Globus Spirits Limited
Report on the Audit of the Standalone FinancialStatements
Qualified Opinion
1. We have audited the accompanying standalone financial statements of Globus Spirits Limited (‘the Company’), which comprise the Balance Sheet as at 31 March 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid standalone 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 (‘Ind AS’) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2024, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis for Qualified Opinion
3. As stated in Note 47 to the standalone financial statements, the Income Tax Department had carried out search and seizure operation at the head office and other premises of the Company between 30 January 2023 to 03 February 2023. Subsequent to year end, the Company has received assessment orders for last 10 assessment years alleging certain disallowances resulting in an aggregate tax demand
of Rs. 3,561 lakhs (including interest and penalties thereon). As stated in the note, the Company’s management has filed an appeal u/s 246A of the Income Tax Act for all the assessment years covered by the order. Company’s management has appointed an independent firm to review these additions. Pending completion of the said review, the Company’s management is currently unable to determine whether further adjustments or disclosures, if any, are required to be made to the standalone financial statements.
Consequently, we were unable to assess the extent of the adjustments to be recognised or disclosures to be made, if any, and the consequential impact on the standalone financial statements as at and for the year ended 31 March 2024.
4. We conducted our audit in accordance with the Standards on Auditing 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 (‘ICAI’) 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 qualified opinion.
Key Audit Matters
5. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
|
Key audit matter
|
How our audit addressed the key audit matter
|
|
A. Indirect Tax Litigation (Goods & Services Tax (GST) case)
Refer note 1.3(XI) to the accompanying Standalone financial statements for the accounting policy on Contingent Liabilities. As described in note 32 to the Standalone financial statements, the Company has an ongoing litigation with respect to GST which is pending adjudication.
Significant judgement is applied by the management in application and interpretation of tax laws and judicial pronouncements, and evaluating the likely outcome / or timing of the cash outflows, to determine whether the related obligation, if any, requires recognition of a provision or a disclosure as a contingent liability in accordance with principles enunciated in Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets (‘Ind AS 37’). Accordingly, considering the significance of amount involved, the uncertainties involved and use of significant management judgement in determining the likely outcome of the litigation as explained above, we have determined this to be a key audit matter.
|
Our audit procedures to address this key audit matter included,
but were not limited to the following:
a. Obtained an understanding of the Company’s process for evaluating the outcome of litigations, including assessment of accounting treatment as per Ind AS 37.
b. Evaluated the design and tested the operating effectiveness of key controls implemented by the management relating to aforesaid process.
c. Obtained and reviewed management’s evaluation on the expected outcome of the litigation including legal advice obtained by management from an external indirect tax expert and correspondences with the concerned authorities.
d. Assessed the objectivity and competence of the external tax expert engaged by the management.
e. Involved auditor’s tax experts to understand the current status of the matter, review the legal/tax advice obtained by the management and assist in evaluating the tax position taken by management by applying and interpreting tax laws, relevant judicial pronouncements and available precedents to challenge management’s assumptions in estimating the possible outcome of the ongoing proceedings.
f. Assessed the adequacy and appropriateness of the disclosures made in the Standalone financial statements in accordance with the applicable accounting standards.
|
|
B. Revenue Recognition
Refer note 1.3(II) to the accompanying Standalone financial statements for the accounting policy on revenue recognition and note 22 for the details of revenue recognised during the year. The Company derives its revenue from sale of liquor products to a wide range of customers through a network of distributors and state government corporations.
Ind AS 115, Revenue from Contracts with Customers (‘Ind AS 115’), requires management to make certain key judgements, such as, identification of performance obligations in contracts with customers, determination of transaction price for the contract and assessment of satisfaction of the performance obligations under each contract representing the transfer of control of the products sold to the customers, including state government corporations.
Given to significance of amount involved, multiplicity of the Company’s products, volume of sales transactions, size of distribution network, nature of customers and varied terms of contracts with different customers, revenue recognition is determined to be an area involving significant risk in line with the requirements of the Standards on Auditing and hence, necessitated significant auditor attention.
Due to the extent of industry knowledge and skills required to design and execute audit procedures to address the risks of material misstatement and management judgments involved in assessing appropriateness of revenue recognition, the matter is considered as a key audit matter in the current year audit.
|
Our audit procedures with respect to revenue recognition
included, but were not limited, to the following:
a. Understood the process of revenue recognition and evaluated the appropriateness of the accounting policy adopted by the management on revenue recognition including determination of transaction price and satisfaction of performance obligations and transfer of control in accordance with Ind AS 115;
b. Evaluated the design and tested the operating effectiveness of key internal controls around revenue recognition;
c. On a sample basis, tested revenue transactions recorded during the year, and transactions recorded in specific period before and after year end, basis inspection of supporting documents such as purchase orders, price lists, proof of dispatch and delivery including regulatory documents used for movement of liquor as per applicable regulations, invoices, to assess the appropriateness of identification of performance obligations, determination of transaction price, including allocation thereof to performance obligations and identification of the point of revenue recognition, in order to ensure revenue is recorded with the correct amount and in the correct period; and
d. Assessed the adequacy and appropriateness of the disclosures made in the accompanying Standalone financial statements in respect of revenue recognition in accordance with the applicable accounting standards.
|
6. In addition to the matter described in the Basis for Qualified Opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report.
Information other than the Financial Statements andAuditor’s Report thereon
7. The Company’s Board of Directors are 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 auditor’s 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 the other information is materially inconsistent with the standalone 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. As described in the Basis for Qualified Opinion section above, we were unable to assess the extent of the adjustments to be recognised or disclosures to be made, if any, and the consequential impact of the Income Tax Department search and seizure operation on the standalone financial statements. We have concluded that the other information is materially misstated for the same reason with respect to the amounts or other items in the Annual Report affected by Income Tax Department search and seizure operation.
Responsibilities of Management and Those Charged withGovernance for the Standalone Financial Statements
8. The accompanying standalone financial statements have been approved by the Company’s Board of Directors. The Company’s Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act 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.
9. In preparing the financial statements, the Board of Directors 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 Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
10. The Board of Directors is also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the StandaloneFinancial Statements
11. 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 Standards on Auditing 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.
12. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism 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 Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of Board of Directors’ 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; and
• 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.
13. 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.
14. 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.
15. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period 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
16. The standalone financial statements of the Company for the year ended 31 March 2023 were audited by the predecessor auditor, Deloitte Haskins & Sells, who have expressed an unmodified opinion on those standalone financial statements vide their audit report dated 25 May 2023.
Report on Other Legal and Regulatory Requirements
17. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
18. As required by the Companies (Auditor’s Report) Order, 2020 (‘the Order’) issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
19. Further to our comments in Annexure A, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, that:
a) We have sought and except for the matter described in the Basis for Qualified Opinion section, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;
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 except for the possible effect of the matter described in Basis for Qualified Opinion section and except for the matters stated in paragraph 19(i)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended).
c) The standalone financial statements dealt with by this report are in agreement with the books of account;
d) Except for the possible effects of the matter described in the Basis for Qualified Opinion section, in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) The matters described in paragraph 3 under the Basis for Qualified Opinion section, 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 and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2024 from being appointed as a director in terms of section 164(2) of the Act;
g) The modification relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 19(b) above on reporting under section 143(3)(b) of the Act and paragraph 19(i)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
h) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2024 and the operating effectiveness of such controls, refer to our separate report in Annexure B wherein we have expressed a modified opinion; and
i) 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: Except for the possible effects of the matters described in paragraph 3 of the Basis for Qualified Opinion section, the Company, as detailed in note 32 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2024;
i. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2024;
ii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024;
iii. a. The management has represented that, to the best of its knowledge and belief, as disclosed in note 49 to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any
person(s) or entity(ies), including foreign entities (‘the 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 (‘the Ultimate Beneficiaries’) or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 49 to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (‘the 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; and
c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under subclauses (a) and (b) above contain any material misstatement.
iv. The final dividend paid by the Company during the year ended 31 March 2024 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
As stated in note 48 to the accompanying standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year ended 31 March 2024 which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
v. As stated in Note 53 to the standalone financial statements and based on our examination which included test checks, except for instance
mentioned below, the Company, in respect of financial year commencing on 1 April 2023, has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been 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 audit trail feature being tampered with, other than the consequential impact of the exception given below.
For Walker Chandiok & Co LLP
Chartered Accountants
Firm’s Registration No.: 001076N/N500013
Arun Tandon
Partner
Membership No.: 517273 UDIN: 24517273BKEXFO1657
Place: New Delhi Date: 30 May 2024
|
Nature of exception noted
|
Details of Exception
|
|
Instances of accounting software maintained by a third party where we are unable to comment on the audit trail feature
|
The accounting software used for maintenance of books of account of the Company is operated by a third party software service provider. The ‘Independent Service Auditor’s Assurance Report on the Description of Controls, their Design and Operating Effectiveness’ (‘Type 2 report’ issued in accordance with ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information) does not comment on existence of audit trail (edit logs) for any direct changes made at the database level. Accordingly, we are unable to comment on whether audit trail feature with respect to the database of the said software was enabled and operated throughout the year.
|
|