TO THE MEMBERS OF
IRCON INTERNATIONAL LIMITED
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the standalone Ind AS financial statements of IRCON INTERNATIONALLIMITED (the company") which comprise the Balance Sheet as at 31 March 2020the statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information in whichare incorporated the Returns for the year ended on that date audited by branch auditors ofthe Company's branches at Northern Region J&K region Eastern Region Patna RegionMumbai Region Algeria Bangladesh & Sri Lanka Region.
We have audited the financial statements of the 2 (two) foreign branches situated atSouth Africa and Malaysia for the year ended 31 March 2020. However we have not visitedany foreign branch and the relevant information for the audit purpose were provided to usby the management at corporate office level.
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 ("the Act") in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2020 the profit andtotal comprehensive income changes in equity and its cash flows for the year ended onthat date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) specified under section 143(10) of the Companies Act2013. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the financial statements under theprovisions of the Companies Act 2013 and the Rules made thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the ICAI'sCode of Ethics. We believe that the audit evidence obtained by us and other auditors interms of their reports referred to it "Other Matter" paragraph below issufficient and appropriate to provide a basis for our audit opinion on the Standalonefinancial Statements.
Emphasis of Matter
We invite attention to Note No. 46 of the Standalone Financial Statements whichdescribes the impact of Covid-19 a global pandemic on the operations and financialmatters of the company.
Our opinion is not modified in respect of the above matter.
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 of the currentperiod. These matters were addressed in the context of our audit of the Standalone Ind ASFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||How our audit addressed the matter |
|a) Lease Recognition in terms of Ind AS 116 "Leases" || |
|The Company has adopted Ind AS 116 "Leases" in the current year replaces Ind AS 17 "Leases". The application and transition to this accounting standard is complex and is an area of focus in our audit since the Company has a major amount of lease agreement with different contractual terms. Ind AS 116 introduces a new lease accounting model wherein lessees are required to recognize a right-of- use (ROU) asset and a lease liability arising from a lease on the balance sheet. The lease liabilities are initially measured by discounting future lease payments during the lease term as per the contract/ arrangement. Adoption of the standard involves significant judgements and estimates including determination of the discount rates and the lease term. Additionally the standard mandates detailed disclosures in respect of transition. ||Our audit procedures on adoption of Ind AS 116 include: |
|For details refer Note 42 to the Standalone Ind AS Financial Statements. || Assessed and tested new processes and controls in respect of the lease accounting standard (Ind AS 116). |
| || Assessed the Company's evaluation on the identification of leases based on the contractual agreements and our knowledge of the business. |
| || Involved our specialists to evaluate the reasonableness of the discount rates applied in determining the lease liabilities. |
| || Upon transition as at 1 April 2019: Evaluated the method of transition and related adjustments. |
| || Tested completeness of the lease data by reconciling the Company's operating lease commitments to data used in computing ROU asset and the lease liabilities. |
| || On a statistical sample we performed the following procedures: |
| || assessed the key terms and conditions of each lease with the underlying lease contracts; and |
| || evaluated computation of lease liabilities and challenged the key estimates such as discount rates and the lease term. |
| || Assessed and tested the accounting policy presentation and disclosures relating to Ind AS 116 including disclosures relating to transition. |
|b) System Environment and internal Controls || |
|The Company is having SAP system in place but for the foreign projects they are using the Tally system for preparing the financial statement of the foreign projects. ||Our procedures included but were not limited to: |
|FI-CO module is working since 2012-13 with its limited functionalities with no integration support from any other system like payroll inventory etc. || Discussing with management and IT department on the IT environment and consideration of the key financial processes to understand where IT systems were integral to the financial reporting process. |
|Further the SAP project system module (PS) is required to generate the projects invoices with integration support. || Testing the design of the key IT controls relating to financial reporting systems of the company. |
|The IT system in the company are not fully automated and manual interventions are in place in preparing and reporting of financial statements. || We also tested the company's controls around system interfaces and the transfer of data from one system to another. |
| || We applied substantive audit procedures to ensure that areas where there are manual controls are operating effectively. |
Information Other than the Standalone Ind AS Financial Statements and Auditor's Reportthereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the Standalone Ind As financial statements and ourauditor's report thereon.
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 Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone IndAS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance changes in equity and cash flows of the companyin accordance 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 from time to time.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
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 for the Audit of the Standalone Ind AS 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 judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. -The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Ind AS financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating
the results of our work; and (ii) to evaluate the effect of any . identifiedmisstatements in the financial statements.
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 of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
The opinion expressed in the present report is based on the information facts andinputs made available to us through electronic means by the company. We wish to highlightthat due to the COVID 19 induced restrictions on physical movement and strict timelinesthe audit teams could not visit the project offices of the company for undertaking therequired audit procedures as prescribed under ICAI issued Standards on Auditing.
We did not audit the financial statements / financial information of 8 (Eight) branchesincluded in the standalone Ind AS financial statement of the company whose financialstatements/financial information reflect Total Assets of Rs. 6386.80 Crores (PreviousYear Rs. 6410.91 Crores) as at 31 March 2020 Total Revenues of ` 5211.55 Crores(Previous Year Rs. 4226.56 Crores) and Total PBT of Rs. 374.29 Crores (Previous Year Rs.336.64 Crores) for the year ended on that date as considered in the standalone Ind ASfinancial statements. The financial statements/ information of these branches have beenaudited by the branch auditors whose reports have been furnished to us and our opinion inso far as it relates to the amounts and disclosure included in respect of these branchesis based solely on the reports of such branch auditors.
The financial statements include Rs. 0.18 Crores (Previous Year Rs. 3.13 Crores) profit(net) the company's share in three integrated joint operations (unincorporated) accountswhich have been certified by other firms of chartered Accountants.
Our opinion is not modified in respect of these matters.
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 Companies Act 2013 we give in the Annexure A a statement on the matters specifiedin paragraphs 3 and 4 of the Order to the extent applicable.
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 and proper returnsadequate for the purpose of our Audit has been received from branches not visited by us.
(c) The reports on the accounts of branch offices of the Company audited under section143(8) of the Act by branch auditors have been sent to us and have been properly dealtwith by us in preparing this report.
(d) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) and the Cash Flow Statement and the Statement of Change in Equity dealt with bythis Report are in agreement with the books of account.
(e) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.
(f) Being a government company provision of section 164(2) of the Act are notapplicable pursuant to the notification No. G.S.R.463(E) dated 5 June 2015 issued by theCentral Government of India.
(g) With respect to the adequacy of the internal financial controls over financialreporting of the company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
(h) Being a government company provision of section 197 of the Act are not applicablevide notification no. GSR 463 (E) dated 5th June 2015 issued by the Central Government ofIndia.
(i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The company has disclosed the impact of pending litigations on its financialposition in its financial statements refer Note 39 to the standalone Ind AS financialstatements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts -Refer NoteNo.19.2 to the standalone Ind AS financial statements. The Company did not have anyderivative contracts for which 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.
3. As required by Section 143(5) of the Act and as per directions issued by Comptrollerand Auditor General of India we report that:
|Directions ||Auditor's Replies |
|(i) Whether the company has system in place to process all the accounting transactions through IT system? If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated. ||The Company has SAP / Tally system to process all the accounting transactions. For details refer Key Audit Matter on "System environment and internal controls" and our opinion on Internal Financial Control as per Annexure B of Independent Audit Report. |
|(ii) Whether there is any restructuring of an existing loan or cases of waiver /write off of debts /loans/interest etc. made by a lender to the company due to the company's inability to repay the loan? Ifyes the financial impact may be stated. ||No Company is having no case of any restructuring of an existing loan or cases of waiver/ write off of debts/ loans /interest etc. made by a lender to the company due to the company's inability to repay the loan |
|(iii) Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. ||According to the information and explanations given to us and as per our examination of records no funds have been received/receivable for any specific schemes from central/ state agencies during the financial year 2019-20. |
"Annexure A" to the Independent Auditors' Report of even date on theStandalone Ind AS Financial Statements of Company for the year ended 31 March 2020
i. a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. In Mumbai Region asset register needsto be updated with regards to situation of fixed assets tagging/numbering to be done onfixed assets and assets with third parties needs to be confirmed.
b) The fixed assets were physically verified by the management during the year. Thereis a regular program of verification which in our opinion is reasonable having regard tothe size of the Company and nature of its business. No material discrepancies were noticedon such verifications.
c) The title deeds of immovable properties are held in the name of the Company exceptlease hold building at San Martin Marg New Delhi Pali Hill Mumbai and Metro RailwayCentral Station Building Kolkata. Documents for the same are yet to be executed.
ii. The inventory has been physically verified by the management at reasonableintervals during the year. In our opinion the frequency of verification is reasonable.The discrepancies noticed on comparison of physical verification with book records werenot material and have been properly dealt with in the books of account. Physicalverification is not carried out on 31.03.2020 however the same have been carried outafter 31.03.2020 but before the finalization of books of account.
iii. According to the information and explanation given to us by the management andrecords produced the Company has not granted any loans secured or unsecured tocompanies firms limited liability partnerships or other parties covered in the registermaintained under section 189 of the Companies Act 2013.Therefore paragraph 3(iii) of theOrder is not applicable to the Company.
iv. In our opinion and according to the information and explanations given to us inrespect of loans investments guarantees and security; the provisions of section 185 and186 of the Companies Act 2013 have been complied with.
v. According to the information and explanations given to us and as per ourexamination of records the Company has not accepted any deposits from public andtherefore the directives issued by the Reserve Bank of India and the provisions ofSection 73 to 76 or any other relevant provision of the Companies Act 2013 and rulesframed there under are not applicable.
vi. The Company has maintained cost records as required under section 148(1) of theCompanies Act 2013. However we are neither required to carry out nor have carried outany detailed examination of such accounts and records.
vii. a. The Company is generally regular in depositing undisputed statutory duesincluding provident fund income tax goods and service tax sales tax duty of customsduty of excise value added tax cess and any other statutory dues applicable with theappropriate authorities. Employees' State Insurance is not applicable to the Company.According to the information and explanation given to us there are no undisputedstatutory dues which were outstanding as on 31.03.2020 for a period of more than sixmonths from the date the same become payable except balances outstanding under Sales Taxpayable of Rs. 8.43 Crores VAT Payable of Rs. 4.13 Crores and GST Payable of Rs. 0.45Crores as reported by Northern Region and TDS demand under Income Tax Act 1961 raised onTRACES portal of Rs.0.06 Crores as reported by Mumbai Region of the company.
b. According to information and explanation given to us and as per our examination ofrecords of the Company following are the particulars of dues on account of sales taxGST service tax entry tax trade tax income tax duty of customs royalty providentfund duty of excise and cess matters that have not been deposited on account of disputeas on 31.3.2020.
|Name of the statue ||Name of Disputed Dues ||Amount Outstanding (Rs. in Crores)* ||Period (A.Y.) ||Forum where dispute is pending |
|1 Sales Tax ||Sales Tax-AGRP ||2.25 ||2007-08 to 2012-13 ||The Additional Commissioner Commercial Taxes Ghaziabad |
|2 Sales Tax ||Entry Tax- AGRP ||0.043 ||2008-09 to 2013-14 ||The Additional Commissioner Commercial Taxes Ghaziabad |
|3 Sales Tax ||UP Trade Tax- Noida Expressway ||0.33 ||2003-04 ||The Additional Commissioner Appeal Noida |
|4 Sales Tax ||UP TRADE TAX - UP 01 ||3.89 ||2004-05 to 2007-08 ||The Assessing Authority |
|5 Sales Tax ||UPTT-UP-01 (Entry Tax) ||0.16 ||2007-08 ||The Assessing Authority |
|6 Sales Tax ||UPVAT ACT-UP-01 ||3.41 ||2007-08 & 2008-09 ||The Appellate Authority |
|7 Sales Tax ||UPVAT ACT-UP-01 (Entry Tax) ||0.15 ||2007-08 to 2009-10 ||The Appellate Authority |
|8 Sales Tax ||UPVAT ACT-UP-01 ||0.01 ||2010-11 ||The Deputy Commissioner |
|9 Sales Tax ||Sales Tax-BE-08 ||0.26 ||2007-08 to 2009-10 ||The Additional Commissioner Appeal Noida |
|10 Sales Tax ||Sales Tax-BE-08 Entry Tax ||0.003 ||2014-15 ||The Additional Commissioner Appeal Noida |
|11 Sales Tax ||UPTT-UP-05 ||1.31 ||2006-07 to 2007-08 ||Tribunal Jhansi Bench |
|12 Sales Tax ||UPTT-UP-05 ||0.01 ||2005-06 ||High Court Allahabad |
|13 Sales Tax ||UPVAT-UP-05 ||3.27 ||2007-08 to 2009-10 ||Tribunal Jhansi Bench |
|14 Sales Tax ||UPVAT-UP-05 ||1.55 ||2013-14 ||Dy. Commissioner Sales Tax Authority Orai |
|15 Sales Tax ||Sales Tax 2005-06 Godhra ||1.90 ||2005-06 ||Dy. Commissioner Sales Tax Authority Vadodara |
|16 Sales Tax ||Sales Tax 2010-11 GED ||0.05 ||2010-11 ||Asst Commercial Tax Officer Margoa |
|17 Uttar Pradesh VAT Act2008 ||Demand raised for sales tax ||0.08 ||1982-83 and 1989-90 ||Appellate Authority Jhansi |
|18 Sales Tax Rewari - Ajmer Project ||Works Contract Tax ||1.84 ||2006-07 to 2010-11 ||High Court Rajasthan |
|19 Sales Tax ||Sales Tax GED GOA ||0.50 ||2011-12 to 2014-15 ||Asst Commercial Tax Officer Margoa |
|20 VAT ||Demand Raised ||4.71 ||2011-12 to 2015-16 ||Deputy Commissioner Lucknow |
|21 Sales Tax ||Demand Raised ||1.19 ||2006-07 ||VAT Tribunal Chandigarh |
|22 Jammu & Kashmir GST Act 1962 ||Sales Tax ||19.33 ||1999-00 to 2005-06 ||J&K High Court Jammu and Deputy Commissioner Commercial Sales Taxes (appeals) Srinagar |
|23 Income Tax ||Assessment Demand by DCT ||8.04 ||AY 2016-17 ||Appeal filed before CIT(A) |
|24 Sales Tax -MRO ||Sales Tax - MRO ||3.51 ||1995-96 & 1996-97 ||Bombay High Court |
|25 Karnataka VAT ||Difference in rate of tax and levy of interest thereon ||0.50 ||2009-10 ||Deputy` Commissioner (appeals) Trivandrum |
|26 Sales Tax- MRO ||Sales Tax - MRO ||3.97 ||2010-11 & 2011-12 ||Sales Tax Office Mumbai |
|27 Kerala VAT ||Kerala VAT ||1.17 ||2013-14 & 2014-15 ||Asst. Commissioner Commercial Tax |
|28 Sales Tax ||Sales Tax Maharashtra ||42.53 ||2007-08 ||Sales Tax Office Mumbai |
|29 Bihar Sales Tax 1981 ||Sales Tax ||1.75 ||1987-88 and 1994-95 ||Bihar Sales Tax Tribunal Khalgaon |
|30 Odisha VAT Act 2004 ||VAT ||1.09 ||2002-03 ||Comm of Sales Tax Odisha |
|31 West Bengal State Sales Tax Act 1994 ||Sales Tax ||0.26 ||1998-99 ||Sr. Jt Commissioner (Appeals) Sales Tax West Bengal |
|32 West Bengal VAT Act 2003 ||VAT ||1.80 ||2004-05 2016-17 & 2017-18 ||Asst. Comm. Of Sales Tax College St. Charge Kolkata |
|33 Service Tax ||Service Tax on Agency Fees ||12.91 ||2010-11 to 2014-15 ||CESTAT |
|34 Service Tax ||Service Tax on Agency Fees ||5.60 ||2009-10 to 2013-14 ||CESTAT |
|35 Service Tax ||Service Tax on Agency Fees ||2.05 ||2016-17 to 2017-18 ||CESTAT |
|36 Bihar VAT Act ||VAT TDS ||5.98 ||2005-06 and 2006-07 ||Bihar VAT Department We Circle Patna |
|37 Bihar VAT Act ||VAT ||0.07 ||2010-11 ||Bihar VAT Department West Circle Patna |
|38 Bihar VAT Act ||VAT ||29.20 ||2012-13 ||Bihar VAT Department West Circle Patna |
|39 Central Excise Act 1944 ||Levy of Excise Duty on Bracket/ Cantilever Assemblies ||0.66 ||1998-99 ||CESTAT (Dept. Appeal) |
|40 UP VAT Act ||Demand for Sales Tax ||0.61 ||2010-11 ||Addl. Commissioner Grade- 2 (Appeal) has remanded the matter on 01.03.19 for re assessment of the above case to DC/Sale Tax/RBL |
|41 UP VAT Act ||Demand for Sales Tax ||8.96 ||2011-12 ||Addl. Commissioner Grade- 2 (Appeal) has remanded the matter on 28.03.20 for re assessment of the above case to DC/Sale Tax/RBL |
|42 UP VAT Act ||Demand for Sales Tax ||117.63 ||2012-13 to 2016-17 ||Addl. Commissioner Grade- 2 (Appeal) Lucknow |
*As complied by the management and relied upon by
viii. The Company has not defaulted in the repayment of loans or borrowings to anyfinancial institution banks Government during the year. The company did not issue anydebenture during the year.
ix. According to the information and explanations given to us the company has notraised moneys by way of initial public offer or further public offer (including debtinstruments). Further as informed to us term Loans were applied for the purposes forwhich those were raised. However no fresh term loan has been raised during the year.Accordingly the provisions of paragraph 3 (ix) of the Order are not applicable to theCompany.
x. According to the information and explanations given to us no fraud by the Companyor any fraud on the Company by its officers or employees has been noticed or reportedduring the course of our audit.
xi. In view of the Government Notification No. GSR 463 (E) dated 5th June 2015government companies are exempt from the applicability of section 197 of the CompaniesAct2013. Accordingly clause 3(xi) of the order is not applicable to the Company.
xii. The Company is not a Nidhi Company as specified in the Nidhi Rules 2014.Thus therequirements under para 3(xii) of the Companies (Auditor's Report) Order 2016 are notapplicable to the Company.
xiii. According to the information and explanations given to us all transactions withrelated parties are in compliance with section 177 and 188 of the Companies Act 2013where applicable and the details have been disclosed in the financial statements asrequired by the applicable accounting standards. However in respect to the leaseagreement entered in previous year with IRSDC Ltd. for which post facto approval has beentaken by the Board during the year.
xiv. According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review.
xv. According to the information and explanations given to us the Company has notentered into non-cash transactions with the directors or persons connected with himwithin the provisions of section 192 of the Companies Act 2013.
xvi. The Company is not a Non-banking finance company hence registration under section45- IA of the Reserve Bank of India Act 1934 does not arise.
"Annexure B" to the Independent Auditors' Report of even date on theStandalone Ind AS Financial Statements of Ircon International Limited for the year ended31 March 2020
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 IrconInternational Limited "the Company" as of March 31 2020 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat date.
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)". Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required 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 prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both issued by the Institute of Chartered Accountants of India. 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 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 judgment 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 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 authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized 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 to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 "based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India". However internal control needs further strengthening inrespect of the following areas identified as on 31.03.2020 based on our audit and reportedby the branch auditors
(a) The Company has an integrated ERP system which was not used at its full potential.Salary is processed from SQL server rather than SAP. In the foreign projects the companyhas not used ERP system for the preparation of financial accounts instead software"Tally" was used for the same. Further the SAP project system module (PS) isrequired to generate the projects invoices with integration support.
(b) The Inventory records at some units is maintained manually and the inventory manualin SAP is under consideration. Further continuous identification system ofsurplus/obsolete/non-moving/ broken assets and material/stores needs to be strengthened.
(c) System of reconciliation of GST ITC in form GSTR 2A with books of account needs tobe strengthened in some of the projects. So as to ensure that all amount paid by thecompany to their respective suppliers/service providers is being duly deposited in Govt.account by them.
Our opinion is not modified in respect of the above matters.
Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operatingeffectiveness of the internal financial controls over financial reporting insofar as itrelates to a branches/ Region is based on the corresponding report of other auditors.
We have considered the identified areas and reported above in determining the naturetiming and extent of audit procedures applied in our audit of the standalone financialstatement of the company for the year ended 31st March 2020 and these areas do not affectour opinion on the Standalone financial statement of the company.
| ||For K. G. Somani & Co. |
| ||Chartered Accountants |
| ||Firm Registration No: 06591N |
| ||Sd/- |
| ||(Bhuvnesh Maheshwari) |
| ||Partner |
|Place: New Delhi ||Membership No: 088155 |
|Date: 10 July 2020 ||UDIN: 20088155AAAAFB2819 |