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Reliance Industries | Auditor's Report > Refineries > Auditor's Report from Reliance Industries - BSE: 500325, NSE: RELIANCE
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Reliance Industries

BSE: 500325|NSE: RELIANCE|ISIN: INE002A01018|SECTOR: Refineries
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Auditor's Report (Reliance Industries) Year End : Mar '19

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

OPINION

We have audited the accompanying Standalone Financial Statements of Reliance Industries Limited (“the Company”), which comprise the Balance sheet as at March 31, 2019, the Statement of Profit and Loss, 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 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 Financial Statements give the information required by the Companies Act,2013, as amended (‘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, 2019, 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 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 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 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 for the financial year ended March 31, 2019. 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. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the Standalone Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Standalone Financial Statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Standalone Financial Statements.

Key audit matters

How our audit addressed the key audit matter

A. Carrying value of Investments in Reliance Energy Generation and Distribution Limited

Management regularly reviews whether there are any indicators of impairment on the investments made by the Company (Refer Note B.2 (p).i.E by reference to the requirements under Ind AS 36 “Impairment of Assets”). Accordingly, management has identified impairment indicators (operating losses, negative net-worth) in Reliance Energy Generation and Distribution Limited (REGDL), a wholly owned subsidiary of the Company with an investment of Rs. 10,501 crore. As a result, an impairment assessment has been performed by the Company by comparing the carrying value of these investments to their recoverable amount to determine whether an impairment was required to be recognised.

For the purpose of the above impairment testing, value in use has been determined by forecasting and discounting future cash flows. Furthermore, the value in use is highly sensitive to changes in some of the inputs used for forecasting the future cash flows e.g. future oil and natural gas prices and reserves volumes. The determination of the recoverable amount of the investments in REGDL involved judgment due to inherent uncertainty in the assumptions supporting the recoverable amount of these investments.

Accordingly, the evaluation of impairment of investments in REGDL was determined to be a key audit matter.

Our audit procedures included and were not limited to the following:

- Obtained and read the financial statements of REGDL and its subsidiaries to identify any disclosure for impairment of assets in their standalone financial statements.

- Assessing the appropriateness of the Company’s valuation methodology applied in determining the recoverable amount.

In making this assessment, we also evaluated the objectivity, independence and competency of specialists involved in the process.

- Assessing the assumptions around the key drivers of the cash flow forecasts including future oil and natural gas prices and reserves volumes, discount rates, etc.

- Assessing the appropriateness of the weighted average cost of capital used in the determining recoverable amount by engaging valuation experts.

- Discussing/Evaluating potential changes in key drivers as compared to previous year / actual performance with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable.

Key audit matters

How our audit addressed the key audit matter

- Assessing the recoverable value headroom by performing sensitivity analysis of key assumptions used.

- Performed inquiry procedures with the auditor of the step down subsidiary of REGDL on their significant findings in relation to the key data and assumptions used by the management for estimating the oil and gas reserve; calculation of the depletion charge and future net income and reasonableness of the discount rate used by the subsidiary for calculating the future net income for impairment calculation.

B. Investment in Reliance Jio Infocomm Limited (RJIL)

A) As at March 31, 2019, the Company has a total investments of Rs. 44,200 crore in Reliance Jio Infocomm Limited (subsidiary of the Company) which constitutes 13 % of the total investment portfolio of the Company (Refer Note 2 of the financial statements). These investments are classified as financial assets in the financial statements.

As per Ind AS 36 - ‘Impairment of assets’, the standard is applicable to financial assets classified as subsidiaries. Accordingly, in assessing whether there is any indication that an asset may be impaired, an entity shall consider as a minimum, the external and internal sources of information, any other indications or evidences from internal reporting that indicates that the assets may be impaired.

In case of RJIL, the existence of an impairment indicator is significantly influenced by whether there is an impairment to the underlying property, plant and equipment and intangible assets including ‘Spectrum / License fee’ in its financial statements. This assessment involves significant judgment especially in relation to determination of the expected pattern of consumption of the expected future economic benefits.

A) In respect of the impairment indicator assessment for the investments in RJIL, our audit procedures included and were not limited to the following:-

- Obtained and read the financial statements of RJIL to identify if any disclosure is made for impairment of assets in its standalone financial statements.

- Obtained the impairment indicator assessment performed by the management considering internal / external sources of information specifically relating to RJIL tangible and intangible assets including ‘Spectrum / License fee’ and related expected pattern of consumption of expected future benefits.

- Performed inquiry procedures with the subsidiary auditor on their significant findings in relation to amortization and impairment of property, plant and equipment and intangible assets, especially in relation to ‘Spectrum / License fee’.’

B) Further, in the current year, as part of Composite Scheme of Arrangement between RJIL, Jio Digital Fibre Private Limited (JDFPL) and Reliance Jio Infratel Private Limited (RJIPL) (‘the scheme’) for demerger of optic fiber cable undertaking of RJIL, upon the scheme becoming effective on 31 March 2019, the Company, being shareholder of RJIL, has received Equity Shares and Optionally Convertible Preference Shares with surplus rights (‘OCPS’) of JDFPL. Pursuant to receipt of these Equity Shares and OCPS, the Company has allocated its cost of investments in RJIL into RJIL and JDFPL and elected to value its investment in OCPS at Fair value through Other Comprehensive Income (FVOCI). Subsequently, Company sold its controlling equity stake in JDFPL to Digital FIbre Infrastructure Trust resulting into a gain of Rs. 494 crore recognised in the statement of profit & loss. The remaining Equity investment in JDFPL has been measured at FVTPL and OCPS continued to be measured at FVTOCI. The Company has no control or significant influence over JDFPL post the sale of controlling stake. Refer Note 2.3 of the financial statements.

The same has been reported as a significant transaction that occurred during the current year which involves exercise of judgment and interpretation of the relevant Indian Accounting Standards and applicable statutes / regulations. Accordingly, assessment of impairment indicator for the investments in RJIL and accounting treatment in the financial statements pursuant to demerger of optic fiber cable undertaking of RJIL has been considered as a key audit matter.

B) In respect of the accounting treatment applied in the financial

statements pursuant to demerger of optic fiber cable undertaking

of RJIL, our audit procedures included and were not limited to the

following:-

- Obtained and read the composite scheme of arrangement for demerger of the optic fiber cable undertaking.

- Obtained the memo prepared by the Company in consultation with external experts (including related assumptions and accounting policy choice) on the accounting treatment to be applied in the financial statements.

- Evaluating whether the measurement, recognition and disclosure of the said transaction is in line with the applicable Indian Accounting Standards.

- Performing substantive testing procedures including involvement of valuation specialists for testing of the valuation reports provided by the management for appropriateness of assumptions involved and testing of the computation.

- Assessing whether the accounting entries recorded in the books is in line with the accounting treatment assessed above, including the arithmetical accuracy of the same.

- Performed inquiry procedures with the auditors of RJIL on the accounting treatment applied in its standalone financial statements in respect of the demerger.

- Review of the disclosure made by the Company in the financial statements in this regard.

Key audit matters

How our audit addressed the key audit matter

C. Capitalisation of property, plant and equipment

As part of Gasification project, the Company has incurred additional capital expenditure, for modification of power plant equipments i.e. Gas Turbines, Auxiliary Boilers, HRSGs, Process Furnaces, etc. to make them compatible to multiple feedstock, including those received from petcoke gasifier. Currently all units of the gasification complex, its associated utilities and offsites have been started and the complex is under stabilization.

The testing phase of the project is under progress as at March 31, 2019 as it has not achieved the quality and efficiency parameters. Accordingly, significant level of judgement is involved to ensure that capitalisation of Property, Plant and Equipment meet the recognition criterias of Ind AS 16 - Property, Plant and Equipment, specifically in relation to determination of trial run period and costs associated with trial runs for it to be ready for intended use.

As a result, the aforesaid matter was determined to be a key audit matter.

Our audit procedures included and were not limited to the following

- Assessing the nature of the costs incurred to substantially modify the existing power plants to test whether such costs are incurred specifically for trial run and meet the recognition criteria as set out in para 16 to 22 of Ind AS 16.

- Evaluating the assessment provided by third party vendors involved in the construction and testing process to determine whether capitalisation ceased when the asset is in the location and condition necessary for it to be capable of operating in the manner intended by the management.

D. Changes in useful life and residual value of plant and machinery

As at March 31, 2019, the Company had a gross block of Rs. 228,340 crore in plant and machinery which constitutes 72.32% of the property, plant and equipment (Refer Note 1 of the financial statements).

In the current year, the Company has revised the useful life and residual value of the plant and machinery. Assessment of useful life and residual values of plant and machinery in an integrated and complex plants involves management judgment, consideration of historical experiences, anticipated technological changes, etc. Refer Note 1.7 of the financial statements.

Accordingly, it has been determined as a key audit matter.

Our audit procedures included and were not limited to the following:

- Evaluating the reasonableness of the assumptions considered by the management in estimation of useful life and residual values.

- Examining the useful economic lives and residual value assigned with reference to the Company’s historical experience, technical evaluation by third party and our understanding of the future utilisation of assets by the Company.

- Assessing whether the impact on account of the change has been appropriately recognised in the financial statements.

- Review of the disclosure made by the Company in the financial statements in this regard.

E. Estimation of oil reserves and decommissioning liabilities

Refer to Note 32.2 on proved reserves and production both on product

Our procedures have focused on management’s estimation process

and geographical basis and Note C(A) on estimation of Oil and Gas

in the determination of oil and gas reserves and decommissioning

reserves, Note C(C) on depreciation and amortisation and Note 16 of the

liabilities. Our work included and were not limited to the following

financial statements.

procedures:

The determination of the Company’s oil and natural gas reserves

- Understand the Company’s process associated with the oil and gas

requires significant judgments and estimates to be applied. Factors such as the availability of geological and engineering data, reservoir

reserves estimation process.

performance data, acquisition and divestment activity, drilling of

- Evaluating the objectivity, independence and competence of the

new wells and commodity prices all impacts the determination of the

Internal specialists involved in the oil and gas reserves estimation

Company’s estimates of oil and natural gas reserves. The Company bases

process.

its proved reserves estimates considering reasonable certainty with

- Assessing whether the updated oil and gas reserve estimates were

rigorous technical and commercial assessments based on conventional

included appropriately in the Company’s consideration of impairment,

industry practice and regulatory requirements.

accounting for amortization/depletion and disclosures of proved

Estimates of oil and gas reserves are used to calculate depletion charges for the Company’s oil and gas assets. The impact of changes in estimated

reserves and proved developed reserves in the financial statements.

proved reserves is dealt with prospectively by amortising the remaining

- Testing of assumption used in the determining the decommissioning

carrying value of the asset over the expected future production. Oil

provisions. Also compared these assumptions with past year and

and natural gas reserves also have a direct impact on the assessment of the recoverability of asset’s carrying values reported in the financial statements.

Further, the recognition and measurement of decommissioning provisions involves use of estimates and assumptions relating to timing of abandonment of well and related facilities which would depend upon the ultimate life of the field, expected utilization of assets by other fields, the scope of abandonment activityand pre-tax rate applied for discounting.

Accordingly, the same is considered as a key audit matter.

enquired for reasons for any variations.

Key audit matters

How our audit addressed the key audit matter

F. Litigation matters (Oil and Gas)

The Company has certain significant open legal proceedings under arbitration for various complex matters with the Government of India and other parties, continuing from earlier years, which are as under:

a) Disallowance of certain costs under the production sharing contract, relating to Block KG-DWN-98/3 and consequent deposit of differential revenue on gas sales from D1D3 field to the gas pool account maintained by Gail (India) Limited (Refer Note 32.3 and Note 32.4 (b)).

b) Claim against the Company in respect of gas said to have migrated from neighboring blocks (KGD6) (Note 32.4 (a)).

c) Claims relating to limits of cost recovery, profit sharing and audit and accounting provisions of the public sector corporations etc., arising under two production sharing contracts entered into in 1994 (Note

Our audit procedures included and were not limited to the following:

- Assessing management’s position through discussions with the in-house legal expert and external legal opinions obtained by the Company (where considered necessary) on both, the probability of success in the aforesaid cases, and the magnitude of any potential loss.

- Discussion with the management on the development in these litigations during the year ended March 31, 2019.

- Roll out of enquiry letters to the Company’s legal counsel (internal/ external) and study the responses received from them. Also verified that accounting/disclosure made by the Company are in accordance with the assessment of legal counsel.

32.4(c) ).

d) Suit for specific performance of a contract for supply of natural gas before the Hon’ble Bombay High Court (Note 32.4 (d)).

Due to complexity involved in these litigation matters, management’s judgement regarding recognition and measurement of provisions for these legal proceedings is inherently uncertain and might change over time as the outcomes of the legal cases are determined. Accordingly, it has been considered as a key audit matter.

- Review of the disclosures made by the Company in the financial statements in this regard.

- Obtained representation letter from the management on the assessment of these matters.

G. IT systems and controls over financial reporting

We identified IT systems and controls over financial reporting as a key audit matter for the Company because its financial accounting and reporting systems are fundamentally reliant on IT systems and IT controls to process significant transaction volumes, specifically with respect to revenue and raw material consumption. Automated accounting procedures and IT environment controls, which include IT governance, IT general controls over program development and changes, access to programs and data and IT operations, IT application controls and interfaces between IT applications are required to be designed and to operate effectively to ensure accurate financial reporting.

Our procedures included and were not limited to the following:

- Assessing the complexity of the IT environment by engaging IT specialists and through discussion with the head of IT.

- Assessing the design and evaluation of the operating effectiveness of IT general controls over program development and changes, access to programs and data and IT operations by engaging IT specialists.

- Assessing the design and evaluation of the operating effectiveness of IT application controls in the key processes impacting financial reporting of the Company by engaging IT specialists.

- Assessing the operating effectiveness of controls relating to data transmission through the different IT systems to the financial reporting systems by engaging IT specialists.

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 Standalone Financial Statements and our auditors’ report thereon.

Our opinion on the Standalone 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 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.

RESPONSIBILITIES OF MANAGEMENT FOR THE STANDALONE 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 Standalone 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) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone 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 RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professiona judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that 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 Financial Statements, including the disclosures, and whether the Standalone 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 Standalone Financial Statements for the financial year ended March 31, 2019 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.

OTHER MATTER

The accompanying standalone financial statements and other financial information includes the Company’s proportionate share in unincorporated joint operation in respect of total assets of Rs. 55 crore, total expenditure of Rs. 494 crore and the elements making up the cash flow statement and related disclosures in respect of an unincorporated joint operation which is based on statements from the operator and certified by the management. Our opinion is not modified in respect of above matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As 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, we give in the “Annexure 1” a statement on the matters specified in paragraphs 3 and 4 of the 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 it 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 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, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 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 Financial Statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure 2” to this report;

(g) In our opinion, the managerial remuneration for the year ended March 31, 2019 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

(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, 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 Standalone Financial Statements - Refer Note 33 to the 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 except for an amount of Rs. 1.51 crore which are held in abeyance due to pending legal cases.

Annexure 1

To the Independent Auditor’s Report of even date on the Standalone Financial Statements of Reliance Industries Limited

(Referred to in paragraph 1, under ‘Report on Other Legal and Regulatory Requirements’ section of our Report of even date)

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

(b) The Company has a regular programme for physical verification in a phased periodic manner, which, in our opinion, is reasonable having regards to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) According to information and explanations given by the management, the title deeds/lease deeds of immovable properties included in property, plant and equipment are held in the name of the Company except for the immovable properties which were acquired by entities that have since been amalgamated with the Company, property acquired during the previous year of Rs. 178 crore for which the registration of title deeds is in progress and in cases of leasehold land of Rs. 89 crore in respect of which the allotment letters are received and supplementary agreements entered; however, lease deeds are pending execution. (Refer note 1.1 of the Financial Statements).

(ii) The management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical verification.

(iii) (a) The Company has granted loans to parties covered in the register maintained under section 189 of the Companies Act, 2013. In our opinion and according to the information and explanations provided to us, the terms and conditions of the grant of such loans are prima facie not prejudicial to the Company’s interest.

(b) The schedule of repayment of principal and payment of interest has been stipulated for the loans granted and the repayment/receipts are regular.

(c) The Principal and interest are not overdue in respect of loans granted to companies, firms or other parties listed in the register maintained under section 189 of the Companies Act, 2013 which are overdue for more than ninety days.

(iv) In our opinion and according to the information and explanations provided to us, the Company has not granted any loans or provided any guarantees or security to the parties covered under Section 185 of the Act. The Company has complied with the provisions of Section 186 of the Act in respect of investments made or loans or guarantee or security provided to the parties covered under Section 186.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013, related to the manufacturing activities, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident fund, Employees’ State Insurance, Income-tax, Sales-tax, Goods and Services tax, Service tax, Duty of Custom, Duty of Excise, Value Added Tax, Cess and Other Statutory Dues applicable to it.

(b) According to the information and explanations provided to us, no undisputed amounts payable in respect of Provident fund, Employees’ State Insurance, Income-tax, Sales Tax, Goods and Service tax, Service tax, Duty of custom, Duty of excise, Value added tax, Cess and Other Statutory Dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues of Income-tax, Sales-tax, Service tax, Duty of Custom, Duty of Excise, Value added tax and Cess which have not been deposited on March 31, 2019 on account of any dispute, are as follows:

Name of the Statute

Nature of Dues

Amount (Rs. in crore)

Period to which the amount relates

Forum where dispute is pending

Income Tax Act,1961

Income Tax

28

Various Years from 1997-98 to 2016-17

Commissioner of Income-Tax (Appeals)

Central Excise Act, 1944

Excise Duty

-*

Various Years from 1990-91 to 2017-18

Commissioner of Central Excise (Appeals)

and Service Tax

210

Various Years from 1991-92 to 2016-17

Central Excise and Service Tax Appellate Tribunal

4

Various Years from 2006-07 to 2009-10

High Court

Central Sales Tax Act,

Sales Tax/ VAT

496

Various Years from 1983-88 to 2011-12

Sales Tax Appellate Tribunal

1956 and Sales Tax Act

and Entry Tax

55

Various Years from 2000-01 to 2011-12

High Court

of various States

23

2001-02 and 2005-06

Supreme Court

Customs Act, 1962

Customs Duty

20

2007-08

Central Excise and Service Tax Appellate Tribunal

* Rs. 0.12 crore

(viii) In our opinion and according to the information and explanations provided by the management, the Company has not defaulted in repayment of loans or borrowing to a financial institution, bank or government or dues to debenture holders.

(ix) In our opinion and according to the information and explanations provided by the management, the Company has utilized the monies raised by way of debt instruments and term loans for the purposes for which they were raised.

(x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the Financial Statements and according to the information and explanations provided by the management, we report that no fraud by the Company or no material fraud on the Company by the officers and employees of the Company has been noticed or reported during the year.

(xi) According to the information and explanations provided by the management, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion, the Company is not a nidhi company.

Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations provided by the management, transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the financial statements, as required by the applicable accounting standards.

(xiv) According to the information and explanations provided to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence, reporting requirements under clause 3(xiv) of the Order are not applicable to the Company and, not commented upon.

(xv) According to the information and explanations provided by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in section 192 of Companies Act, 2013.

(xvi) According to the information and explanations provided to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

REPORT ON THE INTERNAL FINANCIAL CONTROLS 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 Reliance Industries Limited (“the Company”) as of March 31, 2019 in conjunction with our audit of the Standalone 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 the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting with reference to these standalone financial statements 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”) and the Standards on Auditing as specified under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls and, both issued by the Institute of Chartered Accountants of India. 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 with reference to these standalone financial statements 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 with reference to these standalone financial statements and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting with reference to these standalone financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting with reference to these standalone financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING WITH REFERENCE TO THESE FINANCIAL STATEMENTS

A company’s internal financial control over financial reporting with reference to these standalone financial statements 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 with reference to these standalone financial statements 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 authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING WITH REFERENCE TO THESE STANDALONE FINANCIAL STATEMENTS

Because of the inherent limitations of internal financial controls over financial reporting with reference to these standalone financial statements, 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 with reference to these standalone financial statements to future periods are subject to the risk that the internal financial control over financial reporting with reference to these standalone financial statements 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, the Company has, in all material respects, adequate internal financial controls over financial reporting with reference to these standalone financial statements and such internal financial controls system over financial reporting with reference to these standalone financial statements were operating effectively as at March 31, 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For D T S & Associates For S R B C & CO LLP

Chartered Accountants Chartered Accountants

(Registration No.142412W) (Registration No.324982E/E300003)

T P Ostwal Vikas Kumar Pansari

Partner Partner

Membership No. 030848 Membership No. 093649

Mumbai

Date: April 18, 2019

Source : Dion Global Solutions Limited
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