TO THE MEMBERS OF CEREBRA INTEGRATED TECHNOLOGIES LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Cerebra IntegratedTechnologies Limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theCash Flow Statement and the Statement of Changes in Equity forthe year then ended and asummary of the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except forthe effects of the matter described in the Basis for QualifiedOpinion section of our report the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 (the 'Act') in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including IndianAccounting Standards ('Ind AS') specified under Section 133 ofthe Act of the state of affairs (financial position) of the Company as at 31 March 2019and its profit (financial performance including other comprehensive income) its cashflows and the changes in equity for the year ended on that date.
Basis of Qualified Opinion
The Company has not maintained proper inventory records in its e-waste division. Wehave been informed that valuation of inventories of the said division as on 31stMarch 2019 is made based on the physical verification carried out by the management. Valueof e-waste division inventories considered in the financial statement as at 31stMarch 2019 amounted to Rs 293.55 Lakhs. Owing to the nature of inventory and in theabsence of sufficient audit evidence we are unable to ascertain the correctness of thevaluation and ascertain its consequent impact if any on the Ind AS standalone financialstatements.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India ('ICAI') together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Act and the rules there under 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
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key Audit Matter ||How our audit addressed the key audit matter |
|Review of trade receivables : ||Our audit procedures were included and were not limited for the following: |
|Rs 17621.53 lakhs of trade receivables are outstanding for substantial period for which no provision is made in the accounts. Considering the overdue amount involved compared to the turnover of the company evaluating whether the same is doubtful in nature is a key audit matter. |
|a. Obtained confirmation of balance from the customer for Rs 16058.06 lakhs of overdue trade receivables |
|b. Verified the contract between the Company and one of its customer relating to supply of minimum quantity of e waste. |
| ||c. Reviewed the arrangement made by the Company to supply balance quantity of e waste. |
| ||d. We have reported these matters in the para "Emphasis of Matter" |
Information other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. Our opinion on the financialstatements does not cover the other information and we do not express any form ofassurance conclusion thereon. In connection with our audit of the financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information; we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
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 fairview of the state ofaffairs (financial position) profit or loss(financial performance including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Ind AS specified under Section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgements and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fairview and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities fortheAuditofthe Financial Statements
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.
As part of an audit in accordance with SAs we exercise professional judgement andmaintain Professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations orthe override of internal control.
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 Companies Act 2013 we are also responsible forexpressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such 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.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships 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
Emphasis of Matter
We draw attention to the following matters in the standalone Ind AS financialstatements:
a. Loans and advances include Rs 861.12 Lakhs (Rs. 838.86 Lakhs) paid as advance forpurchase for immovable property outstanding for substantial period.(Refer note no. 36.1 tothe standalone financial statement)
b. Export trade receivable of Rs 1563.47 lakhs (Rs.1548.78lakhs) outstanding forsubstantial period. (Refer note no. 36.3 to the standalone financial statement)
c. Trade receivables of e waste division amounting Rs 3902.69 Lakhs the realization ofwhich is dependent upon Company supplying the agreed balance quantity of e waste. We havebeen informed that the Company has already procured sufficient materials to fulfil thesupply of committed quantity of e waste. (Refer note no. 36.5 to the standalone financialstatement)
d. Trade receivables amounting to Rs.12155.37 Lakhs is outstanding for more than sixmonths.(Refer note no. 36.4to the standalone financial statement)
e. Advances of Rs. 595.25 Lakhs due from a subsidiary the net worth of which is fullyeroded.(Refer note no. 36.6 to the standalone financial statement)
f. No provision is made for the above receivables and advances as the management isconfident of recovering the same. We have relied on the representation of the Company inthis respect.
Our opinion is not modified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
As required by Section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under Section 197 read with Schedule V to the Act.
As required by the Companies (Auditor's Report) Order 2016 (the 'Order') issued by theCentral Government of India in terms of Section 143(11) of theAct we give in the AnnexureA a statement on the matters specified in paragraphs 3 and 4 of the Order.
Further to our comments in Annexure A as required by Section 143(3) of the Act wereport 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 ofouraudit;
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 standalone financial statements dealt with by this report are in agreement withthe books of account;
d. in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under Section 133 of the Act;
e. on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2019 from being appointed as a director in terms of Section164(2) of the Act;
f. we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport as per Annexure B expressed an unmodified opinion;
g. 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 (as amended)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 its financialposition in the standalone financial statements;
ii. the Company has made provision as required under the applicable law or Ind AS formaterial foreseeable losses if any on long-term contracts including derivativecontracts;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the yearended31 March2019;
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
Membership No. 021748
Date : 30th May 2019
Place : Bangalore
Annexure - A To The Independent Auditor's Report Of Even Date to The Members Of CerebraIntegrated Technologies Limited On The Standalone Financial Statements for the Year Ended31 March 2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the standalone financial statements of the Company and taking into considerationthe information and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
I. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. The fixed assets of the Company have been verified by the management during theyear. No material discrepancies were noticed on such verification and the same have beenproperly dealt with in the books of account. In our opinion the periodicity of physicalverification is reasonable having regard to the size of the Company and nature of itsbusiness
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. a. As per the information and explanation given to us Inventories have beenphysically verified during the year by the management. In our opinion the frequency ofverification is reasonable.
b. The Company has not maintained proper inventory records in its e waste division. Inrespect of other divisions we have been informed that the discrepancies between thephysical stocks and the book records noticed on physical verification were not materialand have been properly dealt with in the books of account;
iii. a. According to the information and explanations given to us and on the basis ofour examination of the records of the Company the Company
has given interest free unsecured advances to two subsidiaries covered in the registermaintained under section 189 of the Companies Act 2013 amounting to Rs.788.25/- lakhs. Weare of the opinion that these advances are prima facie prejudicial to the interest of theCompany as the same are interest free in nature.
b. We have been informed that schedule for repayment is not specified and hence we areunable to express an opinion as to whether the receipt of principal are regular.
c. As schedule for repayment is not specified we are unable to comment as to whetherthere are over dues outstanding for more than ninety days.
iv. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the advance of Rs. 788.25/- lakhs tosubsidiaries are in violation of provisions of section 185 of the Companies Act2013.According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no violations under section 186 ofthe Companies Act 2013.
v. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not accepted any deposits andhence the requirement of clause 3 (v) of Companies (Auditor's Report) Order 2016 is notapplicable to the Company during the year under review.
vi. We have been informed that maintenance of books of accounts pursuant to the rulesmade by the Central Government under sub-section (1) of Section 148 of the CompaniesAct2013 for maintenance of Cost records in respect of products of the Company are notapplicable to the Company for the year under review and hence the requirement of clause 3(vi) of Companies (Auditor's Report) Order 2016 is not applicable to the Company duringthe year under review.
vii. a. As per the books of information and explanations given to us except in case ofdues under Goods and Service Act and Income Tax Act the
Company has been generally regular in depositing with the appropriate authoritiesundisputed statutory dues including Provident Fund Employees' State Insurance Sales TaxService Tax duty of customs duty of excise value added tax cess and other materialstatutory duesapplicable.
b. There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income Tax Sales Tax Service Tax duty of customs duty of excisevalue added tax cess and other material statutory dues applicable in arrears as at March312019 for a period of more than six months from the date they became payable except asdetailed hereunder.
|Name of the Statute ||Nature of Due ||Amount in Lakhs ||Period for which it relates ||Due Date ||Date of Payment |
|Income Tax 1961 ||Income Tax ||9.00/- ||2001-02 ||Various dates ||Not Paid as on the date of this report |
|Central Excise Act 1944 ||Excise Duty ||28.09/- ||2002-03 ||Various dates ||-do- |
|Income Tax 1961 ||Advance Tax ||220.56/- ||2018-19 ||15th June 2018 ||-do- |
|Income Tax 1961 ||Advance Tax ||661.69/- ||2018-19 ||15th September 2018 ||-do- |
c. According to the information and explanation given to us there are no disputedamounts of income tax or sales tax or service tax or duty of customs or duty of excise orvalue added tax or cess which have not been deposited with the relevant authorities onaccount of any dispute
viii. The Company has not defaulted in repayment of dues to banks. The Company does nothave any loans or borrowings from any financial institution Government or Debentureholders during the year.
ix. In our opinion and according to the information and explanations given to usduring the year the Company did not raise any money by way of initial public offer orfurther public offer (including debt instruments) or term loans. Accordingly clause 3(ix) of Companies (Auditor's Report) Order 2016 is not applicable to the Company duringthe year under review.
x. According to the information and explanations given to us no material frauds by theCompany or on the Company by its officers and employees have been noticed or reportedduring the course of the audit.
xi According to the information and explanations given to us and based on ourexamination of records of the Company the Company has paid / provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V of the Act
xii. In our opinion and according to the information and explanation given to us theCompany is not a nidhi Company. Accordingly clause 3 (xii) of Companies (Auditor'sReport) Order 2016 is not applicable to the Company during the year under review.
xiii. According to the information and explanation given to us and based on ourexamination of the records of the Company transactions with related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
xiv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has made preferential allotment ofshare warrants and shares during the year. The provisions of Sec 42 of the Companies Act2013 have been complied with and the amount raised has been used for the purpose for whichthe funds were raised to the extent required during the period under review. Based on theexplanations provided to us the company has invested the unutilised funds in units ofmutual funds with the approval of the board and the same will be utilised to the purposefor which the funds are raised as and when required.
xv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not entered into any non cashtransactions with directors or persons connected with him. Accordingly clause 3 (xv) ofCompanies (Auditor's Report) Order 2016 is not applicable to the Company during the yearunder review.
xvi. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company is not required to be registeredunder section 45-IAofthe Reserve Bank of India
Registration No: 001154S
Membership No. 021748
Place : Bangalore
Date : 30th May 2019
Annexure - B To The Independent Auditor's Report Of Even Date to The Members Of CerebraIntegrated Technologies Limited On
The Standalone Financial Statements for the Year Ended 31 March 2019
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")
In conjunction with our audit of the standalone financial statements of the CerebraIntegrated Technologies Limited ("the Company") as at 31 March 2019 we haveaudited the internal financial controls over financial reporting of company as of thatdate.
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 Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilitiesinclude the design implementation and maintenance of adequate Internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the CompaniesAct 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 onAudit of Internal Financial Controls over Financial Reporting(the "Guidance Note") issued by ICAI and the Standards on Auditing prescribedunder Section 143 (10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financial controls. Those Standards and the Guidance Note require that we complywith the ethical requirements and plan and perform the audit to obtain reasonableassurance about 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 judgement 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 audit opinion on the Company's internal financial controls systemover 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 and financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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.
According to the information and explanation given to us and based on our audit thefollowing material weakness has been identified as at 31st March 2019.
The Company's internal financial control over advance payment for purchase of fixedassets customer acceptance credit evaluation and establishing customer credit limit forsales were not operating effectively which could potentially result in recognizingrevenue/ non provision for bad debts without establishing reasonable certainty of ultimatecollection.
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 possible effects of the material weaknesses describedabove on the achievement of the objectives of the control criteria the Company hasmaintained adequate and effective internal financial controls over financial reporting andsuch internal financial controls over financial reporting were operating effectively as ofMarch 312019 based on the internal control over financial reporting criteria establishedby the Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountantsof India.
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 312019standalone financial statements of the Company and the same is reported under emphasis ofmatters in our audit report of even date.
Chartered Accountants Registration No:001154S
Place : Bangalore Date : 30th May 2019