Refex Industries Limited
REPORT ON THE AUDIT OF THE STANDALONE IND AS FINANCIAL STATEMENTS
Opinion
We have audited the accompanying financial statements of Refex Industries Limited (“the Company”) which comprise the Balance Sheet as at March 31, 2023 and the Statement of Profit and Loss for the year ended, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the Ind AS financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS 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 accounting principles generally accepted in India, of the state of affairs of the Company as at March 31st 2023, its Profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs), as 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 Ind AS 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 together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical 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 audit opinion on the Standalone Ind AS 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 standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone 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.
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S. No. Key Audit Matters
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Auditor’s Response
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1 Allowance for Expected credit loss on trade
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In view of the significance of the matter, we applied
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receivables.
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the following audit procedures among others, to obtain
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Evaluation of trade receivables for impairment
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sufficient and appropriate audit evidence
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evidence requires exercise of judgement
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• Evaluating the accounting policy for impairment
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and involves consideration of various factors.
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of trade receivables terms of the relevant Indian
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These factors include customer’s ability and
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accounting standard;
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willingness to pay the outstanding amounts, past due receivables financial and economic difficulties of customers:
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• Testing the design, implementation and operating effectiveness of the Company’s key internal financial controls. These controls relate to
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measurement of ECL on trade receivables
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• Evaluated monitoring mechanism by the company
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related to credit control collection of trade receivables, follow up for past due amounts and for identification and recognition of corresponding impairment losses:
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S. No. Key Audit Matters
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Auditor’s Response
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This assessment is done for each group of
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• For a sample of past due receivables, selected on
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customers resulting from possible defaults over
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the basis of risk, aging and volume, we examined
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the expected life of the receivables. Based on
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the ageing of receivables, impairment losses
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this assessment, credit loss rate is determined in
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provided/reversed during the year and compared
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provision matrix. The credit loss rate is based on
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them to historical experience
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the experience of actual credit losses over past
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• Evaluating the Company’s assessment regarding credit worthiness customers and identification of
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years adjusted to reflect the current economic
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conditions and forecasts of future economic conditions. Based on such credit loss rate, the
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the credit impaired customers
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Company records expected credit loss (ECL)
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• Balance confirmation requests were circulated to
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allowance for trade receivables.
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some of the customers based on random sampling
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In view of the above, we have considered
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• We evaluated the historical credit loss
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measurement of ECL on trade receivables
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experience, current observable data and
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(including retention monies) as a key audit matter
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forward-looking outlook
• Assessing the adequacy of the related disclosures in the Standalone Financial Statements with reference to the relevant Indian accounting standards.
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2 Timing of revenue recognition and
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In view of the significance of the matter we applied the
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adjustments for coal quality variances
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following audit procedures in this area, among others
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involving critical estimates
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to obtain sufficient appropriate audit evidence:
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Revenue from the sale of goods is recognised
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• Assessing the Company’s accounting policies
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when control is transferred to the customers and
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for revenue recognition by comparing with the
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when there are no other unfulfilled obligations. This requires detailed analysis of each sale
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applicable accounting standards i.e Ind AS 115;
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agreement/ contract /customer purchase order
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• Assessing the appropriateness of the estimated
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regarding timing of revenue recognition.
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adjustments in the process;
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Inappropriate assessment could lead to a risk
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• Testing the design, implementation, and
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of revenue being recognized on sale of goods
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operating effectiveness of key internal controls
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before the control in the goods is transferred
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over timing of recognition of revenue from sale of
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to the customer.
Subsequent adjustments are made to the
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goods and subsequent adjustments made to the transaction price;
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transaction price due to grade mismatch (GCV)
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• Performing testing on selected statistical
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/ slippage of the transferred goods (coal).
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samples of customer contracts. Checked terms and condition related to acceptance of goods,
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The variation in the contract price if not settled
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acknowledged delivery receipts and tested the
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mutually between the parties to the contract is
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transit time to deliver the goods and its revenue
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referred to third party testing and the Company
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recognition. Our tests of details focused on cut-off
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estimates the adjustments required for revenue
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samples to verify only revenue pertaining to current
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recognition pending settlement of such dispute.
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year is recognized based on terms and conditions
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Such adjustments in revenue are made on
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set out in sale agreements/ contracts and delivery
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estimated basis following historical trend.
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documents. We also performed tests to establish the basis of estimation of the consideration and
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Inappropriate estimation could lead to a risk of
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whether such estimates are commensurate with
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revenue being overvalued or undervalued.
Accordingly, timing of recognition of revenue and adjustments for coal quality variances involving critical estimates is a key audit matter
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the accounting policy of the Company
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S. No. Key Audit Matters
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Auditor’s Response
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3 Assessment of Contingent liabilities in
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We have obtained an understanding of the Company’s
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respect of certain litigations relating to
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procedure in respect of estimation and disclosure
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direct taxes, various claims led by other
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of contingent liabilities and adopted the following
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parties not acknowledged as debt.
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audit procedure:
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There is a high level of judgement required
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• Reviewing the current status and material
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in estimating the contingent liabilities. The company’s assessment of contingent
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developments of legal matters.
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liabilities is supported by the facts of the matter,
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• Examining recent orders from competent
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Company’s judgement thereon, past experience
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authorities and/ or communication received from
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and advices from legal and independent tax
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various authorities, judicial forums and follow-up
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consultants wherever necessary.
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action thereon.
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We identified the above area as Key Audit
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• Review and analysis of evaluation of the
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Matters in view of associated uncertainty
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contentions of the company through discussions,
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relating to the outcome of these matters.
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collection of details of the subject matter under consideration, the likely outcome and consequent potential outcomes on those issues.
• Based on the above procedures performed, the estimation and disclosures of contingent liabilities is considered to be adequate and reasonable.
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Information Other than the Financial Statements and Auditor’s Report thereon
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 Ind AS financial statements and our auditor’s report thereon.
Our opinion on the standalone Ind AS 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 standalone Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the financial statements, or our knowledge obtained in the 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.
Management’s Responsibility for the Standalone Ind AS Financial Statements
The Company’s board of directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these Standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the accounting standards
prescribed under Section 133 of the Act read with relevant rules issued thereunder.
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 Standalone Ind AS financial statements, 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.
Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibility for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS 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 standalone Ind AS 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 with reference to financial statements 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 standalone Ind AS financial statements, including the disclosures, and whether
the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Report on other legal and regulatory requirements
1. 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 enclose in the Annexure - B, a statement on the matters specified in paragraphs 3 and 4 of the said Order.
2. 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 appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies
(Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on March 31, 2023 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 with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure A” to this report;
(g) With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197 (16) of the Act, as amended:
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
(h) With respect to the other matters to be included in the Auditors’ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
(i.) The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements as mentioned in Note No: 31
(ii.) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
(iii.) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
(iv.) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts,
• no funds 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(s) or entity(ies), including foreign entities ‘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; and
• no funds have been received by the company from any person(s) or entity(ies), including foreign entities ‘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.
• Based on audit procedures carried out by us, that we have considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us believe that the representations under sub-clause (i) and (ii) contain any material misstatement.
v. ) The Company has not declared or paid any
dividends during the year and accordingly reporting on the compliance with section 123 of the Companies Act, 2013 is not applicable for the year under consideration.
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 (edit log) facility is applicable with effect from April 1, 2023 to the Company and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.
For ABCD & Co,
Chartered Accountants Firm No: 016415S
Vinay Kumar Bachhawat
Partner
Place: Chennai Membership No: 214520
Date: 28/6/2023 UDIN: 23214520BGWTAF9471
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