To the Members of
Intellect Design Arena Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone financial statements of Intellect DesignArena Limited ("the Company") which comprise the Balance sheet as at March 312021 the Statement of Profit and Loss including the statement of Other ComprehensiveIncome the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and notes to the standalone financial statements including a summary ofsignificant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2021its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Emphasis of Matter
We draw attention to Note 44 of the Standalone Financial Statements which describes thecontinuing impact of Covid-19 pandemic and its possible consequential implications on theCompany's operations and financial metrics. Our opinion is not modified in respect of thismatter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2021. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters.
Accordingly our audit included the performance of procedures designed to respond toour assessment of the risks of material misstatement of the standalone Ind AS financialstatements. The results of our audit procedures including the procedures performed toaddress the matters below provide the basis for our audit opinion on the accompanyingstandalone Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Accounting for revenue from Licenses and Services contracts ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: |
|We focused on revenue from license and services contract because of its significance and its risks related to judgements involved in the measurement timing and presentation/disclosure of revenue from operations. || |
|The Company enters into contracts with its customers that may include multiple performance obligations. For these contracts the Company assesses the performance obligations and accounts for those obligations separately if they are distinct. ||a) We read the Company's revenue recognition policy and related disclosures. We performed walkthroughs of each significant class of revenue transactions and assessed and tested the design effectiveness and operating effectiveness for key controls. |
|The identification and the allocation of the transaction price to the different performance obligations and the appropriateness of the basis used to measure revenue recognised at a point in time or over a period require management to use significant judgement and estimates. ||b) For revenue from license contracts where control is transferred at a point in time we tested license revenue deals in excess of a certain threshold and a random sample of smaller contracts. For each of the sample selected we performed the following: |
|Refer Notes 3(j) to the Standalone financial Statements || Read the customer contract and obtained evidence of license software delivery. |
| || Read the contracts and assessed potential impact of any unusual clause on revenue recognition. Tested the fair value allocations between the various elements of the contract in accordance with Company's revenue recognition policy. |
| || We performed cut off procedures by reference to the contract and evidence of delivery. |
| ||c) For licenses and services where control is transferred over a period of time we tested a sample of transactions to test revenue recognised in the year was calculated based on the stage of completion of the contract. |
| || We selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations possible delays in achieving milestones and verified whether those variations have been considered in estimating the remaining efforts to complete the contract. When needed we also inquired with service project managers to understand the progress difficulties associated with implementation if any and likely impact on the future effort estimates. |
| ||We performed other substantive transactional testing journal entry testing and analytical procedures to validate the recognition of revenue throughout the year. |
|Capitalization and valuation of Intangible Asset and Intangible asset under development ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: |
|Intangible Asset and Intangible asset under development are deemed significant to our audit as specific criteria that need to be met for capitalization. This involves management judgment such as technical feasibility intention and ability to complete the intangible asset ability to use or sell the asset generation of future economic benefits and the ability to measure the costs reliably. ||a) Read the Company's accounting policies for compliance with IND AS and on a sample basis tested available documentation to consider whether the criteria for capitalization were met. |
|In addition determining whether there is any indication of impairment of the carrying value of assets requires management judgment and assumptions which are affected by future market or economic developments including uncertainty arising from the possible impact from COVID 19. ||b) We performed walkthroughs of Intangible assets / Intangible assets under development process and assessed the design effectiveness and operating effectiveness for key controls. |
|Refer Notes 3(g) to the Standalone financial Statements ||c) Performed tests of details on a sample of capitalized costs in the current year and obtained evidence to verify whether the costs qualify for capitalization. We analyzed this evidence and evaluated whether it reflects the use of the asset for the Company and the Company's intention to complete the capitalized projects. |
| ||d) We evaluated the assumptions and methodology used by the Company to test the Intangible asset and Intangible asset under development for impairment. |
| ||e) We tested the amortization charge and estimate of useful life of Intangible asset. |
| ||f) We assessed the disclosures made by the Company in this connection in the accompanying financial statements. |
|Recoverability of accounts receivables and revenue accured and not billed ||Our audit approach was a combination of test of Internal controls and Substantive procedures which included the following: |
|We focused on this risk as the balances are material and there are significant judgments involved in assessing recoverability of accounts receivables and accrued revenue balances. There are many factors that need to be considered when concluding that a balance needs to be impaired including default or delinquency in payments length of the outstanding balances implementation difficulties and possible effect on collections consequent to COVID -19. ||a) We obtained management's analysis on recoverability of accounts receivables and accrued revenue balances for all significant cases. This analysis includes background information of the customer existing contractual relationships balance outstanding delays in collection and operational reasons and summaries of discussions with customers and collection plans together with a detailed legal analysis where applicable. |
|Given the complexity the size and the length of certain implementation projects there is risk that a provision is not recognized in a timely or sufficient manner. ||b) We Tested the ageing of accounts receivables accrued revenue balances and circularized confirmations on selected material customer balances and checked subsequent collections from recoverability perspective. We have performed test of alternate nature in cases where confirmation has not been responded to by the customer. |
|Refer to note 3(u) of the Standalone financial statements. ||c) In addition we evaluated the recoverability of accounts receivable and accrued revenue selected balances (significant and randomly selected) through discussions with project managers and with senior management when necessary. |
| ||d) We assessed the disclosures made by the Company in this connection in the accompanying financial statements. |
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 Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether such other informationis materially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS Financial 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 Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the 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 standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls 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 standalonefinancial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves 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 standalone Ind AS financialstatements for the financial year ended March 31 2021 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls with reference tothese standalone Ind AS financial statements and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2021 hasbeen paid/ provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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 its standalone Ind AS financial statements - Refer Note 33 to the standaloneInd AS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For S.R. BATLIBOI & ASSOCIATES LLP
ICAI Firm Registration Number: 101049W/E300004
per Bharath N S
Membership No. 210934
Place of Signature : Chennai
Date: May 10 2021
Annexure 1 referred to in paragraph 1 of the section "Report on other legal andregulatory requirements" of our report of even date
Re: Intellect Design Arena Limited ("Company")
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property plant and equipment.
(b) All Property plant and equipment have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the Company.
(ii) The Company's business does not involve maintenance inventories and accordinglythe requirements under paragraph 3(ii) of the Order are not applicable to the Company.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under Section 148(1) of the Companies Act 2013for the products/services of the Company.
(vii)(a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-tax goods andservice tax cess and other statutory dues applicable to it. The provisions relating tocustoms duty and excise duty are not applicable to the Company.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax goods andservice tax cess and other statutory dues were outstanding at the year end for a periodof more than six months from the date they became payable.
(c) According to the records of the Company the dues of income-tax service tax andcess on account of any dispute are as follows:
|Name of the statute ||Dues ||(Rs. in millions) ||Relates ||Forum where the dispute is pending |
|Income Tax Act 1961 ||Income Tax ||45.27 ||AY 2002-03 ||Commissioner Appeal |
| || || ||AY 2003-04 || |
| || || ||AY 2006-07 || |
|Income Tax Act 1961 ||Income Tax ||27.15 ||AY 2006-07 ||High Court |
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings to bank. TheCompany did not have any dues in respect of loans and borrowings payable to financialinstitution government and debenture holders during the year.
(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer/further public offer / debtinstruments. The Company utilised monies raised by way of term loans for the purpose forwhich they were raised.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no fraud on the Companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a Nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
For S.R. BATLIBOI & ASSOCIATES LLP
ICAI Firm Registration Number: 101049W/E300004
per Bharath N S
Membership No. 210934
Place of Signature : Chennai
Date : May 10 2021
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF INTELLECT DESIGN ARENA LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of IntellectDesign Arena Limited ("the Company") as of March 31 2021 in conjunction withour audit of the standalone financial statements of the Company for the year ended on 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the 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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing as specified under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls and both issued by the Institute of Chartered Accountants of India.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
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 internal financial controls system overfinancial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2021 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For S.R. BATLIBOI & ASSOCIATES LLP
ICAI Firm Registration Number: 101049W/E300004
per Bharath N S
Membership No. 210934
Place of Signature : Chennai
Date : May 10 2021.