To the Members of
M/s. Cerebra Integrated Technologies Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone Ind AS financial statementsof M/s. Cerebra Integrated Technologies Limited ("the Company") which comprisethe balance sheet as at March 31 2022 the statement of Profit and Loss statement ofchanges in equity and statement of cash flows for the year then ended and notes to thestandalone Ind AS financial statements including a summary of significant accountingpolicies and other explanatory information.
In our opinion and to the best of our information and according to theexplanations given to us Except for the effects of matters mentioned in the " Basisfor Qualified Opinion" paragraph these aforesaid standalone Ind AS financialstatements 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 IndianAccounting Standards prescribed under section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended ("Ind AS") and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2022 and its profit changes in equity and its cash flows for the yearended on that date.
Basis of Qualified Opinion
We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Companies Act 2013. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the standalone Ind AS Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the standalone Ind AS financial statements under the provisions of theCompanies Act 2013 and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for ourQualified Opinion.
i. The company has reported Rs.22.88 Crore as inventory held by thecompany as on 31.03.2022 which includes Rs.14.97 Crore being materials related to E WasteDivision for which we have not been provided with item wise details movement ofinventory during the year and basis for valuation. And Due to the nature of inventory wecould not verify the quantity of the inventory and in the absence of sufficient auditevidence we are unable to ascertain the correctness of the quantity and value of inventoryheld by the E waste division as on 31.03.2022. In view of the above we are unableascertain the correctness of the valuation of Inventory and ascertain its consequentimpact if any on the standalone Ind AS financial statements.
ii. Loans (under Noncurrent assets) reported by the company includesRs.5.94 Crore receivable from its subsidiary company and which is outstanding for morethan 2 years. Also the subsidiary company's auditors expressed concerns over thesubsidiary company's ability to continue as going concern as the net worth of the companyhas been completely eroded. The company has not made any provision for expected loss ofsaid advance and its investment in equity shares (book value of Rs.0.035 Crore) of thesaid subsidiary company. And hence profit and Reserves reported in standalone Ind ASfinancial statements are over stated to the extent of Rs.5.97 Crore.
Emphasis of Matter
We draw attention to the following matters in the standalone Ind ASfinancial statements wherein:
The company has reported total receivables of Rs.189.09 crore (Ref NoteNo.13 ) out of which Rs.18.74 crore outstanding for more than 3 years classified asundisputed trade receivables.
The company has total Advances of Rs.85.28 Crore (Ref Note No.11)reported under "Other Non Current Assets" of the Standalone Balance Sheet whichis due from overseas parties and are outstanding for more than 1 year and which aresubject to statutory compliances.
Our opinion on the standalone Ind AS financial Statement is notmodified in respect of above matter
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|Trade receivables are recognised at their realisable value which is the original invoiced amount less allowance for expected credit loss (if any). ||For trade receivables and the management's estimations for trade receivables recover ability our key audit procedures included the following: |
|Valuation of trade receivables is a key audit matter in the audit due to the size of the trade receivable balance and the high level of management judgement used in determining the recover ability. ||We obtained trade receivables balance confirmations for major parties; |
| ||We analysed the aging of trade receivables; and |
| ||We obtained a list of long outstanding receivables and assessed the recover ability of these through inquiry with management and by obtaining sufficient audit evidence to support the opinion. |
| ||However in few cases we are unable to obtain sufficient audit evidence and the same is reported in Empasis of Matter paragraph of this report |
Information Other than the standalone Ind AS Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone Ind AS financial statements and ourauditor's report thereon. Such other information is expected to be made available to usafter the date of this auditor's report.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financialstatements our responsibility is to read the other information when it becomes availableand in doing so consider whether the other information is materially inconsistent withthe standalone financial statements or our knowledge obtained in the audit or otherwiseappears to be materially misstated.
When we read the other information Ifwe conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance and take appropriate action accordingly.
Responsibility of Management for the standalone Ind AS FinancialStatements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone Ind AS financial statements that give a true and fair viewof the financial position financial performance changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the accounting Standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateimplementation and maintenance of accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statement that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing thecompany's financial reporting process.
Auditor's Responsibilities for the Audit of the standalone FinancialStatements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue 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 auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgement and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosure areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone `financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
Report on Other Legal and Regulatory Requirements
1. 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 the "Annexure A" astatement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable.
2. As required by Section 143(3) of the Act we report that: a. We havesought and obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit.
b. In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss statement ofchanges in equityand the Cash Flow Statement dealt with by this Report are in agreementwith the books of account.
d. In our opinion the aforesaid standalone financial statements complywith the specified under Section 133 of the Act.
e. On the basis of written representations received from the directorsas on March 31 2022 and taken on record by the Board of Directors none of the directorsis disqualified as on March 31 2022 from being appointed as a director in terms ofsection 164 (2) of the Act;
f. With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
g. With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements ii. The Company did not have anylong-term contracts including derivative contracts for which there are materialforeseeable losses. iii. There were no amounts which were required to be transferred tothe Investor Education and Protection Fund by the Company. iv.
a. The management has represented that to the best of it's knowledgeand belief no funds have been advanced or loaned or invested (either from borrowed fundsor share premium or any other sources or kind of funds) by the company to or in any otherperson or entity including foreign entity ("Intermediary") with theunderstanding whether recorded in writing or otherwise that the Intermediary shallwhether directly or indirectly lend or invest in other persons or entities identified inany 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 it's knowledgeand belief no funds have been received by the company from any person or entityincluding foreign entity ("Funding Party") with the understanding whetherrecorded in writing or otherwise that the company shall whether directly or indirectlylend or invest in other persons or entities
(c) identified in any manner whatsoever by or on behalf of the FundingParty ("Ultimate Beneficiaries") or provide any guarantee security or the likeon behalf of the Ultimate Beneficiaries
(d) Based on the audit procedures that havebeen considered reasonableand appropriate in the circumstances nothing has come to our notice that has caused us tobelieve that the representations under sub-clause (i) and (ii) of Rule 11(e) as providedunder (a) and (b)abovecontain any material mis-statement.
v. The company has not declared or paid any dividend during the year incontravention of the provisions of section 123 of the Companies Act 2013
3. With respect to the matter to be included in the Auditor's Reportunder Section 197(16) of the Act: In our opinion and according to the information andexplanations given to us the remuneration paid by the Company to its directors during thecurrent year is in accordance with the provisions of Section 197 of the Act. Theremuneration paid to any director is not in excess of the limit laid down under Section197 of the Act.
"Annexure A" to the Independent Auditors Report
(Referred to in paragraph 1 under the heading 'Report on Other Legal& Regulatory Requirements' of our report of even date to the standalone Ind ASfinancial statements of the company for the year ended 31st March 2022)
As per the books and records produced before us and as per theinformation and explanations given to us and based on such audit checks that we considerednecessary and appropriate we confirm that:
i. In respect of the Company's Property Plant and Equipment andIntangible Assets:
a. (A) The Company has maintained proper records showing fullparticulars includingquantitative details and situation of Property Plant and Equipment.
(B) The Company has maintained proper records showing full particularsof intangible assets.
b. As per the information and explanation given us all Property Plantand Equipmentright-of-use assets and other Intangible assets have been physicallyverified by the management during the year. However documents in support of physicalverification has not been provided or our verification. Hence we are unable to comment onthe reasonability of physical verification and material discrepancies noticed if any.
c. The title deeds of immovable properties are held in the name of theCompany. According to the information and explanations given to us the records examinedby us and based on the examination of the conveyance deeds provided to us we report thatthe title deedscomprising all the immovable properties of land and buildings which arefreehold are held in the name of the Company as at the balance sheet date.
d. As per the information and explanation given us the Company has notrevalued any of its Property Plant and Equipment (including right of-use assets).
e. As per the information and explanation given usno proceedings havebeen initiated during the year or are pending against the Company as at March 31 2022 forholding any benami property under the Benami Transactions (Prohibition) Act 1988 (asamended in 2016) and rules made thereunder.
a. We have not been provided with the details of physical verificationof inventory conducted by the company during the current financial year. Hence we areunable to comment on the clause 3(ii)(a) of the order.
b. The Company has been sanctioned with working capital limits inexcess of 5 crore in aggregate during the year from banks on the basis of security ofinventory and trade receivables quarterly returns or statements filed by the company withsuch banks are not in agreement with the books of account of the company below are thedetails of the same :
| || ||INR in Crores |
|Quarter Ended ||Closing Stock as per Stock statement provided to Bank ||Closing Stock as per Financials |
|Jun 2021 ||6.05 ||21.85 |
|Sep 2021 ||8.57 ||9.83 |
|Dec 2021 ||10.65 ||23.89 |
iii. According to the information and explanation given to us and basedon our examination of records of the company the Company has given interest freeunsecured advances to parties covered in the register maintained under section 189 of theCompanies Act 2013. Which amounts to Rs.594 lakh as on 31.03.2022.
a. According to the information and explanation given to us and basedon audit procedures conducted by us we are of the opinion that the terms and conditionsof the grant of such loans/advances are prima facie prejudicial to the interest of thecompany as such loans/advances are interest free.
b. We have been informed that schedule of repayment is not fixed forthese loans/advances hence we are unable to comment on whether repayments or receipts areregular.
c. As the schedule of repayment is not fixed for these loans/advanceswe are unable to comment on whether the amount is overdue and whether reasonable stepshave been taken by the company.
iv. As per the information provided and explanation given to us thereare no loans investments guarantees and security under section 185 and 186 of theCompanies Act 2013. Hence the provisions of clause 3(iv) of paragraph 3 of the Order arenot applicable.
54 v. As per the information provided and explanation given to us theCompany has not accepted any deposit or amounts which are deemed to be deposits. Hencereporting under clause 3(v) of the Order is not applicable
vi. We have been informed that maintenance of cost records under subsection (1) of section 148 of the companies Act 2013 and the rules made thereunder are notapplicable relating to the operations of the company and hence the requirements of clause3(vi) of the Order is not applicable.
a. As per the information and explanations given to us the company hasgenerally been regular in depositing undisputed statutory dues including Goods and servicetax provident fund income-tax cessand other statutory dues to the appropriateauthorities except for few delays. As explained to us the company did not have any dueson account of employee's state insurance duty of customs and duty of excise.
As per the information and explanations given to us below are thedetails of undisputed amounts payable in respect of aforesaid dues were outstanding as onMarch 31 2022 for a period of more than 6 months from the date they became payable.
|Statute ||Nature of Due ||Amount (Rs. In lakhs) ||Period to which amount relates ||Date of Payment Not Paid as on the |
|Income Tax Act 1961 ||Income Tax ||9 ||2001-02 ||Date of this Report |
|Income Tax Act 1961 ||Income Tax ||1630.66 ||2018-19 ||Date of this Report |
|Income Tax Act 1961 ||Income Tax ||13.06 ||2017-18 ||Date of this Report |
|Central Excise Act 1944 ||Excise Duty ||28.09 ||2002-03 ||Date of this Report |
|Goods and service Tax ||Interest on reversal of GST input credit ||214.91 ||2018-19 ||Date of this Report |
b. As per the information and explanations given to us the followingstatutory dues have not been deposited on account of dispute:
|Statute ||Nature of Due ||Amount (Rs. In lakhs) ||Period to which amount relates ||Date of Payment Not Paid as on the |
|Income Tax Act 1961 ||Disallowance of Expenses ||Rs.141.97 ||FY 2017-18 ||CIT (A)Bengaluru- 11 |
|Income Tax Act 1961 ||Disallowance of Expenses ||Rs.116.99 ||FY 2018-19 ||CIT (A)Bengaluru- 11 |
|Income Tax Act 1961 ||Disallowance of Bad Debts Written off ||Rs.987.39 ||FY 2019-20 ||CIT (A)Bengaluru- 11 |
viii. As per the information and explanations given to us there wereno transactions relating to previously unrecorded income that have been surrendered ordisclosed as income during the year in the tax assessments under the Income Tax Act1961(43 of 1961). Hence reporting under clause 3(viii) of the Order is not applicable.
(a) In our opinion the company has not defaulted in repayment of loansor other borrowings or in the payment of interest thereon to any lender during the year;
(b) Company is not declared wilful defaulter by any bank or financialinstitution or other lender;
(c) According to the information and explanation given to us termloans were applied for the purpose for which the loans were obtained;
(d) According to the information and explanation given to us fundsraised on short term basis have not been utilised for long term purposes;
(e) According to the information and explanation given to us thecompany has not taken any funds from any entity or person on account of or to meet theobligations of its subsidiaries associates or joint ventures;
(f) According to the information and explanation given to us thecompany has not raised loans during the year on the pledge of securities held in itssubsidiaries joint ventures or associate companies;
vi. As per the information and explanations given to us the companyhas not raised any money by way of initial public offer or further public offer (includingdebt instruments) during the year. Hence reporting under clause 3(x) of the Order is notapplicable.
a. No fraud by the Company and no material fraud on the Company hasbeen noticed or reported during the year.
b. No report under sub-section (12) of section 143 of the Companies Acthas been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors)Rules 2014 with the Central Government during the year and up to the date of thisreport.
c. As per the information and explanation given to us the Company hasnot received any whistle blower complaints during the year.
xii. The company is not a Nidhi Company.Hence reporting under clause3(xii) of the Order is not applicable.
xiii. As per the information and explanations given to us alltransactions with the related parties are in compliance with sections 177 and 188 of theCompanies Act2013 where applicable and details of such transactions have been disclosedin the standalone financial statements as required by the applicable accounting standards.
a. Based on the draft internal audit report shared to us we are of theopinion that Companydoes not have an adequate internal audit system commensurate with thesize and the nature of its business. And in our opinion scope coverage and periodicity ofthe Internal Audit to be improved
b. We have relied on the draft Internal Audit report provided by themanagement and the same is considered in determining the nature timing and extent of ouraudit procedures.
xv. As per the information and explanations given to us the Companyhas not entered into any non-cash transactions with its directors or persons connectedwith its directors. and hence provisions of section 192 of the Companies Act 2013 are notapplicable to the Company.
xvi. In our opinion the Company is not required to be registered undersection 45-IA of the Reserve Bank of India Act 1934 and also is not a core investmentcompany (as defined in the Core Investment Companies (Reserve Bank) Directions 2016).Hence reporting under clause 3(xvi)(a) (b) (c) and (d) of the Order is not applicable.
xvii. The Company has not incurred cash losses during thefinancial year covered by our audit and the immediately preceding financial year andhence reporting under clause 3(xvii) of the Order is not applicable.
xviii. There has been no resignation of the statutory auditors of theCompany during the year and hence clause 3(xviii) is not applicable to the company.
xix. On the basis of the financial ratios ageing and expected dates ofrealization of financial assets and payment of financial liabilities other informationaccompanying the financial statements and our knowledge of the Board of Directors andManagement plans and based on our examination of the evidence supporting the assumptionsnothing has come to our attention which causes us to believe that any materialuncertainty exists as on the date of the audit report indicating that Company is notcapable of meeting its liabilities existing at the date of balance sheet as and when theyfall due within a period of one year from the balance sheet date. We however state thatthis is not an assurance as to the future viability of the Company. We further state thatour reporting is based on the facts up to the date of the audit report and we neither giveany guarantee nor any assurance that all liabilities falling due within a period of oneyear from the balance sheet date will get discharged by the Company as and when they falldue.
a. As per the information and explanations given to us the company hasnot complied with second proviso to sub-section (5) of Section 135 of the said Act.
b. As the company has not complied with the second proviso tosub-section (5) of Section 135 of the said Act reporting under clause 3(xx)(b) of theOrder is does not arise.
Page of "Annexure B" to the Independent Auditor's Report
(Referred to in paragraph 2(f) under the heading 'Report on Other Legal& Regulatory Requirements' of our report of even date to the standalone financialstatements of the company for the year ended 31st March 2022)
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of M/s. Cerebra Integrated Technologies Limited ("the Company") as of31st March 2022 in conjunction with our audit of the standalone financial statements ofthe Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting ("the Guidance Note") issued by the Institute of CharteredAccountants of India. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness.
Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our 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 aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of standalone financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the standalonefinancial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
According to information explanation provided to us and based on auditprocedures conducted by us the following material weakness has been identified as atMarch 31 2022
The Company's internal financial control over placing purchase orderpayment to vendor processing of sales order customer acceptance credit evaluation isinadequate and not commensurate with the size of operation and nature of activity.
The Company's internal financial control over selection of vendorspayment to vendor in case of capital expenses is inadequate and not commensurate with thesize of operation and nature of activity.
The Company's internal financial control over payment of advances forsupplies services and capital assets were not operating effectively which couldpotentially result in impact on recognition of expenses.
The Company's internal financial control over recovery of tradereceivables were not operating effectively which could potentially result in creditlosses.
A 'material weakness' is a deficiency or a combination ofdeficiencies in internal financial control over financial reporting such that there is areasonable possibility that a material misstatement of the company's annual or interimStandalone Ind AS financial statements will not be prevented or detected on a timelybasis.
In our opinion except for the possible effects of the materialweakness described above on the achievement of the objectives of the control criteria theCompany has an adequate internal financial controls system over financial reporting andsuch internal financial controls over financial reporting were operating effectively as at31st March 2022 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 Reportingissued by the Institute of Chartered Accountants of India.
We have considered the material weakness identified and reported abovein determining the nature timing and extent of audit tests applied in our audit of theMarch 31 2022 Standalone financial statements of the Company and the material weaknessdo not affect our opinion on the Standalone financial statements of the Company.
| ||For YCRJ & Associates |
| ||Chartered Accountants |
| ||FRN: 006927S |
|Place: Bangalore ||Yashavanth Khanderi |
|Date:30.05.2022 ||Partner |
| ||M.No: 029066 |
| ||UDIN:22029066AJXZOR5117 |