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Ashok Leyland

BSE: 500477|NSE: ASHOKLEY|ISIN: INE208A01029|SECTOR: Auto - LCVs & HCVs
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Mar 16
Auditor's Report (Ashok Leyland) Year End : Mar '17

To The Members of Ashok Leyland Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Ashok Leyland Limited (the Company), which comprise the Balance Sheet as at March 31, 2017, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone 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 including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed 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 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditor of the amalgamating company in terms of their report referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements. Opinion

In our opinion, and to the best of our information and according to the explanations given to us, and based on the consideration of report of the other auditor on the financial information of the amalgamating company referred to in the Other Matters paragraph below, the aforesaid standalone Ind AS financial statements give the information required by 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 31, 2017, and its profit, total comprehensive income, cash flows and the changes in equity for the year ended on that date.

Other Matters

The standalone Ind AS financial statements include the financial information of erstwhile Hinduja Foundries Limited (amalgamating company) for the period October 1, 2016 to March 31, 2017 consequent to amalgamation into the Company, which has been effected on April 24, 2017, with the appointed date of October 1, 2016 (Refer Note 3.21 to the standalone Ind AS financial statements). We did not audit the financial information of the amalgamating company for the period October 1, 2016 to March 31, 2017, included in the standalone Ind AS financial statements of the Company, whose financial information reflect total assets of ''85,225.21 lakhs as at March 31, 2017 and total revenues of ''36,558.10 lakhs for the staid period, as considered in the standalone Ind AS financial statements. The said financial information of the amalgamating company, has been audited by other auditor whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of the amalgamating company and our report in terms of sub-sections (3) and (11) of Section 143 of the Act, in so far as it relates to the amalgamating company, is based solely on the report of the other auditor.

Our opinion on the standalone Ind AS financial statements and our report on Other Legal and Regulatory Requirements below is not modified in respect of this matter with respect to our reliance on the work done and the report of the other auditor.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit and on the consideration of the report of the other auditor on the financial information of the amalgamating company referred to in the Other Matters paragraph above, we report, to the extent applicable 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 and the report of the other auditor on the financial information of the amalgamating company referred in the Other Matters paragraph above.

c) The report on the financial information of the amalgamating company audited by the other auditor referred in the Other Matters paragraph above, has been sent to us and has been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account and the financial information of the amalgamating company audited by the other auditor referred in the Other Matters paragraph above.

e) In our opinion, and based on the consideration of the report of the other auditor on the financial information of the amalgamating company referred in the Other Matters paragraph above, the aforesaid standalone financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

f) On the basis of the written representations received from the directors as on March 31, 2017 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017 from being appointed as a director in terms of Section 164(2) of the Act.

g) With respect to the adequacy of the internal financial controls over financial reporting and the operating effectiveness of such controls, refer to our report in Annexure A, which is based on our audit and the consideration of the report of the other auditor on the financial information of the amalgamating company referred in the Other Matters paragraph above.

Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

h) With respect to the other matter to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our

information and according to the explanations given to us and to the other auditor in terms of the report of the other auditor in respect of the amalgamating company referred in the Other Matters paragraph above:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, 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; and

iv. The Company has provided requisite disclosures in the standalone financial statements as regards its holding and dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the November 8, 2016 of the Ministry of Finance, during the period from November 8, 2016 to December 30, 2016. Based on audit procedures performed by us and the representations provided to us by the Management and on the consideration of the report of the other auditor on the financial information of the amalgamating company referred in the Other Matters paragraph above, we report that the disclosures are in accordance with the books of account maintained by the Company and produced to us and to other auditor.

2. As required by the Companies (Auditor''s Report) Order, 2016 (the Order) issued by the Central Government in terms of Section 143(11) of the Act, we give in Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order.

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the Act)

We have audited the internal financial controls over financial reporting of Ashok Leyland Limited (the Company) as of March 31, 2017 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to 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 Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) issued by the Institute of Chartered Accountants of India and the Standards on Auditing deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditor of the amalgamating company in terms of their report referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us, and based on the consideration of report of the other auditor on the financial information of the amalgamating company referred to in the Other Matters paragraph below, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2017, 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 Institute of Chartered Accountants of India.

Other Matters

The standalone Ind AS financial statements include the financial information of erstwhile Hinduja Foundries Limited (amalgamating company) for the period October 1, 2016 to March 31, 2017 consequent to amalgamation into the Company, which has been effected on April 24, 2017, with the appointed date of October 1, 2016 (Refer Note 3.21 to the standalone Ind AS financial statements). The said financial information of the amalgamating company, has been audited by other auditor whose report has been furnished to us, and our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal financial controls over financial reporting in so far as it relates to the amalgamating company, is based on the report of the other auditor.

Our reporting on the Order includes erstwhile Hinduja Foundries Limited (the amalgamating company) for the period October 1,

2016 to March 31, 2017, consequent to amalgamation into the Company, which has been audited by other auditor in terms of their report referred in the Other Matters paragraph of our report of even date, and our report in respect of the amalgamating company is based solely on the report of the other auditor, to the extent considered applicable for reporting under the Order in the case of the standalone Ind AS financial statements.

(i) In respect of its fixed assets:

a) The Company/ the amalgamating company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets.

b) The fixed assets were physically verified during the year by the Management in accordance with a phased programme of verification, which, in our opinion and the opinion of the other auditor, provides for physical verification of all the fixed assets at reasonable intervals having regard to the size of the Company, nature

and value of its assets. According to the information and explanation given to us and the other auditor, no material discrepancies were noticed on such verification.

c) According to the information and explanations given to us and the other auditor and the records examined by us and the other auditor and based on the examination of the registered sale deeds/ transfer deeds/ conveyance deeds provided to us and the other auditor, we report that, the title deeds, comprising all the immovable properties of land and buildings, are held in the name of the Company/ the amalgamating company as at the balance sheet date, except for certain portion of land at Bhandara unit of the Company admeasuring 25.16 acres in respect of which the title deed is not in the name of the Company - Also Refer Note 1.1(2) to the Financial Statements. Immovable properties of land and buildings whose title deeds have been pledged as security for loans, guarantees, etc., are held in the name of the Company/ the amalgamating company based on the confirmations directly received by us and the other auditor from lenders. In respect of immovable properties of land and buildings that have been taken on lease and disclosed under other non-current and other current assets in the financial statements, the lease agreements are in the name of the Company/ the amalgamating company, where the Company/ the amalgamating company is the lessee in the agreement.

(ii) As explained to us and the other auditor, the inventories, other than goods in transit and stock lying with third parties (where certificates confirming physical inventory are received), were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) According to the information and explanations given to us and the other auditor, the Company has granted unsecured loan to a company covered in the register maintained under Section 189 of the Companies Act, 2013, in respect of which:

a. The terms and conditions of the grant of such loan are, in our opinion, prima facie, not prejudicial to the Company''s interest.

b. The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations.

c. There is no overdue amount remaining outstanding as at the year-end.

(iv) In our opinion and the opinion of the other auditor and according to the information and explanations given to us and the other auditor, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to information and explanations given to us and the other auditor, the Company has not accepted any deposit during the year and there are no unclaimed deposits to which the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act, 2013 are applicable.

(vi) The maintenance of cost records has been specified by the Central Government under Section 148(1) of the Companies Act, 2013 for certain products of the Company. We and the other auditor have broadly reviewed the cost records maintained by the Company/ the amalgamating company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under Sub-section (1) of Section 148 of the Companies

Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We and the other auditor have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us and the other auditor, and the books of account examined by us and the other auditor, in respect of statutory dues:

a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess and other material statutory dues applicable to it with the appropriate authorities during the year. There were no undisputed amounts payable in respect of the aforesaid statutory dues in arrears as at March 31, 2017 for a period of more than six months from the date they became payable.

b) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax and Cess which have not been deposited as at March 31, 2017 on account of disputes are as stated below:

Nature of Dues

Disputed

Dues*

Period to which the amount relates

Forum where the dispute is pending

Amount stayed out of disputed dues

Income

Tax

1,826.79

Various periods from 2007 - 2013

Appellate authority -Tribunal

-

200.71

Various periods from 2006 - 2010

High Court

-

Sales Tax and Value Added Tax

22,261.21

Various periods from 1993 - 2016

Appellate authority - up to

Commissioner

level

20,535.06

2,767.35

Various periods from 1987 - 2013

Appellate authority -Tribunal

2,767.35

660.48

Various periods from 1986 - 2001

Central Sales tax Appellate authority

660.48

108.92

Various periods from 2006 - 2012

High Court

108.92

Excise Duty and cess thereon

196.24

Various periods from 2008 - 2016

Appellate authority - up to

Commissioner

level

152.70

2,372.23

Various periods from 2008 - 2016

Appellate authority -Tribunal

2,312.11

Customs

Duty

1.78

Various periods from 2006 - 2007

Appellate authority -Tribunal

-

Service Tax and cess thereon

3,214.28

Various periods from 2009 - 2014

Appellate authority - unto

Commissioner

level

3,214.28

335.07

Various periods from 2009 - 2011

Appellate authority -Tribunal

335.07

(viii) In our opinion and the opinion of other auditor and according to the information and explanations given to us and the other auditor, the Company has not defaulted in the repayment of loans or borrowings to banks and government and dues to debenture holders. There are no loans or borrowings from the financial institutions.

(ix) In our opinion and the opinion of other auditor and according to the information and explanation given to us and the other auditor, term loans have been applied by the Company during the year for the purpose for which they were raised. The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year.

(x) To the best of our and the other auditor''s knowledge and belief, and according to the information and explanations given to us and the other auditor, and considering the size and nature of the Company''s operations, no fraud by the Company and no fraud of material significance on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid/ provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013.

(xii) The Company is not a Nidhi Company and, hence, reporting under clause (xii) of the Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Sections 177 and 188 of the Companies Act, 2013, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.

(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and, hence, reporting under clause (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and the opinion of the other auditor and according to the information and explanations given to us and the other auditor, during the year, the Company has not entered into any non-cash transactions with its directors or persons connected with him, and hence provisions of Section 192 of the Companies Act, 2013 are not applicable.

(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

For M.S. Krishnaswami & Rajan For Deloitte Haskins & Sells LLP

Chartered Accountants Chartered Accountants

Firm''s Registration No. 01554S Firm''s Registration No. 117366W/W-100018

M S Murali A Siddharth

Partner Partner

Membership No. 26453 Membership No. 31467

May 25, 2017 Chennai

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