To the Members of
Kernex Microsystems (India) limited
Report on the Audit of the Standalone Financial Statements Qualified
We have audited the standalone Financial statements of KernexMicrosystems (India) limited ("the Company") which comprise the balance sheetas at 31 March 2020 and the statement of Profit and loss including the Statement ofOther Comprehensive Income the statement of cash flows and the statement of changes inequity for the year then ended and notes to the financial statements including a summaryof significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to theexplanations given to us except for the effects of the matter described in the Basisfor Qualified Opinion section of our report the aforesaid standalone Financialstatements give the information required by the Companies Act 2013 as amended ("theAct") in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 312020 and its profit and its cash flows for the year ended on that date.
Basis for Qualified Opinion
As detailed in note 7 to the financial results otherfinancial assets amounting to Rs. 6.00 crores which has been outstanding for more than 3years has been subject to balance confirmation from the respective party/(s). Accordingto the information and explanations given to us the company is taking steps forobtaining balance confirmation and in the opinion of the management the amount isrecoverable. In the absence of sufficient appropriate evidence we are unableto comment upon the carrying value of the aforesaid receivable as at 31stMarch 2020 or any adjustment impairment required to and the consequent impact if any; onthe financial results.
We conducted our audit of standalone Financial statements in accordancewith the Standards on Auditing (SAs) as specified under section 143(10) of the CompaniesAct 2013. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial statements sectionof our report. We are independent of the Company in accordance with the Code of Ethicsissued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the standalone Financial statements underthe provisions of the Act and the Rules there under and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the standalone Financial statements.
Key Audit Matter
Key audit matters are those matters that in our professionaljudgement were of most significance in our audit of the financial statements of thecurrent period. These matters were addressed in the context of our audit of the financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate 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 ||Auditor's Response |
|1. The Company recognizes revenue from sale of goods based on the terms and conditions of purchase orders I contracts received from different customers. For recognising revenue in case of sale of goods it is essential to ensure that the control of the goods have been transferred to the customers. As revenue recognition is subject to management's judgement on whether the control of the goods has been transferred we consider ensuring transfer of control and cut-off of revenue as a key audit matter. ||1. We have obtained an understanding of the revenue recognition process considering the terms and conditions of purchase orders and verified respective delivery documents to ensure that the control of the goods have been transferred in case of revenue recognized for sale of goods. |
|2. The Company recognizes revenue on completion of installation of level crossing gates and their provisional handing over to the customer based on the terms of contract entered into with the customers. Obtaining evidence regarding completion of these services which are being executed outside India is a key audit matter. ||2. We have obtained an understanding of the Company's processes and controls for revenue recognition process evaluating the key controls around such process. Obtain the relevant documents evidential the completion of services including customer acknowledgments/accep - tance letters. |
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises Statutory reports corporate govemancereports and Boards Report included in the annual report but does not include thestandalone Financial statements and our auditor's report thereon which we obtain prior tothe date of auditor's report.
Our opinion on the standalone Financial statements does not cover theother information and we do not and will not express any form of assurance conclusionthereon.
In connection with our audit of the standalone Financial statementsour responsibility is to read the other information identified above and in doing soconsider whether such other information is materially inconsistent with the standaloneFinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone Financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in the equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards(lnd AS) specifiedunder section 133 of the Act read with the companies (Indian Accounting Standards) Rules2015 as amended. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and 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 Standalone Financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the Standalone Financial statements the management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing thecompany's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financialstatements
Our objectives are to obtain reasonable assurance about whether thefinancial 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 Financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thefinancial 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 theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(1) of the Companies Act 2013 we are also responsible for expressing ouropinion on whether the company has adequate internal financial controls system in placeand the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the 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.
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 of the Companies Act 2013 we give in the Annexure a statement on thematters specified in 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 explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books
c) The Balance Sheet the Statement of Profit and Loss and the CashFlow Statement dealt with by this Report are in agreement with the books of account
d) In our opinion. the aforesaid standalone financial statements complywith the Accounting Standards specified under Section 133 of the Act. read with Rule 7 ofthe Companies (Accounts) Rules 2014.
e) On the basis of the written representations received from thedirectors as on 31 March 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2020 from being appointed as a director in termsof 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 such controls referto our separate Report in "Annexure A".
g) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements.
ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(f) under 'Report on Other legal andRegulatory Requirements' section of our report to the Members of Kernex Microsystems(India) limited of even date)
Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) of Sub- section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financialreporting of Kernex Microsystems (India) LIMITED ("the Company") as of 31 March2020 in conjunction with our audit of the standalone Financial statements of the Companyfor the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishingand maintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.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 aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that
(1) Pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) Provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of thecompany; and
(3) Provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to theexplanations given to us 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 31 March 2020 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.
ANNEXURE 'B' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under 'Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Kernex Microsystems (India) Limitedof even date)
i. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.
(b) The Company has a regular program of verification to cover all theitems of fixed assets in a phased manner which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. No physical verificationof assets has been carried out during the year under Audit.
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties are held in the name of the company.
ii. As explained to us the management has conducted physicalverification of inventory at reasonable intervals during the year and no materialdiscrepancies were observed in the inventories.
iii. According to the information and explanations given to us theCompany has not granted any unsecured loans 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) (b) (c) and (d) arenot applicable to the Company
iv. In our opinion and according to the information and explanationsgiven to us the Company has not advanced loans to director! to a Company in which theDirector is interested to which provisions of section 185 of the Companies Act 2013apply. In our opinion and according to the information and explanations given to us theCompany has made investments and given guarantees/provided security which is in compliancewith the provisions of Sections 186 of the Companies Act 2013.
v. The Company has not accepted deposits during the year within themeaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules2014 (as amended). Therefore the provisions of the clause 3 (v) of the Order are notapplicable to the Company.
vi. The maintenance of cost records has not been specified by theCentral Government under section 148(1) of the Companies Act 2013 for the businessactivities carried out by the Company. Thus reporting under clause 3(vi) of the order isnot applicable to the Company.
vii. (a) The Company is regular in depositing with appropriateauthorities undisputed statutory dues including provident fund employees' stateinsurance income-tax duty of custom goods and service tax cess and other statutorydues applicable to it except minor delays in a very few instances.
(b) According to the information and explanations given to us noundisputed amounts payable in respect of Provident fund Employees' State InsuranceIncome Tax Sales Tax Service Tax Value Added Tax Goods and Service Tax Customs DutyExcise Duty Cess and other material statutory dues were outstanding at the year end fora period of more than six months from the day they became payable except the following.
|Name of statutory dues ||Amount (Rs. In Lakhs) |
|CST against 'C' Forms ||22.07 |
|Total ||91.80 |
( c) According to the information and explanations given to usdisputed amounts payable in respect of income-tax that were outstanding as at March312020 as follows
|Nature of the statute ||Nature of Dues ||Forum where Dispute is Pending ||Period to which the Amount Relates ||Amount in Lakhs |
|The Income Tax Act 1961 ||Income Tax ||Commissioner (Appeals) ||A.y. 2014-15 ||43.86 |
viii. In our Opinion and according to the information and explanationsgiven by the management the company has not defaulted in repayment of loans or borrowingsto banks or government. There are no dues which are payable to financial institutions. TheCompany did not have any debenture holders during the year.
ix. According to information and explanation given by management theCompany has not raised any moneys by way of initial public offer/further public offer/debt instruments and term loans and hence reporting under clause 3(ix) of the Order is notapplicable to the Company.
x. Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management we report that no fraud by theCompany or no material fraud on the Company by its officers or employees has been noticedor reported during the year.
xi. In our opinion and according to the information and explanationsgiven to us the Company has paid/provided managerial remuneration in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct. xii The Company is not a Nidhi Company and hence reporting under clause 3 (xii) ofthe Order is not applicable to the Company.
xiii. In our opinion and according to the information and explanationsgiven to us the Company is in compliance with Section 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and the details ofrelated party transactions have been disclosed in the financial statements as required bythe applicable accounting standards. xiv. During the year the Company has not made anypreferential allotment or private placement of shares or fully or partly paid convertibledebentures and hence reporting under clause 3 (xiv) of the Order is not applicable to theCompany.
xv. In our opinion and according to the information and explanationsgiven to us during the year the Company has not entered into any non-cash transactionswith its Directors or persons connected to its directors and hence provisions of section192 of the Companies Act 2013 are not applicable to the Company. xiv. The Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934 asthe company is not engaged in the business of financing. Hence the provisions of theclause 3(xvi) of the order are not applicable to the Company.