ARTEFACT PROJECTS LIMITED
Report on the Indian Accounting Standards (Ind AS) Financial Statements
We have audited the accompanying Ind AS financial statements of ARTEFACT PROJECTSLIMITED ("the Company") which comprise the Balance Sheet as at March 312019 the Statement of Profit and Loss (including Other Comprehensive Income) the CashFlow Statement for the year then ended and a summary of significant accounting policiesand other explanatory information.
Management's Responsibility for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Ind AS financial statements that give a true and fair view of the financialposition financial performance (including Other Comprehensive Income) cash flows andchanges in equity of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards (Ind AS) specified underSection 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2015.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the Ind ASfinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on these Ind AS financial statements basedon our audit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder and the Order under section 143(ll)ofthe Act. We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the Ind AS financial statements are free from materialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of theaccounting estimates made by the Company's directors as well as evaluating the overallpresentation of the Ind AS financial statements.
We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Ind AS financial statements.
Basis for Qualified Opinion
Attention is drawn to:
i) Note no. 9.01 to the accompanying audited financial Statements wherein themanagement of the company has considered trade receivables from the Government clients inrespect of completed Contracts amounting to Rs 686.02 Lacs as good and fully recoverable.As per Management the receivables are due from the Government Departments as per ExpressContracts provisions of the agreement and hence the same are considered good andrecoverable and no provision is required. In the absence of any balance confirmation fromClients we are unable to comment the exact extend to which these balances shall berecoverable.
ii) Note no. 12.02 to the accompanying audited financial statements considered thereceivable amounting to Rs 72.72 Lacs given as sponsorship for higher education in earlieryears as good and recoverable even though he has not fulfilled his stipulated commitmentsand obligations till date. As explained to us the said loan is considered good andrecoverable based on management's assessment.
iii) The Company has not evaluated or made any provision for any impairment forexpected Losses If any In accordance with Ind-AS-109 "Financial Instruments"for investments in fully compulsory convertible debentures amounting to Rs 5.98Crores as the Management considers the same good and recoverable for reason stated in NoteNo 6.01 of audited financial statements. The Company has negative net worth and hence weare unable to comment on the carrying amount the recoverability thereof and the impactif any on the balance sheet.
Emphasis on Matter:
We draw attention to:
1) Note no.9.02 to the accompanying financial statements regarding invoices amountingto Rs. 254.11 Lacs of previous year reduced from revenue together with corresponding GSTliability of Rs. 45.73 Lacs thereon also reversed and the company has correspondinglyvalued and accounted WIP of Rs 155.36 Lacs to match the revenue reversed. The net impactof the above is reduction in profits by Rs 98.75Lacsfor the year ended 3T march2019.
2) Note No 6.01 to the accompanying financial statements regarding investment of Rs.740 lacs in fully convertible debentures and equity shares in respect of which the Companyhas not evaluated and made provision for impairment loss as the Management considers andhave positive net worth.
Our opinion is not Qualified in respect of above matters.
In our opinion and to the best of our information and according to the explanationsgiven to us exceptfor the possible effects of the matters described in the basis forqualified opinion paragraph above the aforesaid financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 312019 and its profit and its cash flows for the yearended on that date.
Key Audit Matters:
Except For the matters described in basis for qualified opinion and Emphasis on mattersfor paragraphs above. We have determined that there are no other matters to communicate inour report.
a) The Financial Statements and other financial information includes the Company'sproportionate share in jointly controlled total assets of Rs 453.78 Lacs asat March 312019 total revenue of Rs. Nil and total expenditure of Rs. 36 Lacsfor the year ended on that date and the elements making up the cash flow statementsand related disclosures in respect of unincorporated Joint Ventures which is based onaudited financial statements of the respective Joint Ventures audited by us. Our Opinionis not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. 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 bestof our knowledge and belief were necessary for the purpose of our audit except for thematters described in the 'Basis for Qualified Opinion' paragraph above.
b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c. The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;
d. Except for the matters described in the 'Basis for Qualified Opinion' paragraphabove in our opinion the aforesaid IndAS financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act as applicable read with Rule7 of the Companies (Accounts) Rules 2015.;
e. The matter described in the 'Basis for Qualified Opinion' paragraph above in ouropinion may have an adverse effect on the functioning of the company.
f. On the basis of the written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 312019 from being appointed as a director in terms of Section164 (2) of the Act.
g. With respect to the adequacy of the internal financial controls over financialreporting of the company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A" to this report.
h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2016 in our opinionand 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 financialposition in its Ind AS financial statements as referred to inNote no. 32 to the INDASfinancial statements.
ii. The Company does not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
2. 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 section143 of the Act we give in "Annexure B" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
For Banthia Damani & Associates
Firm Registration Number- 126132W
Membership No. - 041344
Date : May 302019
"ANNEXURE A" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 1 (g) under 'Report on Other Legal and RegulatoryRequirements' of our report of even date on Ind AS financial statements of ArtefactProjects Limited for the year ended March 312019)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the Internal Financial Controls over financial reporting of ARTEFACTPROJECTS LIMITED ("the Company") as of March 312019 in conjunction with ouraudit of the 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 internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note and the Standards on Auditing issued by the ICAI and deemed to beprescribed under Section 143 (10) of the Act to the extent applicable to an audit ofinternal financial controls. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate. In our opinionthe Company has maintained in all material respects adequate internal financial controlsover financial reporting and such internal financial controls over financial reportingwere operating effectively as of March 312019 based on the internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note issued by the ICAI.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified in the operating effectiveness of thecompany's internal financial control over financial reporting as on March 312019 inrespect of:
a) Reconciliations of balances outstanding specifically trade receivables for morethan six months sundry creditors and imprest accounts and confirmations from parties arenot available that has effect on disclosure of Financial Statements which indicates thatmanagement is not taking effective steps for the same and consequently it affects thecollection from customers which may result into under provision of doubtful balances.
A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim financial statements willnot be prevented or detected on a timely basis.
In our opinion except for the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas maintained in all material respects adequate internal financial controls overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as of March 312019 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note issued by the ICAI except for the materialweakness described above and the effects/possible effects thereof.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2019financial statements of the Company and the material weaknesses described above does notaffect our qualified opinion on the financial statements of the Company.
For Banthia Damani & Associates
Firm Registration Number- 126132W
Membership No. - 041344
Date : May 30 2019
"ANNEXURE B" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date on Ind AS financialstatements of Artefact Projects Limited for the year ended March 312019)
i. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b. According to the information and explanations given to us the Company hasphysically verified all the fixed assets and no material discrepancies were noticed onsuch physical verification as compared with the available records.
c. According to the information and explanations given to us the original title deedsof immovable properties have been pledged as security for loans with a lender The Companyhas produced the photocopy of the title deeds of these immovable properties and based onsuch documents the title deeds are held in the name of the Company except that the Landon which the building has been constructed is jointly owned by the Company some of thedirectors and their relatives (Refer Note No. 3.02 to the Financial Statements).
ii. In respect of its inventories:
The Company does not have any Inventories of Raw Material Finished Goods and Stores& Spares. The Inventory/ WIP at the year end represents expenditure incurred inrespect of the Project Management Consultancy Services executed but remained un-billed ason the reporting date and accordingly the provisions of Clause (ii) of Paragraph 3 of theOrder as far as it relates to Physical Verification of Inventories are not applicable tothe Company.
iii. In respect of loans secured or unsecured granted by the Company to companiesfirms limited liability Partnerships or other parties covered in the register maintainedunder section 189 of the Act:
a. The Company has given advances in the nature of loan to three joint ventures andCompany. As per the information and explanations given to us the loans are repayable ondemand.
b. As the loan is repayable on demand the question of overdue amount does not arise.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act asapplicable in respect of loans granted investments made and guarantees and securitiesprovided.
v. According to the information and explanations given to us the Company has notaccepted any deposit from the public.
Therefore the provisions of Clause (v) of paragraph 3 of the Order are not applicableto the Company.
vi. According to the information and explanations given to us the Central Governmenthas not prescribed maintenance of the cost records under sub section (1) of section 148 ofthe act in respect of business activities carried on by the company. Therefore theprovisions of Clause (vi) of paragraph 3 of the Order are not applicable to the Company.
iv. According to the information and explanations given to us in respect of statutorydues:
a) Substantial delays have been noticed in depositing undisputed statutory dues inrespect of Service Tax ESIC Provident fund Profession tax GST and TDS with theappropriate authorities during the year. According to the information and explanationsgiven to us undisputed amounts payable in respect of such statutory dues outstanding asat March 312019 for a period of more than six months from the date they became payableare as given below:
|Name of the Statute ||Nature of the Dues ||F.Y. to which it relates ||Amount (In Rs.) |
|Income Tax Act 1961 ||Tax Deducted at ||2016-17 ||262945.00 |
| ||Source (TDS) ||2017-18 ||67266.00 |
| || ||2018-19 ||856283.00 |
|Service Tax Act ||Service Tax || ||12431256.00 |
|Employees Provident Funds & Miscellaneous Provisions Act 1952 ||Provident Fund ||2017-18 ||95494.00 |
|Employees State Insurance Act 1948 ||ESIC ||2017-18 ||99597.00 |
| ||ESIC ||2018-19 ||147002.00 |
|Profession Tax Act 1975 ||PT ||2018-19 ||1.79.750.00 |
|TOTAL || || ||14139593.00 |
The company has however subsequently paid ESIC of Rs 147002/- Profession Tax of Rs179750/- and TDS of Rs. 856283/- for FY 2018-19 have been paid in May 2019.
a) According to information and explanations given to us and the records of the Companyexamined by us there are no dues of Goods & services Tax which have not beendeposited on account of any dispute. The particulars of Dues of income tax Service tax asat March 312019 which have not been deposited on account of dispute are as below:
|Name of the statute ||Nature of dues ||Amount ||F.Y. to which the amount relates ||Forum where The dispute is Pending |
|Income Tax Act 1961 ||Income Tax ||2309910.00 ||2016-17 ||CIT(A) |
|Finance Act 1994 ||Service Tax & Penalty thereon ||3638000.00 ||2012-13 to 1617 ||CESAT |
|Total || || || || |
viii) According to the records of the Company examined by us and on the basis ofconfirmations and explanations given to us the term Loan borrowed from Canara Bank isoverdue since 3151 January 2018 by Rs 5182619/- as on 31.03.2018.
ix) According to the information and explanations given to us the Company did notraise any term loans during the year. Accordingly provisions of paragraph 3 (ix) of theCARO 2016 is not applicable to the Company.
x) Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and on the basis of information and explanationsgiven by the management no fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the year.
xi) According to the information and explanations given to us the managerialremuneration has been paid or provided in accordance with the provisions of section 197read with Schedule V to the Act.
xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofClause (xii) of paragraph 3 of the Order are not applicable to the Company.
xiii) According to the information and explanations given to us the transactionsentered with the related parties are in compliance with section 177 and 18 8 of the Actwhere applicable and the details of related party transactions have been disclosed in thefinancial statements as required by the applicable accounting standards.
xiv. According to the information and explanations give to us and based on ourexamination of the records of the Company during the year the company has not raised anymoney by preferential allotment or private placement of share or debentures. Thereforethe provisions of Clause (xiv) of paragraph 3 of the Order are not applicable to theCompany.
xv. According to the information and explanations given to us during the year thecompany has not entered into any noncash transactions with directors or persons connectedwith him Therefore the provisions of Clause (xv) of paragraph 3 of the Order are notapplicable to the Company.
xvi. In our opinion and according to information and explanations provided to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934.
For Banthia Damani & Associates
Firm Reg.No- 126132W
Membership No. - 041344
Date : May 30 2019