ECL) of trade receivables
|
Audit Procedures
Our audit procedures involved the following:
|
| |
The Company determines the provision for credit losses based on the Company’s historical observed default rates which are negligible over the years. The Company considered current and anticipated future economic conditions relating to industries the Company deals with, to calibrate the provision matrix to adjust the historical credit loss experience with forward-looking information. While determining expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future.
We focused on this area as the Company has exercised significant judgment in determining the ECL and accordingly has not provided for any such allowance for credit losses as at the balance sheet date.
Refer to Note 2(ii)(f) to the Financial Statements.
|
• testing the effectiveness of controls over the development of the methodology for the provision for expected credit losses;
• discussing with management about their consideration of the current and estimated future economic conditions;
• evaluating the completeness and accuracy of information used in the estimation of probability of default by the customers;
• performing our assessment of the past experience supporting the non-provisioning or other disclosures made in the financial statements;
• verifying subsequent collection from the customers after the balance sheet date, with respect to the outstanding trade receivables, in order to establish the appropriateness for not making the provisions; and
• assessing the adequacy of the Company’s disclosures.
|
|
3
|
Information Systems and Controls
During the year on November 3, 2022, the Company has upgraded to a new ERP System, SAP HANA as its financial and operational reporting system from the erstwhile system SAP ECC. All the information has been migrated from ECC to HANA on the date of implementation of the new system. We consider this activity as a key audit matter due to its significance considering the voluminous financial and operational transactions processed through the system which has a direct impact on the financial statements for the year ending on March 31, 2023.
Refer to Note 49 to the Financial Statements.
|
Audit Procedures
Our audit approach involved the following procedures:
• Obtain the understanding from the management regarding various procedures followed for implementing the new system with respect to migration of data, process and documentation for accounting of transaction under SAP HANA. This includes proper authorization, completeness, accuracy and manual controls put in place in the process of implementation.
• Tested the operating effectiveness of key internal financial controls over the new system implementation, which includes the review of project implementation plan; defined roles and responsibilities of the project and authorization for the ‘Go Live’ process.
• Obtained User Acceptance Testing (‘UAT’) sign-off to ensure that the implemented system was configured in line with requirements of various user departments of the company.
• We have also referred the reports issued by the Internal Auditors to the extent of the areas covered by them for such migration.
• We have substantively tested the migrated balances, for completeness and accuracy as on November 1, 2023 from old system to the new system.
• Through sample testing we have tested the key reports generated from the SAP HANA system, and found that IT controls are adequate.
|
Information Other than the Financial Statements and Auditor’s Report
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Report on Corporate Governance, Shareholder information and Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the financial statements, and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do 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 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
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 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 Company’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting, unless management either intends to liquidate the Company or cease operations, or has no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibility for the Audit of 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 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 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 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 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 an 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 may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• 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.
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 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
1. 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 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, Cash Flow Statement and Statement of Change in Equity, dealt with by this Report, are in agreement with the books of account.
(d) In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, as applicable.
(e) On the basis of the written representations received from the directors as on March 31, 2023, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023, 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 A”. Our report expresses an unmodified opinion on adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
(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 has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 35A to the financial statements;
ii. The Company did not have any material foreseeable losses on long-term contracts including derivative contracts.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds (which are material
either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries”) or provide any guarantee, security or the like, on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either
individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. As stated in Note 15.2 to the financial statements -
a. The final dividend proposed in the previous year, declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
b. The Board of Directors of the Company has proposed final dividend for the year, which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.
vi. Proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail facility is applicable with effect from April 1, 2023 to the Company, and accordingly reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.
2. With respect to the matter to be included in the Auditor’s Report under section 197(16):
In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of section 197, read with Schedule V of the Act.
3. As required by the Companies (Auditor’s Report) Order, 2020 ("the Order”), issued by the Central Government of India, in terms of sub section (11) of section 143 of the Companies Act, 2013, we give in the ‘Annexure B” a statement on the matters specified in paragraph 3 and 4 of the Order.
For N. M. Raiji & Co.
Chartered Accountants Firm Registration Number: 108296W
Vinay D. Balse
Partner
Membership Number: 039434 UDIN: 23039434BGWHWE9790
Place: Mumbai Date: May 11, 2023
|