Good Q1 numbers, but few red flags from their recent annual report –
The auditors draw attention to Note 39 in the financial statements, which discusses the restatement of prior period errors
The auditors referenced a disclaimer in Annexure C that may have an adverse effect on the functioning of the company.
The company’s accounting software had an audit trail (edit log) feature, but it was not enabled throughout the year for certain transactions at the application level. Additionally, the audit trail feature was not enabled at the database level to log any direct data changes
During the year the Company has been sanctioned working capital limits in excess of ` 5 crores in aggregate from Banks on the basis of security of current assets and immovable fixed assets. Based on the records examined by us in the normal course of audit of the financial statements, quarterly returns filed with such Banks are not in agreement with the books of accounts of the Company
According to the information and explanation given to us, the Company has not formalized and documented its internal financial control with reference to financial statements on criteria based on or considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (“Guidance Note”) issued by the Institute of Chartered Accountants of India (“ICAI”). Consequently, we are unable to obtain sufficient appropriate audit evidence to provide a basis for our opinion on whether the Company had adequate internal financial controls with reference to financial statements and whether such internal finaancial controls were operating effectively as at March 31, 2024.
The Company has accounted for material prior period errors discovered during the current period, retrospectively by restating the comparative amounts to which the same relate, due to this their last year profit came down from 331cr to 268cr and eps came down from 12 to 9.76
Recently management said – The company is in the process of formalizing internal financial controls to improve business operations. These controls will ensure better systems for safeguarding assets and business continuity. An ERP system has already been implemented to improve transparency and operational visibility.
Disclosure – Invested
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