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Petron Engineering Construction

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Auditor's Report (Petron Engineering Construction) Year End : Mar '16

Report on the Financial Statements

We have audited the accompanying financial statements of Petron Engineering Construction Limited (the Company), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the 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 and presentation of these 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 specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on 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 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. 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. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the 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 financial statements.

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.

Basis for qualified Opinion

Attention is drawn to:

i. Note no. 32 in respect of certain suspended / delayed contracts as of 31st March, 2016 , trade receivables of Rs.1,923 lacs (net of mobilization advance of Rs.2,934 lacs) ( FY ended 31st March 2015 Rs.1,501 lacs net of mobilization advance of Rs.4,240 lacs) and unbilled revenue of Rs.6,256 lacs (FY ended 31st March 2015 Rs.7,756 lacs) receivables from customers are pending confirmation/ negotiation; trade payables w.r.t. these stated customers aggregated to Rs.819 lacs (FY ended 31st March 2015 Rs.1,323 lacs) are subject to negotiation/ confirmation, where we are unable to comment on the same and its corresponding impact on profit and assets/liabilities as at that date. This matter was also qualified in the report of the predecessor auditors on the financial statements for the year ended 31st March 2015.

ii. Note no. 33 (a), the company has recognized revenue of Rs.1,353 lacs during earlier periods (till 31st March 2015 Rs.2,555/- lacs) on account of cost overruns on certain contracts, pending acceptance / confirmation from customers and our inability to comment on the amounts ultimately receivable in respect of these contracts and its impact on the reported profit for the year ended 31st March'' 2016 and corresponding assets as on date. This matter was also qualified in the report of the predecessor auditors on the financial statements for the year ended 31st March'' 2015.

iii. Note no. 33 (b) regarding recognition revenues of Rs.1,621 lacs (till 31st March 2016 Rs.2,922 lacs) during the year ended 31st March 2016, on account of cost overruns on certain contracts, which are not in accordance with the principles set out in the Accounting Standards AS-7 ''Construction Contracts''. Accordingly the Revenue and profit for the year ended 31st March2016 is higher by Rs.1621 lacs and also balance in retained earnings and unbilled revenue balance as at 31st March 2016 is higher by Rs.2,922 lacs (as at 31st March 2015 by Rs.1,301 lacs). This matter was also qualified in the report of the predecessor auditors on the financial statements for the year ended 31st March 2015.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid 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 31st March, 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of Matters

Attention is drawn to note no. 43 (b):

The balances of certain trade receivable, other liabilities and loan & advances are subject to confirmation/reconciliation, where the management is confident that there will not be any material impact on confirmation /reconciliation on profit for the year.

Our opinion is not modified in respect of matter stated above.

Report on Other Legal and Regulatory Requirements

1. A s required by the Companies (Auditor''s Report) Order, 2016 (the Order) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us during the course of audit, we give in the Annexure ''A'' a statement on the matters specified in the paragraphs 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

(a) W e 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,2014;

(e) The matters described in the basis for qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

(f) On the basis of the written representations received from the directors as on 31st March, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on31st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act;

(g) As required by section 143(3)(i) of the Companies Act, 2013, and based on the checking of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, our report on the Internal Financial Controls over Financial Reporting is as per Annexure ''B'';

(h) 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, 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 no. 31 and Note No. 35 to the 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 - Refer Note No. 7 to the financial statements. The Company does not have any derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Annexure-A referred to in paragraph 1 under the heading Report on other legal and regulatory requirements of our report of even date on the Standalone Financial Statements of Petron Engineering Construction Ltd. for the year ended 31st March, 2016

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of Physical Verification of its Fixed assets by which fixed asset are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) Ts per the records and information and explanations given to us, title deeds of immovable properties are in the name of the Company.

2. T he inventories of the Company, have been physically verified by the management at reasonable intervals and the procedures of physical verification of inventory followed by the Management are reasonable in relation to the size of the Company and nature of its business. The discrepancies noticed on such physical verification of inventory as compared to book records were not material.

3. According to the records and information and explanations made available to us, the Company has not granted any loans, secured or unsecured to companies, firms, LLP and other parties covered in the register maintained under section 189 of the Companies Act, 2013.

4. According to the information, explanations and representations provided by the management and based upon audit procedures performed, the Company has not granted any loans, investments, guarantees and security; accordingly, the provisions of Clause 3(iv) of the Order are not applicable.

5. In According to the information and explanations given to us, the Company has not accepted any deposits from the public within the provisions of Section 73 to76 of the Act or any other relevant provisions of the Act and the rules framed there under. According to the information and explanations given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or other tribunal in this regard.

6. W e 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 section 148 (1) of the Act, related to the manufacture of Machinery and Mechanical appliances and parts thereof and execution of projects having application of Mechanical Engineering, Fabrication, Construction and Refractory products, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the said records with a view to determine whether they are accurate or complete.

7. a) According to the records of the Company, undisputed statutory dues including income tax, custom duty, excise duty and other material statutory dues have generally been regularly deposited with the appropriate authorities though there have been delay in some cases of tax deducted at source, provident fund, employees'' state insurance, service tax and sales-tax and there were no undisputed statutory dues payable for a period of more than six months from the date they became payable as at 31st March, 2016. However, there was one instance where provident fund amounting to Rs.42,14,889/- was paid post resolution of technical issues with delay of 4 days.

b) According to the records and information & explanations given to us, there are no dues in respect of Wealth Tax, Duty of Custom that have not been deposited with the appropriate authorities to the extent applicable on account of any dispute and the dues in respect of Service Tax, Duty of Excise, Income Tax, VAT or cess that have not been deposited with the appropriate authorities on account of dispute and the forum where the dispute is pending are given below: -

Name of Statute

Nature of Dues

Period

Amount (in Rs.)

Forum where dispute is pending

Finance Act, 1994

Service Tax

2005-09

4,68,22,758

CESTAT, Ahmedabad

Finance Act, 1994

Service Tax

2007-08

251,566

Deputy Commissioner (Appeals) Central Excise, Panipat

Finance Act, 1994

Service Tax

2008-09

184,672

Commissioner (Appeals) of Central Excise, Haldia

Finance Act, 1994

Service Tax

2006-07

2,475,194

CESTAT, New Delhi

Central Excise Act, 1944

Excise Duty

2001-02

252,640

CESTAT, Navi Mumbai

Central Excise Act, 1944

Excise Duty

2004-05

219,156

CESTAT, Vadodara

Name of Statute

Nature of Dues

Period

Amount (in Rs.)

Forum where dispute is pending

Central Sales Tax, 1956

Central Sales Tax

2006-07

807,261

Joint Commissioner Sales Tax, West Bengal

Bombay Sales Tax Act, 1959

Sales Tax

2004-05

169,822

Joint Commissioner of Sales Tax (Appeals)

West Bengal Value Added Tax

VAT

2007-08

2,589,556

Joint Commissioner of Commercial Taxes

West Bengal Value Added Tax Act, 2003

VAT

2009-10

17,483,088

Joint Commissioner of Sales Tax

Central Sales Tax (West Bengal) Rules, 1958

Central Sales Tax

2009-10

1,514,805

Joint Commissioner of Sales Tax

West Bengal Value Added Tax Act, 2003

VAT

2010-11

16,694,017

Joint Commissioner of Sales Tax

Building and Other Construction Workers'' Welfare Cess Act, 1996

Labour Welfare Cess

2007-08

3,970,102

Bihar Building and Other Construction Workers'' Welfare Board

Income Tax Act, 1961

Income Tax

2011-12

264,790

Commissioner of Income-tax (Appeals), Mumbai

Orissa Value Added Tax, 2004

VAT

2002-03

244,655

Sales Tax Authority, Angul, Orissa

Income Tax Act, 1961

Income Tax

2009-10

29,048,080

Comm. of Income Tax (Appeals), Mumbai

(This is to be read with Note No.35)

8. In our opinion, on the basis of audit procedures and according to the information and explanations given to us and based on the confirmation received, the Company has not defaulted in repayment of loans and borrowings to banks. The company did not have any outstanding dues in respect of debentures, financial institutions and government (both State and Central) during the year.

9. On the basis of information and explanations given to us, term loans have been applied for the purposes for which they were obtained. The company did not raise any money by way of initial / further public offer.

10. Based on the audit procedure performed and on the basis of information and explanations provided by the management, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the course of the audit.

11. On the basis of records and information and explanations made available and based on our examination of the records of the company, the company has paid/ provided managerial remuneration, in accordance with the requisite approvals mandated under Section 197 read with Schedule V of the Act.

12. The Company is not a chit fund or a nidhi /mutual benefit fund /society, therefore, the provisions of clause 3 (xii) of the said Order are not applicable to the Company, hence we are not offering any comment.

13. As per the information and explanations and records made available by the management of the Company and audit procedure performed, for the related parties transactions entered during the year, the Company has complied with the provisions of Section 177 and 188 of the Act, where applicable. As explained and as per records / details the related parties transactions have been disclosed as per the applicable Accounting Standards.

14. According to the information and explanations given to us, the Company has not made any preferential allotment of shares or fully / partly convertible debentures during the year in terms of provisions of Section 42 of the Act.

15. On the basis of records made available to us and according to information and explanations given to us, the Company has not entered into non-cash transactions with the directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

16. The company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934, as the provision of section is not applicable to the Company.

For LODHA & CO.,

Chartered Accountants

Firm''s Registration No. 301051E

N.K. Lodha

Place: New Delhi Partner

Date: 31st May,2016 Membership No.085155

Source : Dion Global Solutions Limited
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