To the Members of KPIT Technologies Limited (Erstwhile KPIT Engineering Limited) Reporton the Audit of the Standalone Financial Statements Opinion
We have audited the standalone financial statements of KPIT Technologies Limited(Erstwhile KPIT Engineering Limited) ("the Company") which comprise thestandalone balance sheet as at 31 March 2020 and the standalone statement of profit andloss (including other comprehensive income) standalone statement of changes in equity andstandalone statement of cash flows for the year then ended and notes to the standalonefinancial statements including a summary of the significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilledour 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.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
Description of Key Audit Matter
|The key audit matter ||How the matter was addressed in our audit |
|Revenue recognition in respect of fixed price contracts ||Our audit procedures in this area included the following: |
|The Company engages into fixed-price contracts with customers. In respect of fixed-price contracts revenue is recognized using percentage of completion computed as per the input method. ||Obtained an understanding of the systems processes and controls implemented by the Company and evaluating the design and implementation of internal controls for measuring and recording revenue and the associated contract assets and unearned revenue. |
|This is based on the Company's estimate of contract costs and efforts for completion of contract. Provision for estimated losses on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date. ||Tested the design and operating effectiveness of key IT controls over IT environment in which the business systems operate. This includes access controls program change controls program development controls and IT operation controls; |
|Contract estimates are formed by the Company considering the following: ||For selected samples of contracts we inspected the terms of the contract and assessed the revenue recognized in accordance with Ind AS by: |
|Application of the revenue recognition accounting standard is complex. It involves a number of key judgements and estimates. ||? ? Evaluating the identification of performance obligations. |
|One of the key estimate is total cost-to- completion of these contracts. It is used to determine the percentage of completion of the relevant performance obligation. ||? ? Agreeing the transaction price to the underlying contracts. |
|There is judgement involved in identification of distinct performance obligations and determination of transaction price for such performance obligations. ||? ? Inspecting the approval of the estimates of cost to complete. |
|COVID 19 pandemic may impact the total revenue and costs to complete the contracts. In some cases Company's contract interests are adequately protected. In other cases there may be possible significant risks though the Company is cautious of them. ||? ? Evaluating the impact on the total revenue and the cost to complete the contract from COVID 19 pandemic. |
|These contracts may involve onerous obligations on the Company requiring critical estimates to be made. ||? ? Challenging the Company's estimate of contract cost through a retrospective comparison of costs incurred with budgeted costs. Identifying significant variations and testing variations resulting into re- estimating the remaining costs to complete the contract. |
|Contracts are subject to modification to account for changes in contract specification and requirements. ||? ? Assessing the work in progress (contract assets) on the balance sheet date by inspecting the underlying invoices and signed agreements on sample basis to identify possible delays in achieving milestones. |
|At year-end a significant amount of work in progress (Contract assets and liabilities) related to these contracts is recognised on the balance sheet representing the work completed costs incurred and accrued. Considering the significant estimate involved in recognition of revenue based on percentage of completion method in respect of fixed price contracts we have considered this as key audit matter. ||Those may require change in estimated costs to complete the remaining performance obligations. |
|(Refer note 1.2 and 40 to the standalone financial statements) ||? ? Comparing on a sample basis revenue transactions recorded during the year with the underlying contracts actual costs incurred and invoices raised on customers. Also checked the related revenue contract costs provision for onerous contracts contract assets and unearned revenue had been recognised in accordance with the requirements of Ind AS 115. |
| ||? ? Performing analytical procedures on incurred and estimated contract costs or efforts. It includes assessment of contracts with unusual or negative margins little or no movement in efforts from previous periods. We also performed analytical procedures on contract assets with little or no movement in invoicing from previous periods. |
Information Other than the Standalone Financial Statements and Auditors' Report Thereon
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 financial statements and our auditors' reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's and Board of Directors' Responsibility for the Standalone FinancialStatements
The Company's Management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss andothercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements Management and Board of Directors areresponsible 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.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We 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 to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures in the standalone financial statements madeby the Management and Board of Directors.
Conclude on the appropriateness of the Management and Board of Directors use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone disclosuresand whether the standalone financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
2. (A) As required by Section 143(3) of the Act we report that: a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit. b) In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books. c) The standalone balance sheet the standalone statement ofprofit and loss (including other comprehensive income) the standalone statement ofchanges in equity and the standalone statement of cash flows dealt with by this Report arein agreement with the books of account. d) In our opinion the aforesaid standalonefinancial statements comply with the Ind AS specified under section 133 of the Act. e) Onthe basis of the written representations received from the directors as on 31 March 2020taken on record by the Board of Directors none of the directors is disqualified as on 31March 2020 from being appointed as a director in terms of Section 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' 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. TheCompany does not have any pending litigations which would impact its financial standalonefinancial statements; ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses; iii. There areno amounts which are required to be transferred to the Investor Education and ProtectionFund by the Company; iv. The disclosures in the standalone financial statements regardingholdings as well as dealings in specified bank notes during the period from 8 November2016 to 30 December 2016 have not been made in these financial statements since they donot pertain to the financial year ended 31 March 2020.
(C) With respect to the matter to be included in the Auditors' Report under section197(16):
In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
Place : Pune Date : 27 May 2020
For B S R & Co. LLP
Chartered Accountants Firm's Registration No. 101248W/W-100022
Partner Membership No. 113896 UDIN: 20113896AAAABJ9143
Annexure A to the Independent Auditors' report on the standalone financial statementsfor the year ended 31 March 2020
With reference to the Annexure referred to in paragraph 1 in "Report on OtherLegal and Regulatory Requirements" of the Independent Auditors'ReporttotheMembersoftheCompanyonthestandalonefinancial statements for the year ended 31March 2020 we report that:
(i) In respect of its fixed assets: a. The Company has maintained proper recordsshowing full particulars including quantitative details and situation of fixed assets. b.The Company has a regular programme of physical verification of its fixed assets by whichall fixed assets are verified annually. In ouropinionthisperiodicityofphysicalverification is reasonable having regard to the size ofthe Company and the nature of its assets. No material discrepancies were noticed on such
c. The title deeds of the immovable properties are in the process of being transferredin the name of the Company under the Scheme of arrangement. (Refer note 42(1) of thestandalone financial statements)
(ii) The inventory has been physically verified by the Management during the year. Inour opinion the frequency of such verification is reasonable and there were no materialdiscrepancies noted during such verification.
(iii) In our opinion and according to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms limitedliability partnerships or other parties covered in the register maintained under Section189 of the Act. Accordingly paragraph 3(iii) of the Order is not applicable to theCompany.
(iv) In our opinion and according to information and explanation given to us theCompany has complied with provisions of Section 186 of the Act with respect to investmentsmade loans and guarantees during the year. The Company has not given any loan guaranteeor security covered under Section 185 of the Act during the year.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public in accordance with the provisions of Section 73 toSection 76 of the Act and the rules framed there under apply. Accordingly paragraph 3(v)of the Order is not applicable.
(vi) According to the information and explanations given to us the Central Governmenthas not prescribed the maintenance of cost records under sub section (1) of Section 148 ofthe Act for any of the services rendered by the Company. Accordingly paragraph 3(vi) ofthe Order is not applicable.
(vii) a. According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccounts in respect of undisputed statutory dues including employee's state insuranceincome tax goods and services tax and any other statutory dues have generally beenregularly deposited during the year by the Company to the appropriate authorities exceptfor certain delays in payment of Income tax (tax deducted at source) ranging from 5 daysto 22 days and provident fund ranging from 6 days to 188 days. As explained to us theCompany did not have any dues on account of custom duty and cess.
According to the information and explanations given to us no undisputed statutory duespayable in respect of provident fund employees' state insurance income-tax goods andservices tax and other material statutory dues were in arrears as at 31 March 2020 for aperiod of more than six months from the date they became payable except as disclosedbelow.
|Nature of Statute ||Nature of Dues ||Amount (Rs. in million) ||Period to which amount relates ||Due date ||Date of payment |
|Employees Provident Fund and ||Provident ||0.99 ||2019-20 ||Various ||20 April |
|Miscellaneous Provisions Act 1952 ||Fund || || || ||2020 |
b. According to the information and explanations given to us there are no dues withrespect to income tax sales tax goods and services tax value added tax custom dutyexcise duty which have not been deposited with the appropriate authorities on account ofany dispute.
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to its banks financial institution andgovernment. The Company did not have any borrowings from debenture holders during theyear.
(ix) In our opinion and according to the information and explanations given to us theterm loans have been applied for the purpose for which they were raised. The Company hasnot raised money by way of initial public offer or further public offer (including debtinstruments) during the year.
(x) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company no fraud by the Company or no material fraud onthe Company by its officers or employees has been noticed or reported during the course ofthe audit.
(xi) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has paid / provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company as per the Act. Accordingly paragraph 3(xii) of the Orderis not applicable.
(xiii) According to the information and explanations given to us and on the basis ofour examination of the records of the Company all transactions with the related partiesare in compliance with section 177 and 188 of the Act and the details have been disclosedin the financial statements as required by the applicable accounting standards. (xiv) Inour opinion and according to the information and explanations given to us during the yearunder audit the Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures. Hence the provisions of clause 3 (xiv)of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.
Place : Pune Date : 27 May 2020
For B S R & Co. LLP
Chartered Accountants Firm's Registration No. 101248W/W-100022
Partner Membership No. 113896 UDIN: 20113896AAAABJ9143 financial statements for theperiod ended 31 March 2020
Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 (Referred to in paragraph 1A (f) under Report on Other Legal andRegulatory Requirements' section of our report of even date) Opinion
We have audited the internal financial controls withreferencetofinancial statements ofKPIT Technologies Limited
(Erstwhile KPIT Engineering Limited) ("the Company") as of 31 March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
In our opinion the Company has in all material respects adequateinternalfinancialcontrols with reference to and such internal financial controls were operating effectivelyas at 31 March 2020 based on the internal financial controls with referencetofinancialstatements 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 (the"Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 (hereinafter referred to as"the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internalfinancial controls with referencetofinancialstatements included obtaining an understanding of such internal controls assessing therisk that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the standalone 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 internalfinancial controls withreference tofinancial statements.
Meaning of Internal Financial controls with Reference to Financial Statements
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation offinancial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial controls with Reference to FinancialStatements
Because oftheinherentlimitationsofinternal controlswithreferenceto financial statementsincluding the possibility of collusion or improper management override of controlsmaterial misstatements due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls with reference tofinancial statements to future periods are subject to the risk that the internal financialcontrols with reference to financial statements may become inadequate because of changesin conditions or that the degree of compliance with the policies or procedures maydeteriorate.
Place : Pune Date : 27 May 2020
For B S R & Co. LLP
Chartered Accountants Firm's Registration No. 101248W/W-100022
Partner Membership No. 113896 UDIN: 20113896AAAABJ9143
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