To the Members of Izmo Limited
REPORTON THE AUDITOF THE STANDALONE FINANCIAL STATEMENTS
I have audited the accompanying standalone financial statements of IzmoLimited (the Company') which comprise the balance sheet as at March 312020 the statemenTof profit and loss (including other comprehensive Income) thestatemenTof changes in Equity and the statemenTof cash flows for the year then ended anda summary of significant accounting policies and other explanatory information(hereinafter referred to as "the standalone financial statements").
In my opinion and to the besTof my information and according to the explanationsgiven to me the aforesaid standalone financial statements give the information requiredby the Companies Act 2013("the Act") in the manner so required and givea true and fair view in conformity with Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended ("Ind AS") and the other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312020 the profit and total comprehensive income changes in equity and its cashflows for the year ended on that date.
Basis for Opinion
I have conducted my audiTof the standalone financial statements in accordancewith the standards on Auditing ("SA"s) specified under section 143(10) ofthe Act. My responsibilities under those standards are further described inthe Auditor's Responsibilities for the AudiTof the standalone financial statements sectionof the my report. I am IndependenTof the Company in accordance with the code of ethics issuedby the Institute of Chartered Accountants of India (ICAI) together with theindependence requirements that are relevant to my audiTof the standalone finan-cialstatements under the provisions of the Act and the Rules made thereunder and I havefulfilled my other ethical responsibilities in accordance with these requirementsand the ICAI's code of ethics. I believe that the audit evidence I have obtained issufficient and appropriate to provide a basis for my opinion on the standalone financialstatements.
Key audit matters
Key audit matters (KAM') are those matters that in my professionaljudgment were of most significance in my audiTof the standalone financial statements ofthe current period. These matters were addressed in the contexTof my audiTof thestandalone financial statements as a whole and in forming my opinion thereon andI do not provide a separate opinion on these matters.
Description of Key Audit Matters
1(a) Adoption of Ind AS 115 Revenue from Contracts with customers
As described in Note 2(f) to the standalone financial statements the Companyhas adopted Ind AS 115 R evenue from Contracts with Customers (Ind AS 115').The application and transition to this accounting standard is complex and is anarea of focus in the audit. The revenue standard establishes a comprehensiveframework for determining whether how much and when revenue is recognized.
This involves certain key judgments relating to identification of distinctperformance obligations determination of transaction price of identified performanceobligation the appropriateness of the basis used to measure revenue recognizedover a period. Additionally the standard mandates robust disclosures inrespecTof revenue and periods over which the remaining performance obligationswill be satisfied subsequent to the balance sheet date. The Company adopted IndAS 115 and applied the available exemption provided therein to not restate thecomparative periods.
1(b) A uditor's Response
My audit procedures on adoption of Ind AS 115 R evenue from contracts withCustomers (Ind AS include
Evaluated the design and implementation of the processes and internal controlsrelating to implementation of the new revenue accounting standard.
Evaluated the detailed analysis performed by managemenTon revenue streams byselecting samples for the existing contracts with customers and consideredrevenue recognition policy in the current period in respecTof those revenuestreams.
Evaluated the changes made to IT systems to reflect the changes required inrevenue recognition as per the new accounting standard.
Evaluated the cumulative effect adjustments as at 1 April 2019 for compliance with thenew revenue standard; and
Evaluated the appropriateness of the disclosures provided under the new revenuestandard and assessed the completeness and mathematical accuracy of therelevant disclosures.
2(a) Accuracy of revenues and onerous obligations in respecTof fixed-price contractsinvolves critical estimates.
Estimated effort is a critical estimate to determine revenues and liability foronerous obligations. The estimate has a high inherent uncertainty as it requiresconsideration of progress of the contract efforts incurred till date and effortsrequired to complete the remaining contract performance obligations. R efer NotesNote 2(f) and 24 to the Financial Statements.
2(b) Auditor's Response
The Company has majority of Time and Material Contracts where the revenue isdetermined based on the Milestones defined in the contracts based on PurchaseOrder.
I have verified the Contracts with the purchase order and they are in line withthe requirements.
My audit approach was a combination of tesTof internal controls and substantiveprocedures which included the following:
Evaluated the design of internal controls relating to recording of effortsincurred and estimation of efforts required to complete the performance obligations.
T ested the access and application controls pertaining to time recording allocationand which prevents unauthorized changes to recording of efforts incurred.
Selected a sample of contracts and through inspection of evidence of performanceof these controls tested operating effectiveness of the internal controls relatingto efforts incurred and estimated.
Performed analytical procedures and tesTof details for reasonableness of incurred andestimated efforts .
3(a) Evaluation of uncertain tax positions
The Company has material uncertain tax positions including matters under disputewhich involves significant judgement to determine the possible outcome ofthese disputes Refer Notes 2(i) 43 & 46 to the standalone FinancialStatements.
3(b) A uditor's Response
Obtained details of completed tax assessments and demands for the year endedMarch 31 2020 from management.
R ead and analysed select key correspondences external legal opinions/consultations bymanage- ment for key uncertain tax positions.
Discussed with appropriate senior management and evaluated management'sunderlying key assump- tions in estimating the tax provisions; and
Assessed management's estimate of the possible outcome of the disputed cases.
4(a) Receivables outstanding for more than 6 months & Confirmation of balances
The Company is of the opinion that Receivables are good in nature and will berealized with certainty in the subsequent period. R efer Notes 11 44 & 49 tothe standalone Financial Statements.
4(b) A uditor's Response
The Company must take necessary steps to receive the money within the timelinesspecified in the contracts and keep receivables under control.
The Debtors balances are subject to confirmation and reconciliation.
Emphasis of Matter
As more fully described in Note. 43 & 46 to the Standalone Financial Statements andin Point 3 of key Audit Matters The Company is responding to inquiries from Indianregulatory authorities. The scope duration or outcome of these matters areuncertain.
My opinion is not modified in respecTof this matter.
Information Other than the Standalone Financial Statements and Auditor's Report Theron
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and my auditor'sreport thereon.
My opinion on the standalone financial statements does not cover the other informationand I do not express any form of assurance conclusion thereon.
In connection with my audiTof the standalone financial statements myresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financialstatements or my knowledge obtained in the audiTor otherwise appears to be materiallymisstated.
If based on the work I have performed I conclude that there is a materialmisstatemenTof this other information I am required to report that fact. I have nothingto report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's management and Board of Directors are responsible for the mattersstated in Section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income changes in equity andcash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards (Ind AS) specifiedunder Section 133 of the Act. This responsibility also includes main tenance of adequateaccounting 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;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal finan-cial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financialstatementsthatgiveatrueandfairviewandarefreefrommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board ofDirectors are responsible for assessing the Company's ability to continue as agoing concern disclosing as applicable matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so. Board ofDirectors is also responsible for overseeing the Company's financial reporting process.
Auditors' Responsibility for the AudiTof the Standalone Financial Statements.
My 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 my opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs 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 economicdecisions of users taken on the basis of these standalone financial statements.
As parTof an audit in accordance with SAs I exercise professional judgment andmaintain professional skepticism throughout the audit. I also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for my opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud mayinvolve collusion forgery intentional omissions misrepresentations or theoverride 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 Section143(3)
(i) of the Act I am also responsible for expressing my opinion on whether thecompany has adequate internal financial controls with reference to standalone financialstatements in place and the 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 materialuncertainty exists related to events or conditions that may cast significantdoubTon the Company's ability to continue as a going concern. If I conclude thata material uncertainty exists I am required attention in my auditor's reportto the related disclosures in the standalone financial statements or if such disclosuresare inadequate to modify my opinion. My conclusions are based on the auditevidence obtained up to the date of our auditors' report. However future eventsor conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and contenTof the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the standalone financial statementsmay be influenced. I consider quantitative materiality and qualitative factorsin (i) planning the scope of my audit work and in evaluating the results of mywork; and (ii) to evaluate the e_ecTof any identified misstatements in thestandalone financial statements.
I communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings includingany significant deficiencies in internal control that we identify during our audit.
I also provide those charged with governance with a statement that I havecomplied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably bethought to bear on my independence and where applicable related safeguards.
From the matters communicated with those charged with governance I determinethose matters that were of most significance in the audiTof the standalonefinancial statements of the current period and are therefore the key audit matters. Idescribe these matters in my auditors' report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances I determine that amatter should not be communicated in my report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
ReporTon Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) to draw
Order 2016 ("the Order") issued by the Central Government of India in termsof Section 143(11) of the Act I give in "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extentapplicable.
(A) As required by Section 143(3) of the Act I report that :
a) I have sought and obtained all the information and explanations which to thebesTof my knowledge and belief were necessary for the purposes of my audit.
b) In my opinion proper books of account as required by law have been kept bythe Company so far as it appears from my examination of those books.
c) The Balance Sheet the StatemenTof Profit and Loss including othercomprehensive income StatemenTof Changes in Equity and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
d) In my opinion the aforesaid standalone financial statements comply with theIndian Accounting S tandards prescribed under Section 133 of the Act.
e) On the basis of the written representations received from the directors ofthe company as on March 31 2020 tak en on record by the Board of Directors noneof the directors is disqualified as on March 31 2020 from being appointed as adirector in terms of Section 164 (2) of the Act.
f With) respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of suchcontrols refer to my separate report in "Annexure B". My report expresses anunmodified opinion on the adequacy and operating effectiveness of the Company'sinternal financial controls over financial reporting.
g) With respect to the other matters to be included in the A uditor's Report inaccordance with the of section 197(16) of the Act as amended :
In our opinion and to the besTof our information and according to theexplanation given to me the remuneration paid by the company to its directors duringthe year is in accordance with the provisions of Section 197 of the Act.
(B) 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 asamended in my opinion and to the besTof my information and according to theexplanations given to me. As required by Section 143(3) of the Act I report that :i) The Company has disclosed the impacTof pending litigations as at 31stMarch 2020 on its financial position in its financial statements Refer Note43 to the financial statements.
ii) The Company did not have any long-term contracts including derivativecontracts 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.
Guru Prakash V
Chartered Accountant M. No: 228938
Place: Bangalore Date: 29th June 2020
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of my report to the members of Izmo Limited of even date)
i) In respect of the Company's fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and of fixed assets.
b) The Company has a program of verification to cover all the items of its fixedassets in a phased manner which in my opinion is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the program certainfixed assets were physically verified by the Management during the year. Accordingto the information and explanations given to me no material discrepancies werenoticed on such verification.
c) According to the information and explanations given to me the recordsexamined by me and based on the examination of the conveyance deeds provided to meI report that the title deeds comprising all the immovable properties of landand buildings which are freehold are held in the name of the Company as at theSheet date.
ii) In my opinion and according to the information and explanations given to methe inventories have been verified by the management at reasonable intervals in relationto size of the Company and nature of business and no material discrepancies werenoticed on physical verification.
iii) According to the information and explanations given to me the Company hasgranted unsecured loans to body corporate covered in the register maintained undersection 189 of the Companies Act 2013 (the Act') in respect of which:
a). The terms and conditions of the granTof such loan are not prejudicial to theCompany's interest. b). The schedule of repaymenTof principal and payment ofInterest had been stipulated and repayments and receipts are regular.
c). No payments were overdue.
iv) In my opinion and according to the information and explanations given to methe Company has complied with the provisions of section 185 and 186 of the Act inrespect of granTof loans making investments and providing guarantees andsecurities as applicable.
v) The Company has not accepted deposits during the year and does not have anyunclaimed deposits as at March 31 2020 and therefore the provisions of the clause 3 (v)of the Order are not applicable to the Company.
vi) The maintenance of cost records has not been specified by the CentralGovernment under section 148(1) of the situation Companies Act 2013 for thebusiness activities carried out by the Company. Thus reporting under Clause 3(vi)of the order is not applicable to the Company.
vii) According to the information and explanations given to me in respecTofstatutory dues:
a) The company has generally been regular in depositing undisputed statutorydues including Provident Fund Employees' State Insurance Income Tax Sales TaxService Tax Goods and Service Tax Duty of Customs Value Added Tax Cess andother material dues applicable to it with the appropriate authorities.
b) There were no undisputed amounts payable in respect of Provident FundEmployees' State Insurance T ax Sales Tax Service Tax Goods and Service of CustomsValue Added Tax Cess and other material statutory dues in arrears as at March 312020 for a Balance period of more than six months from the date they becamepayable.
c) According to the information and explanations given to me there are nomaterial dues of duty of have not been deposited with the appropriate authoritieson accounTof any dispute. However according to information and explanations givento me the following dues of income tax and Karnataka Value Added Tax havenot been deposited by the Company on accounTof disputes:
|Name of the statute ||Nature of dues ||Amount (Rs) ||Amount Paid Under Protest (Rs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income-tax Act 1961 ||Transfer pricing ||Nil ||Nil ||FY 2004-05 (AY 2005-06) ||Assessing officer to give effect to the ITATorder |
|Income Tax Act 1961 ||Transfer Pricing ||12740080 ||NIL ||FY 2008-09 (AY 2009-10) ||Rectification filed with the Assessing officer; Appeal filed with the High Court |
|Income Tax Act 1961 ||Transfer Pricing ||36750932 ||7000000 ||FY 2009-10 (AY 2010-11) ||Assessing Officer to give effect to the ITATorder; The Company is in process of filing appeal before the High Court Assessing Officer to give effect to the |
|Income Tax Act 1961 ||Transfer Pricing ||30910300 ||NIL ||FY 2010-11 (AY 2011-12) ||ITATorder; The Company is in the process of filing appeal before the HC |
|Income Tax Act 1961 ||Income Tax and Transfer Pricing ||22885010 ||NIL ||FY 2011-12 (AY 2012-13) ||CIT Appeals |
|Income Tax Act 1961 ||Income Tax ||8423520 ||NIL ||FY 2012-13 (AY 2013-14) ||Assessing Officer to give effect to CIT (Appeals) order |
|Income Tax Act 1961 ||Income Tax and Transfer Pricing ||51033800 ||10206761 ||FY 2013-14 (AY 2014-15) ||CIT Appeals |
|Income Tax Act 1961 ||Income Tax ||14704667 ||NIL ||FY 2016-17 (AY 2017-18) ||CIT Appeals |
|Karnataka Value Added Tax act2003 ||CST ||389511 ||389511 ||FY 2010-11 ||KAT |
viii) According to the Information and explanations given to me and on the basisof examination of books of accounts The Company has been repaying the loans as perthe agreed terms during the FY 2019-20.
ix) The Company has not raised money by way of initial public offer or furtherpublic offer (including debt instruments) or term loans and hence reporting underClause 3(ix) of the Order is not applicable to the Company.
x) To the besTof my knowledge and according to information and explanations given tome no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.
xi) In my opinion and according to the information and explanations given to methe company has paid/ provided managerial remuneration in accordance with therequisite approvals mandated by the provision of the section 197 read withSchedule V to the Act.
xii) The Company is not a Nidhi Company and hence paragraph 3(xii) of the Orderis not applicable to the Company.
xiii) In my opinion and according to the information and explanations given tome the company is in compliance with sections 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and thedetails of related party transactions have been disclosed in the standalonefinancial statements as required by the applicable accounting standards.
xiv) According to the information and explanations given to me and based on myexamination of the records of the Company the Company has not made anypreferential allotment and private placemenTof fully or partly convertibledebentures during the year. the
xv) In my opinion and according to the information and explanations given to meduring the year the Company has not entered into non-cash transactions with directorsor persons connected to its Directors and hence provisions of Section 192 of theCompanies Act 2013 are not applicable to the Company.
xvi) The Company is not required to be registered under Section 45-IA of ReserveBank of India Act 1934
Guru Prakash V
Chartered Accountant M. No: 228938
Place: Bangalore Date: 29th June 2020
(Referred to in paragraph 1(f) under ReporTon Other Legal and RegulatoryRequirements' section of our report to the members of Izmo Limited of even date)
ReporTon the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
I have audited the internal financial controls over financial reporting of IZMOLimited ("the Company") as of March 31 2020 in conjunction with my audiTofthe standalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on AudiTof Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India(ICAI'). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conducTof its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errorsthe accuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
My responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on my audit. I conducted my audit in accordancewith the Guidance Note on AudiTof Internal Financial Controls over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued byICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013to the extent applicable to an audiTof internal financial controls both applicableto an audiTof Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that I comply withethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
My audit involves performing procedures to obtain audit evidence about theadequacy of the internal financial controls system over financial reporting andtheir operating effectiveness . My audiTof internal financial controls over financialreporting included obtaining an understanding of internal financial controls overfinancial reporting assessingtheriskthatamaterialweaknessexistsandtestingandevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment including theassessmenTof the risks of material misstatemenTof the financial statements whether due tofraud or error.
I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my audiTopinion 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 processdesigned to provide reasonable assurance regarding the reliability of financialreporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A company'sinternal financial control over financial reporting includes those policies andprocedures that
(1) pertain to the maintenance of records that in reasonable detail accuratelyand fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are beingmade only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that couldhave a material e_ecTon 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 managemenToverride ofcontrols material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controlsover financial reporting to future periods are subject to the risk that the internalfinancial control over financial reporting may become inadequate because of changesin conditions or that the degree of compliance with the policies or procedures maydeteriorate.
In my opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31 March 2020based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in theGuidance Note on AudiTof Internal Financial Controls Over Financial Reporting issuedby the Institute of Chartered Accountants of India.
Guru Prakash V
Chartered Accountant M. No: 228938
Place: Bangalore Date: 29th June 2020