To the Members of CARE Ratings Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the standalone financial statements of CARE Ratings Limited(formerly known as 'Credit Analysis and Research Limited') ('the Company') which comprisethe Balance Sheet as at March 31 2019 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year then ended and notes to the financial statements including a summary ofsignificant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ('the Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 and its profit (including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
2. We conducted our audit in accordance with the Standards on Auditing ('SAs')specified under section 143(10) of the Act. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India ('ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the Rules thereunder; and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
Key Audit Matters
3. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current year. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|Key Audit Matter ||Our approach |
|presentation and disclosures of revenues and other related balances in accordance with Ind AS 115 "Revenue from contracts with customers" (new accounting standard) and other regulatory requirements ||We assessed the entity's process to comply with the applicable Ind AS and other regulatory requirements Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: |
|The recognition measurement presentation and disclosures of revenues and other related balances in accordance with Ind AS 115 and other regulatory requirements involve significant judgements and estimation on behalf of the management of the Company. Further the recognition of revenue involves various complexities with respect to nature and category of clients of the Company. || Evaluated the design of internal controls relating to implementation of the new revenue accounting standard. |
|We determined this matter to be a key audit matter due to the complexity associated to comply with the applicable Ind AS and other regulatory requirements. [Note 1(j) to the standalone Ind AS financial statements] || Evaluated the report of expert on the application of the standard on the entity as per its accounting policies. |
| || Evaluated the reasonableness of the significant judgements and estimation involved in the process. |
| || Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. |
| || Selected a sample of continuing and new contracts and performed the following procedures: |
| || Read analysed and identified the distinct performance obligations in these contracts. |
| || Compared these performance obligations with that identified and recorded by the entity. |
| || Sample of revenue disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts. |
|Regulations - Litigations and claims || Our Audit approach in relation to the matter involved the following: |
|The Company is exposed to various laws and regulations. In this regulatory environment there is an inherent risk of litigations and claims. Consequently provisions and contingent liabilities disclosures may arise from direct and indirect tax proceedings legal proceedings including regulatory and other government / department proceedings as well as investigations by authorities. || Review the outstanding litigations against the Company for consistency with the previous years. Enquire and obtain explanations for movement during the year. |
| || Reading the latest correspondence between the Company and the various tax/legal authorities for significant matters. |
|As at March 31 2019 the Company's has ascertained contingent liabilities of Rs. 62.26 Lakhs and also has unascertained liabilities (refer note 28 to the standalone Ind AS financial statements) || Examined selectively the Company's legal expenses and read fully the minutes of the board meetings in order to ascertain all cases have been identified. |
|Management applies significant judgement in estimating the likelihood of the future outcome in each case when considering whether and how much to provide or in determining the required disclosure for the potential exposure of each matter. This is due to the highly complex nature and magnitude of the legal matters involved along with the fact that resolution of tax and legal proceedings may span over multiple years and may involve protracted negotiation or litigation. These estimates could change substantially over time as new facts emerge and each legal case progress. || With respect to tax matters involving our tax specialists and discussing with the Company's personnel dealing with tax matters their views and strategies on significant cases as well as the related technical grounds relating to their conclusions based on applicable tax laws and precedence. |
| || Assessing the decisions and rationale for provisions held or for decisions not to record provisions or make disclosures. |
| || For those matters where management concluded that no provisions should be recognised considering the adequacy and completeness of the Company's disclosures. |
|We determined this matter to be a key audit matter due to the inherent complexity and magnitude of potential exposures across the Company and the judgment necessary to estimate the amount of provisions required or determine the required disclosure. || For complex regulatory litigations reviewing the relevant correspondence by the company studying the matters in the light of past precedence and views of company's legal advisor as made available by the company |
Information other than the Financial Statements and Auditors' Report Thereon
4. The Company's Board of Directors is responsible for the preparation of the otherinformation comprising of the information included in the Management Discussion andAnalysis Board's Report including Annexures to Board's Report Business ResponsibilityReport Corporate Governance and such other disclosures related Information excluding thestandalone financial statements and auditor's report thereon ('Other Information'). TheOther Information is expected to be made available to us after the date of this Auditors'Report. Our opinion on the standalone financial statements does not cover the OtherInformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the Other Information when it becomes available and in doing so considerwhether the Other Information is materially inconsistent with the standalone financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated. When we read the Other Information and if we conclude thatthere is a material misstatement therein we are required to communicate the matter tothose charged with governance as required under SA 720 'The Auditor's responsibilitiesRelating to Other Information'.
Responsibility of Management for Standalone Financial Statements
5. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the AccountingStandards specified under section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error. In preparing thefinancial statements management is responsible for assessing the Company's ability tocontinue as a going concern disclosing as applicable matters related to going concernand using the going concern basis of accounting unless management either intends toliquidate the Company or to cease operations or has no realistic alternative but to doso.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
6. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an Auditor's Report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements. Our audit process in accordance with the SAs isnarrated in details in Annexure 1 to this report.
Report on Other Legal and Regulatory Requirements
7. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of sub-section (11) of section 143 of the Act wegive in the Annexure 2 a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
8. 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 purposes of our audit.
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 including Other ComprehensiveIncome the Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
d. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
e. On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of section 164 (2) of theAct.
f. 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 3.
g. In terms of provisions of Section 197(16) of the Act as per the information andexplanations given we report that the managerial remuneration paid by the Company to itsDirectors is in accordance with provisions of Section 197 of the Act.
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 2014 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 standalone financial statements - Refer Note 28 to the financialstatements;
(ii) The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts - Refer Note 29 to the financial statements;
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For Khimji Kunverji & Co LLP
(formerly Khimji Kunverji & Co)
Firm Registration No 105146W
Partner (F - 033494)
Date: May 21 2019
INDEPENDENT AUDITOR'S REPORT
(referred to in paragraph 6 of Independent Auditors' Report)
As part of our audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error to design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign 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 hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourAuditor's Report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
INDEPENDENT AUDITOR'S REPORT
(referred to in paragraph 7 of Independent Auditors' Report)
i (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. According to theinformation and explanation given to us no material discrepancies were noticed on suchverification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
ii. The Company does not hold any inventory or securities as stock in trade henceclause 3(ii) of the Order is not applicable to the Company.
iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct. Accordingly the provisions of clause 3 (iii) (a) (b) and (c) of the Order are notapplicable to the Company.
iv. In our opinion and according to the information and explanations given to usprovisions of Section 185 and 186 of the Act in respect of loans to directors includingentities in which they are interested and in respect of loans and advances giveninvestments made and guarantees and securities given have been complied with by theCompany.
v. As explained to us the Company has not accepted any deposits from the public.
vi. According to the information and explanations given to us the Company is notrequired to maintain any cost records prescribed by the Central Government undersub-section (1) of Section 148 of the Act.
vii. (a) According to the information and explanations given to us and based on therecords of the Company examined by us the Company is regular in depositing the undisputedstatutory dues including Provident Fund Employees' State Insurance Income-tax Goodsand Service Tax and other material statutory dues as applicable with the appropriateauthorities in India.
As informed the Company is not liable to pay Custom Duty and Cess during the year.
(b) According to the information and explanations given to us and based on the recordsof the Company examined by us there are no dues of Income Tax Service Tax Value AddedTax Sales Tax Customs Duty Excise Duty Goods and Service Tax and Cess which have notbeen deposited on account of any disputes except the following:
|Name of the statute ||Nature of the dues ||Amount (Rs.) ||Period to which the amount relates ||Forum where dispute is pending |
|The Income Tax Act 1961 ||Income Tax ||2720469 ||AY 2010-11 ||Dy. Commissioner of Income Tax 6(2) Mumbai |
|The Income Tax Act 1961 ||Income Tax ||34924835 ||AY 2013-14 ||Commissioner of Income Tax (Appeals) |
|The Income Tax Act 1961 ||Income Tax ||53976512 ||AY 2014-15 ||Commissioner of Income Tax (Appeals) |
|The Income Tax Act 1961 ||Income Tax ||2466238 ||AY 2016-17 ||Commissioner of Income Tax (Appeals) |
viii. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no loans taken from financialinstitutions government and banks nor has the Company issued any debentures hence clause3(viii) of the Order is not applicable.
ix. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Hence theprovision of clause 3(ix) of the Order is not applicable to it.
x. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven to us by the management we report that no fraud by the Company or no fraud on theCompany by the officers and employees of the Company has been noticed or reported duringthe year.
xi. According to the information and explanations given to us the managerialremuneration has been paid / provided in accordance with the requisite approvals mandatedby the provisions of Section 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Therefore the provisions of clause 3(xii) of the orderare not applicable to the Company.
xiii. According to the information and explanations to us and based on our examinationof the records of the Company transactions with the related parties are in compliancewith Section 177 and 188 of the Act where applicable and the details have been disclosedin the Standalone Ind AS financial statements as required by the applicable accountingstandards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review and hence reporting requirements under clause 3(xiv) of the Orderare not applicable to the Company.
xv. According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him asreferred to in Section 192 of the Act.
xvi. According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
For Khimji Kunverji & Co LLP
(formerly Khimji Kunverji & Co)
Chartered Accountants Firm Registration No 105146W
Partner (F - 033494)
Date: May 21 2019
(referred to in paragraph 8(f) of Independent Auditors' Report)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ('the Act') Opinion
In conjunction with our audit of the standalone Ind AS financial statements of theCompany as of and for the year ended 31 March 2019 we have audited the internal financialcontrols with reference to standalone Ind AS financial statements of CARE Ratings Limited(formerly known as 'Credit Analysis and Research Limited') ('the Company') as of thatdate.
In our opinion the Company has in all material respects adequate internal financialcontrols system with reference to standalone Ind AS financial statements and such internalfinancial controls were operating effectively as at 31 March 2019 based on the internalfinancial controls with reference to standalone Ind AS financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (the 'Guidance Note').
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to standalone Ind AS financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding 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 (hereinafterreferred to as 'the Act').
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to standalone Ind AS financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to standalone Ind AS financial statements.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to standalone Ind AS financial statements wereestablished and maintained and whether such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to standalone Ind AS financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to standalone Ind AS financial statements included obtaining anunderstanding of such internal financial controls assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgement including the assessment of the risks of material misstatement of thestandalone Ind AS 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 audit opinion on the Company's internal financial controls withreference to standalone Ind AS financial statements.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internal financial controls with reference to standalone Ind AS financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of standalone Ind AS financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sinternal financial controls with reference to standalone Ind AS financial statementsinclude those policies and procedures that;
1. pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
2. provide reasonable assurance that transactions are recorded as necessary to permitpreparation of standalone Ind AS financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
3. provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the standalone Ind AS financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls with reference tostandalone Ind AS financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone Ind AS financial statements to future periods aresubject to the risk that the internal financial controls with reference to standalone IndAS financial statements may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
For Khimji Kunverji & Co LLP (formerly Khimji Kunverji & Co)
Chartered Accountants Firm Registration No 105146W
Partner (F - 033494)
Date: May 21 2019