To the Members of CL Educate Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of CL EducateLimited (the Company') which comprise the Balance Sheet as at 31 March 2021 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
2. 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 (Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in Indian includingIndian Accounting Standards (Ind AS') specified under section 133 of the Act of thestate of affairs of the Company as at 31 March 2021 and its loss (including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
3. 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 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.
Emphasis of Matter
4. We draw attention to Note 59 to the standalone financial statements which describesthe uncertainties relating to COVI D-19 pandemic outbreak and management's evaluation ofits impact on the operations of the Company and accompanying standalone financialstatements as at the balance sheet date the extent of which is significantly dependent onfuture developments as they evolve.
Our opinion is not modified in respect of this matter.
Key Audit Matters
5. Key audit matters are those matters that in our professional judgment 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.
6. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue recognition (Refer Note 2(ii) and Note 37 to the accompanying standalone financial statements) || |
|We refer to the Company's significant accounting policies in note 2(ii) and the revenue related disclosures in note 37 of the standalone financial statements. ||Our audit procedures included but were not limited to the following: |
|Revenue is a key business driver for the Company and is therefore susceptible to misstatement. Revenue recognition under Ind AS 115 || |
|'Revenue from contracts with customers' find AS 115') involves significant judgement by the management in identification of separate performance obligations in contracts with multiple performance obligations determining transaction price in view of discounts offered to the customers allocation of such transaction price to the identified performance obligations and assessing satisfaction of the performance obligations to ensure the revenue is booked in correct periods. || Assessed the appropriateness of the Company's revenue recognition policy in accordance with Ind AS 115 including evaluation of management's assessment of performance obligations determined to be satisfied over time and related method of measuring progress towards complete satisfaction of such performance obligation. |
|Further for fixed price contracts the management assesses progress towards complete satisfaction of performance obligations basis the pattern in which content is delivered by the Company to the students over a period of time. || Understood evaluated and tested the design and operating effectiveness of key controls implemented by the Company in relation to revenue recognition including discounts. |
|Considering significant volume of transactions the materiality of amounts involved and significant judgements involved as above revenue recognition was identified as a key audit matter for the current year audit. || Performed test of details for samples selected from revenue transactions recorded during the year by inspecting invoices and other related supporting documents for such samples. Further evaluated whether the revenue has been recognized as per the accounting policy of the Company for such samples. |
| || Performed substantive analytical procedures which included review of price quantity and discounts variances and month-to-month ratio analysis based on customer level and company level data. |
| || Tested the calculations related to discounts and other supporting documents on a test check basis. |
| || Evaluated the adequacy and accuracy of relevant disclosures made in the standalone/ consolidated financial statements in accordance with Ind AS 115. |
|Loss allowance for Trade Receivables || |
|(Refer Note 2(x) and Note 17 to the accompanying standalone financial statements) || |
|The Company has trade receivables of Rs. 1508.62 lacs as at 31 March 2021 (net of impairment of Rs 166.95 lacs). During the year the Company has recorded a charge of Rs 1934.47 lacs towards bad debts for such trade receivables. ||Our audit procedures included the following: |
|Owing to the nature of operations of the Company and related customer profiles the Company has significant long standing trade receivable balances for which appropriate loss allowance is required to be created for expected credit losses using simplified approach in accordance with the requirements of Ind AS 109 Financial Instruments measuring the loss allowance equal to lifetime expected credit losses. || Understanding the trade receivables process with regards to valuation and testing of controls designed and implemented by the management. |
|For the purpose of expected credit loss assessment of trade receivables significant judgment is required by the management to estimate the timing and amount of realisation of these receivables basis the past history customer profiles and consideration of other internal and external sources of information including the impact of COVID 19 pandemic in aforesaid estimates. || Testing the accuracy of ageing of trade receivables at year end on sample basis. |
|Considering the significant judgement involved increased complexities due to the pandemic high estimation uncertainty and materiality of the amounts involved we have identified loss allowance on trade receivables as a key audit matter for current year audit. || Obtained a list of outstanding receivables identified significant long outstanding receivables and discussed plan of recovery with management. |
| || Circularized balance confirmations to a sample of non-student trade receivables and reviewed the reconciling items if any. |
| || Verified the appropriateness of judgments regarding provisions for trade receivables and assess as to whether these provisions were calculated in accordance with the Company's provisioning policies. |
| || Tested subsequent settlement of trade receivables after the balance sheet date on a sample basis as applicable. |
| || Verified the related disclosures made in notes to the standalone financial statements in accordance with Ind AS 115 and Ind AS 109. |
|Recoverability of investments made and loans given to certain subsidiaries || |
|As disclosed in note 9 to the accompanying standalone financial statements the Company has a carrying value of Rs. 14181.60 lacs as at 31 March 2021 in respect of its investment in four of its subsidiary companies and has outstanding long-term loans recoverable from such subsidiaries aggregating to Rs. 3923.58 lacs as on the reporting date. Considering the decline in business and stress on profitability over the years by aforementioned subsidiary companies the management has identified that indicators exist that requires the management to test the carrying value of such loans and investments for possible impairment. ||Our audit work included but was not limited to performing the following procedures: |
| || Obtained an understanding of the management's process to estimate the recoverable value of the investments made in and loans given to subsidiaries outstanding as at the reporting date |
| || Evaluated design and tested operating effectiveness of controls on identification of indicators of impairment of the carrying value of investment and loans under Ind AS 36 |
| ||'Impairment of assets' and Ind AS 109 'Financial Instruments' respectively. |
|Management's assessment of the recoverable amount of investments in and loans given to these subsidiary companies requires estimation and judgement around assumptions used in the Discounted Cash Flow valuation model adopted by the Company for the purpose. The principal driver of recoverable value is the estimated growth in the operations of the subsidiaries and ability to generate cash profits in the future. || Assessed the professional competence objectivity and capabilities of the specialist used by the management for performing required valuations to estimate the recoverable value of the investment in such subsidiary companies; |
|Other significant estimates include expected operating investing and finance costs terminal growth rates and the weighted average cost of capital (discount rate). Changes to assumptions could lead to material changes in estimated recoverable amounts resulting in impairment of the investment in subsidiary companies. || Involved auditor's experts to assess the appropriateness of the valuation model used by the management and to test reasonability of the valuation assumptions used therein relating to discount rates risk premium industry growth rates etc. including the impact of COV ID-19 on such assumptions; |
|Complexity involved in such assumptions and estimates increased in the current year due to the impact of COVID-19 pandemic outbreak on the Company's operations as disclosed in Note 59 to the accompanying financial statements. Considering the significance of the amounts involved and auditor attention required to test the appropriateness of accounting estimate that involves high estimation uncertainty and significant management judgement this matter has been determined to be a key audit matter for the current year audit. || Tested the future business projections used for performing above said valuations for the subsidiary from the business plans approved by the board of directors of the subsidiary company and ensured its consistency with our understanding of future business plans of the subsidiary companies obtained through interviews with both operating and senior management; |
| || Assessed operating and capital costs included in the cash flow forecasts for consistency with current operating costs and forecasted business plans; |
| || Performed sensitivity analysis on management's calculation of future projections such as growth rates during explicit period terminal growth rate and the discount rate used in the valuations performed; |
| || Tested the arithmetical accuracy of the valuation workings performed by the management expert; |
| || Evaluated the adequacy and accuracy of disclosures made in the standalone financial statements in respect of aforesaid matter in accordance with the requirements of the accounting standards. |
Information other than the Financial Statements and Auditor's Report thereon
7. 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 standalone financial statements and our auditor's report thereon. The Annual Report isexpected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we will 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 identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
8. The accompanying standalone financial statements have been approved by the Company'sBoard of Directors. The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including the IndAS specified under section 133 of the Act. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding 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; and 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.
9. 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.
10. Those Board of Directors is also responsible for overseeing the Company's financialreporting process Auditor's Responsibilities for the Audit of the Financial Statements
11. 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
12. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism 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 or the 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 Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness 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;
13. We 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.
14. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
15. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when 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.
16. The standalone financial statements of the Company for the year ended 31 March 2020were audited by the predecessor auditor Haribhakti & Co LLP who have expressed anunmodified opinion on those standalone financial statements vide their audit report dated29 June 2020.
Report on Other Legal and Regulatory Requirements
17. As required by section 197(16) of the Act based on our audit we report that theCompany has paid remuneration to its directors during the year in accordance with theprovisions of and limits laid down under section 197 read with Schedule V to the Act.
18. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of section 143(11) of the Act we give in theAnnexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.
19. Further to our comments in Annexure I as required by section 143(3) of the Actbased on our audit we report to the extent applicable that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit of theaccompanying standalone financial statements;
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) the matter described in paragraph 4 under the Emphasis of Matter in our opinionmay have an adverse effect on the functioning of the Company.
f) 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 March2021 from being appointed as a director in terms of section 164(2) of the Act;
g) we have also audited the internal financial controls with reference to financialstatements of the Company as on 31 March 2021 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 24 June 2021 as per Annexure II expressed unmodified opinion; and
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 (as amended) inour opinion and to the best of our information and according to the explanations given tous:
i. the Company as detailed in note 47(b) to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2021;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2021;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2021; and
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
Annexure I to the Independent Auditor's Report of even date to the members of CLEducate on the standalone financial statements for the year ended 31 March 2021
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation 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 comprising of property plant andequipment (PPE) right-of-use assets intangible assets and intangibles under development.
(b) The Company has a regular program of physical verification of its PPE andright-of-use assets under which assets are verified in a phased manner over a period ofthree years which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. I n accordance with this program certain fixed assets wereverified during the year and no material discrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the headPPE' and right-of-use assets') are held in the name of the Company.
(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.
(iii) The Company has granted interest bearing unsecured loans to Companies and aninterest free loan given to a party covered in the register maintained under Section 1 89of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest except in case of one loan wherein theCompany has granted unsecured loan to one party in the earlier years having outstandingbalance of Rs. 462.77 lacs as at 31 March 2021 is prejudicial to the Company's interestas no interest has been charged on such loan given to the party.
(b) In respect of interest bearing loans given to companies the schedule of repaymentof principal has been stipulated wherein the principal amounts are repayable on demand andsince the repayment of such loans has not been demanded in our opinion repayment of theprincipal amount is regular while in case of interest free loan given to the party theschedule of repayment of the principal has not been stipulated and hence we are unable tocomment as to whether repayments/receipts of the principal amount and the interest areregular;
(c) there is no overdue amount in respect of loans granted to such companies howeverin respect of interest free loan given to the party in the absence of stipulated scheduleof repayment of principal and payment of interest we are unable to comment as to whetherthere is any amount which is overdue for more than 90 days and whether reasonable stepshave been taken by the Company for recovery of the principal amount and interest.
(iv) In our opinion the Company has complied with the provisions of Sections 185 ofthe Act. In our opinion the Company has not complied with the provisions of Section 186of the Act. The details of the non-compliances are given below:
|S. No. Particulars ||Name of Party ||Amount involved (Rs in lacs) ||Balance as on 31 March 2021 (Rs in lacs) ||Remarks |
|1 Loan given at a rate lower than prescribed ||Career Launcher Education Foundation ||Nil ||462.77 ||Interest free loan given |
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersubsection (1) of Section 148 of the Act in respect of Company's products/services and areof the opinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax goods and services tax duty of customs duty of excise cess andother material statutory dues as applicable have generally been regularly deposited tothe appropriate authorities though there has been a slight delay in a few cases. Furtherno undisputed amounts payable in respect thereof were outstanding at the year-end for aperiod of more than six months from the date they became payable.
(b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount (Rs) in lacs ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service Tax ||166.36 ||October 2010 to September 2011 ||Commissioner of Service tax New Delhi |
|Finance Act 1994 ||Service Tax ||125.53 ||October 2011 to June 2012 ||Commissioner of Service tax New Delhi |
|Finance Act 1994 ||Service Tax ||46.54 ||September 2004 to March 2007 ||Central Excise and Service Tax Appellate Tribunal New Delhi |
|Finance Act 1994 ||Service Tax ||15.69 ||October 2007 to March 2008 ||Commissioner of Service tax New Delhi |
|Finance Act 1994 ||Service Tax ||400.97 ||April 2008 to March 2012 ||Commissioner of Service tax New Delhi |
|Income Tax Act 1961 ||Income Tax ||607.96 ||Assessment year (A.Y.) 2013-14 ||Commissioner of Income tax (Appeals) New Delhi |
|Income Tax Act 1961 ||Income Tax ||240.93 ||A.Y. 2017-18 ||Commissioner of Income tax (Appeals) New Delhi |
|Income Tax Act 1961 ||Income Tax ||49.87 ||A.Y. 2014-15 ||Income tax Appellate Tribunal New Delhi |
(viii) The Company has not defaulted in repayment of loans or borrowings to any bankduring the year. Further the Company has no loans or borrowings payable to a financialinstitution or government and no dues payable to debenture holders during the year.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained.
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid by the Company in accordance with therequisite approvals mandated by the provisions of Section 197 of the Act read withSchedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-1A of the ReserveBank of India Act 1934.
Independent Auditor's Report on the internal financial controls with reference to thestandalone financial statements under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 201 3 (the Act')
1. In conjunction with our audit of the standalone financial statements of CL EducateLimited (the Company') as at and for the year ended 31 March 2021 we have auditedthe internal financial controls with reference to financial statements of the Company asat that date.
Responsibilities of Management and Those Charged with Governance for I nternalFinancial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of I nternal Financial Controls overFinancial Reporting ('the Guidance Note') issued by the Institute of Chartered Accountantsof India (ICAIj. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto the Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Auditor's Responsibility for the Audit of the Internal Financial Controls withReference to Financial Statements
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Standards on Auditing issued by the ICAI prescribed under Section143(10) of the Act to the extent applicable to an audit of internal financial controlswith reference to financial statements and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to financial statements were established and maintainedand if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements includes obtaining an understanding of such internal financialcontrols 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.
5. 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 financial statements.
Meaning of I nternal Financial Controls with Reference to Financial Statements
6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial 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 financialstatements.
Inherent Limitations of I nternal Financial Controls with Reference to FinancialStatements
7. Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls with reference to financial statements and such controls were operatingeffectively as at 31 March 2021 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by the ICAI.