We have audited the accompanying financial statements of Eastern Treads Limited ('the Company'), which comprise the
Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including other comprehensive income), the
Statement of Changes in Equity and the Statement of Cash flows for the year then ended and the notes to the financial
statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred
to as “the financial statements”).
In our opinion and to the best of our information and according to the explanations given to us the aforesaid financial
statements give the information required by the Companies Act 2013 (“the Act”) in the manner so required and give a true
and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the
Companies (Indian Accounting Standards ) Rules, 2015,as amended, (“IND AS”) and other accounting principles generally
accepted in India, of the state of affairs of the Company as at March 31, 2024, and its loss, total comprehensive income,
its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standard of Auditing (SAs) specified under section 143(10) of the Act.
Our responsibility under those SAs are further described in the Auditor's Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by
the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the
financial statements under the provisions of the Act and the Rules made thereunder and we have fulfilled our ethical
responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion on the financial statements.
Emphasis of Matter
In our opinion, the financial statements give a true and fair view of the state of affairs of the Company as at March 31,
2024 and of its financial performance and cash flows for the year then ended in accordance with IND AS. Our audit did
not identify any matters that required an “Emphasis of Matter” paragraph, indicating that there were no issues requiring
special emphasis or disclosure beyond what is already included in the financial statements.
Key Audit Matters
Key audit matter is a matter that, in our professional judgement, were of most significance in our audit of the financial
statements of the current year. These matters were addressed in the context of our audit of 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 key audit matter to be communicated in our report.
|
Key Audit Matter
|
Auditor's Response
|
|
1. Valuation of Inventory
The net carrying value of inventory held by the Company
as on 31 March 2024 amounts to ' 714.72 lakhs as
disclosed in note 2.7 to accompanying standalone financial
statements, which is 20.21% of total assets of the company
as on that date. Further, refer to note 1.15 for accounting
policies relating to valuation of inventory adopted by the
management in accordance with Ind AS 2, Inventories ('Ind
AS 2').
Inventories are valued at the lower of cost and net realisable
value item wise. Cost includes costs incurred in bringing
the inventory to its present location and condition as further
detailed below:
i) Raw Materials
Cost includes cost of purchase net of duties and taxes that
are recoverable from the government and other costs
incurred in bringing the inventories to their present location
and condition. Cost is determined basis using first-in, first-
out ('FIFO') method of computation.
ii) Finished goods and work in progress:
Cost includes cost of direct materials and labour and a
proportion of manufacturing overheads determined based
on the normal operating capacity. Cost is determined using
weighted average method of computation
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the
sale.
The management also identifies slow-moving, obsolete and
damaged inventory on a periodical basis and makes an
appropriate provision for obsolescence for such items as
at reporting date.
The aforesaid inventory valuation and estimation of
provision for obsolescence is manually performed by the
management on the reporting date and involve significant
estimates and judgements.
Considering the size, the assumptions used in the valuation
and the complexities involved significant auditor attention
is required to test accuracy of inventory valuation, and thus,
we have identified valuation of inventory as a key audit
matter in the current year audit.
|
Our audit procedures in relation to valuation of inventory
included, but were not limited to, the following:
1) Evaluated the design and implementation, and tested
the operating effectiveness of key internal controls over
measurement of inventory balances as at year end.
2) Assessed the appropriateness of the principles used in
the valuation of inventory in accordance with the
requirements of Ind AS 2.
3) Tested, on a sample basis, the accuracy of cost
computed for raw material inventory by verifying the actual
costs of latest purchase of raw materials applying the
principle of FIFO method, by inspection of supporting
documents.
4) Tested, on a sample basis, the accuracy of cost
computed for work-in-progress and finished goods
inventory by recomputing the weighted average cost
computation. Further, in the process, tested the cost of
direct materials used as per bills-ofmaterial (BOM), and
allocation of labour and manufacturing overheads to such
finished goods;
5) Obtained management working of valuation of inventory
and reconciled the quantities with the stock verification
reports to ensure completeness of the underlying data on
which valuation is performed by the management and
tested the mathematical accuracy of such workings.
Recomputed the overall allocation computation of
overheads on inventory and ensured consistency of
assumptions used therein by the management with prior
periods.
Tested, on sample basis, the inventory aging report and
net realisable value of inventories basis the latest market
prices of the products.
Evaluated the process followed by the management for
identification of slow-moving, obsolete and damaged
inventory items and accordingly assessed reasonableness
of provision for obsolescence estimated by the Company.
Evaluated the appropriateness and adequacy of
disclosures presented by the management relating to
inventory balances in the financial statements in
accordance with applicable financial reporting framework.
|
|
2. Trade Receivables
|
Our audit procedures in relation to valuation of ECL
|
|
The total balance of trade receivable for the year ended
|
included, but were not limited to, the following:
|
|
31 March 2024 is ' 1209.44 lakhs net of provision of
|
|
|
' 284.5 lakhs as disclosed in note No 2.3, to
|
1) Evaluated the design and implementation, and tested
|
|
accompanying standalone financial statements, which is
|
the operating effectiveness of key internal controls over
|
|
34.19% of total assets of the company as on that date.
|
measurement of ECL and Trade receivables balances as
|
|
Further, refer to note 1.17(d) for accounting policies relating
|
at year end.
|
|
to valuation of trade receivables adopted by the
|
|
|
management in accordance with Ind AS 109, Financial
|
2) Assessed the appropriateness of the principles used
|
|
Instruments ('Ind AS 109').
|
in the valuation of ECL in accordance with the
|
| |
requirements of Ind AS 109 and Ind AS 37.
|
|
For recognition of impairment loss on other financial assets
|
3) Sought external confirmations from a selected sample
|
|
and risk exposure, the Company determines that whether
|
of debtors.
|
|
there has been a significant increase in the credit risk since
|
|
|
initial recognition. If credit risk has not increased
|
4) Obtained management working of ECL and reconciled
|
|
significantly, 12-month ECL is used to provide for
|
the inputs used with the ageing reports to ensure
|
|
impairment loss. However, if credit risk has increased
|
completeness of the underlying data on which valuation
|
|
significantly, lifetime ECL is used. If, in a subsequent period,
|
is performed by the management and tested the
|
|
credit quality of the instrument improves such that there is
|
mathematical accuracy of such workings.
|
|
no longer a significant increase in credit risk since initial
|
|
|
recognition, the Company reverts to recognising
|
|
|
impairment loss allowance based on 12-month ECL.
|
|
|
Lifetime ECL are the expected credit losses resulting from
|
|
|
all possible default events over the expected life of a
|
|
|
financial instrument. The 12-month ECL is a portion of the
|
|
|
lifetime ECL which results from default events that are
|
|
|
possible within 12 months after the reporting date.
|
|
|
The Company's financial statements include a significant
|
|
|
amount of financial assets subject to ECL measurement.
|
|
|
ECL involves complex models and significant judgement
|
|
|
in determining the credit risk parameters and the calculation
|
|
|
of future cash flows. Given the complexity and the high
|
|
|
degree of estimation uncertainty, we considered ECL to
|
|
|
be a key audit matter.
|
|
• The Company's management and Board of Directors are responsible for the other information. The other information
comprises the information included in the Company's annual report, but does not include the financial statements and
our auditor's report thereon. The annual report is expected to be made available to us after the date of this auditor's
report.
• Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon.
• In connection with our audit of the financial statements, our responsibility is to read the other information identified
above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially
misstated.
• When we read the management report, if we conclude that there is a material misstatement therein, we are required
to communicate the matters to those charged with governance as required under SA 720 'The Auditor's responsibilities
Relating to Other 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 of these financial statements that give a true and fair view of the financial
position, financial performance including other comprehensive income, and cash flows and changes in equity of the
Company in accordance with the IND AS and other accounting principles generally accepted in India. This responsibility
also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding
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 design,
implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the
accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the 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 the management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, 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 the management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the company to express an
opinion on the financial statements.
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 (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.
From the matters communicated with those charged with governance, we determine those matters that were of utmost
significance in the audit of financial statements of the current year and are therefore the key audit matter.We describe
these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
A. As required by the Companies (Auditor's Report) Order, 2020 (“the Order”), issued by the Central Government of India
in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in Annexure “A” a statement on the
matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
B. As required by Section 143 (3) of the Act, based on our audit we report that:
1. 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.
2. 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.
3. The company does not have any branches and so the provisions of section 143(8) are not applicable to the
company.
4. The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), the Statement of
Changes in Equity and the Statement of Cash flows dealt with by this Report are in agreement with the books
of account.
5. In our opinion, the aforesaid financial statements comply with the Ind AS specified under Section 133 of the Act.
6. On the basis of the written representations received from the directors as on 31st March, 2024 taken on record
by the Board of Directors, none of the directors is disqualified as on 31st March, 2024 from being appointed as
a director in terms of Section 164 (2) of the Act.
7. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the
operating effectiveness of such controls, refer to our separate Report in 'Annexure B'. Our report expresses an
unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls
over financial reporting.
8 With respect to the 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 explanation
given to us:
i. The Company, as detailed in note 2.30 to the standalone financial statements, has disclosed the impact of
pending litigations on its financial position as at 31 March 2024
ii. The Company did not have any long-term contracts including derivative contracts for which there were
anymaterial foreseeable losses as at 31 March 2024;
iii. We are given to understand that the company is in the process of transferring the unpaid dividend amounting
to Rs.1,81,862 pertaining to the year ended March 31, 2017 to the Investor Education and Protection Fund
(IEPF) as of 31 March 2024.
iv.
(a) The Management has represented that, to the best of its knowledge and belief, no funds (which are
material either individually or in the aggregate) have been advanced or loaned or invested (either from
borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any
other person or entity, including foreign entity (“Intermediaries”), with the understanding, whether
recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest
in other persons or entities identified in any manner whatsoever by or on behalf of the Company
(“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate
Beneficiaries
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are
material either individually or in the aggregate) have been received by the Company from any person
or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing
or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or
entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”)
or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
(c) Based on the audit procedures that have been considered reasonable and appropriate in the
circumstances, nothing has come to our notice that has caused us to believe that the representations
under the sub-clause (a) and (b) contain any material misstatement.
v. Since the Company has not declared or paid any dividend during the year, the question of commenting
on whether dividend declared or paid is in accordance with Section 123 of the Companies Act, 2013
does not arise.
C. Based on our examination which included test checks, the Company has used an accounting software for
maintaining its books of account for the financial year ended 31 March 2024 which has a feature of recording
audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded
in the software. Further, during the course of our audit we did not come across any instance of the audit trail
feature being tampered with.
For G Joseph & Associates
Chartered Accountants
Firm Reg. No. 006310S
Place: Kochi Allen Joseph
Date : 29-05-2024 Partner
M No. 228498
UDIN: 24228498BKDGLN7200
|