THE MEMBERS OF
ORTEL COMMUNICATIONS LIMITED (UNDER CIRP)
REPORT ON THE STANDALONE FINANCIAL STATEMENTS
DISCLAIMER OF OPINION
We were engaged to audit the accompanying Standalone Financial Statements of OrtelCommunications Limited ("the Company") which comprise the Balance Sheet as at31st March 2021 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Statement of Cash Flow for the year then endedand a Summary of Significant Accounting Policies and Other Explanatory Information.
We do not express an Opinion on the accompanying Standalone Financial Statements of theCompany in view of the significance of the matters described in the Basis for Disclaimerof Opinion Section of our Report. We have not been able to obtain sufficient appropriateaudit evidence to provide a basis for an Audit Opinion on these Standalone FinancialStatements.
Basis for Disclaimer of Opinion
a) As explained by Management the Company recognises Revenue on 2nd of every month inadvance as a consistent practice. Subsequently at the end of the month managementreviews situation for cases where the Company could not provide its services towardsdisruption of services/deficient provision of services to its subscribers and issue CreditNotes for such amounts. Such Credits Notes are duly booked and charged to StandaloneStatement of Profit and Loss. Accordingly there would be no corresponding Cash Inflowsfor such Credit Notes issued by the Company. Hence Revenue from Operations of Rs. 6797.07Lac as reported in Statement of Audited Standalone Profit and Loss during the FinancialYear 2020-21 is on Gross Basis(Previous Year-Rs.8716.97 Lac). However Revenue fromOperations net-off Credit Notes Rs.805.47 Lac (Previous Year- Rs.1744.73 Lac) asreported stands Rs.5991.60 Lac(Previous Year-Rs.6972.24 Lac). During the course ofAudit we observe that documentation review mechanism and approval procedure for CreditNotes are unstructured and needs substantial improvement.
b) As mentioned in Note No.53 to the Standalone Financial Statements no ImpairmentAssessment of Property Plant and Equipment Capital Work-in-Progress Goodwill and Storesof & Spares in carrying values of these Assets as at 31st March 2021 has been madeby the Company. Therefore we are unable to comment on the consequential impairment ifany that is required to be made in the carrying value of Property Plant and EquipmentCapital Work-in-Progress Goodwill and Stores & Spares. Hence we are unable comment onthe carrying value of Property Plant and Equipments as shown in Standalone FinancialStatements as at 31st March 2021.
In notes to accounts 39 the Company has covered and assessed risks towards marketcurrency interest rate and credit. However considering the nature of Company's businessthe Company has not carried out and assessed any technology risks so far which as per ourview is the backbone of the Company's business and extremely critical in a competitivemarket. As per our view technology risk is significant considering regular disruption ofCompany's services to its subscribers and issuing of credit notes thereafter which isnegatively impacting the cash flow of the Company. During the last three financial yearsthe Company has issued credit notes for disruption of service-data for which are asfollows.
|Finanscial Year ||Credit Notes Issued (Rs.Crores) ||Gross Revenue from Operations (Rs. Cro res) ||% of Credit Notes / Gross Revenue from Operations |
|2018-1 9 ||68.45 ||110.56 ||62% |
|2019-20 ||17.45 ||87.17 ||20% |
|2020-21 ||8.06 ||67.97 ||12% |
Though the amount of credit notes is on a decreasing trend we still considertechnology as a major risk for the Company. We have also noted that the Company'sInformation Technology system for maintaining books of accounts and generating managementinformation system was developed in-house with the help of third party vendors in the year2000 and no further technological up- gradation was made subsequently. During the courseof our audit we noted that access restriction on IT system is not reviewed regularly in astructured way-leading to unauthorised access by several past employees.As per our viewthis is also a major risk area for which the Company should have a back- up plan andreadiness in case of any disruption.
a) In respect of Company's Borrowings from Banks and Financial Institutions(includingNBFCs) aggregating to Rs.16644.37 Lac and Bank Balances (Current Accounts and TermDeposits) aggregating to Rs.363.54 Lac independent Balance Confirmations as at 31stMarch 2021 have not been received.
b) We have been informed by the Resolution Professional that certain informationincluding the Minutes of Meetings of the Committee of Creditors is confidential in natureand cannot be shared with anyone other than the Committee of Creditors and NCLT.Accordingly it is not practicable to comment on the possible Financial Effects on theStandalone Financial Statements including on presentation reporting and disclosures ifany that may have arisen if we had been provided access to those information.
c) As a part of Corporate Insolvency Resolution Process (CIRP) Creditors were calledupon to submit their claims. Till the date of our signing of the Standalone FinancialStatements claims submitted by Creditors have not been reconciled with the books ofaccounts of the Company. Pending such reconciliation and final outcome of the CIRP noaccounting impact in the books of accounts has been made in respect of excess short ornon-receipts of claims for operational and Financial Creditors. Hence it is notpracticable to quantify the Financial Impact of the same if any on the StandaloneFinancial Statements (refer Note No. 52 to the Standalone Financial Statements).
d) The Company has given Advances for Supplies/Services and the amount outstandingthere as at 31st March 2021 was Rs.1944.32 Lac. However we have been unable to obtainsufficient appropriate audit evidence regarding certain aspects of the aforesaid Advancesviz. Ageing analysis and the basis on which the same will be adjusted in subsequentperiod. Hence we are unable to comment on the aforesaid advances and it is notpracticable to quantify the financial effects of the same if any on the StandaloneFinancial Statements.
e) As at 31st March 2021 the Company is having Liabilities against "Creditorsfor Capital Goods" and "Liability for Operating Expenses" amounting toRs.6781.60 Lac and Rs. 4470.05 Lac respectively. However we have been unable to obtainsufficient appropriate audit evidence regarding certain aspects of the aforesaidLiabilities viz. Aging analysis and the basis on which the aforesaid Liabilities will besettled subsequently. Hence we are unable to comment on the Balances appearing under theaforesaid Liabilities and it is not practicable to quantify the Financial Effects of thesame if any on the Standalone Financial Statements.
f) The Company is having a Non-Current Investment of Rs.211.28 Lac in Equity Shares ofOdisha Television Limited an Unquoted Company as at 31st March 2021. Originalinvestment made by the Company was Rs.3250000(325000 Equity Shares of Rs.10/- each).In the absence of the Fair Valuation of the said investments at 31st March 2021 we areunable to comment on the carrying value of such investment as at 31st March 2021 inStandalone Financial Statements and related re-measurement gain/loss if any on the saidinvestment.
g) As a business strategy upon acquisition of LCOs in the past the Company paidexcess of fair value to such LCOs and treated such amount as goodwill and disclosedRs.244.35 lacs in Balance Sheet as at 31st March 2019. (PY: Rs.109.16 lacs). However thebusiness case along with approved documentation and calculation of value of goodwill socreated could not be submitted to us. Before transitioning to Ind-AS the Company did notamortize the value of such goodwill neither it did any impairment assessment of suchgoodwill. In the absence of any documentation clarification in notes to accounts bymanagement we are not in a position to comment on the fairness justification and valueof goodwill of Rs.244.35 Lacs appearing in Balance Sheet as at 31st March 2021 foracquisition of LCOs in the past.
Key Audit Matters
Key Audit Matters are those matters that in our professional judgement were of mostsignificant in our audit of the Financial Statements of the current period. These matterswere addressed in the context of our audit of the Financial Statements as a whole and informing of our Opinion. We have nothing to report in this regard.
|Material Uncertainty Related to Going Concern |
|We draw attention to Note No.54 to the Standalone Financial Statements which indicates that due to the events or conditions as mentioned in the said Note material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business. However the Standalone Financial Statements have been prepared on a going concern basis. |
|However we have the following observations with regard to Company's operation: |
|i. Gradual reduction in Gross Revenue from Operations. The Company's Gross Revenue from Operations for Q1 Q2 Q3 and Q4 during the financial year 2020-21are Rs. 18.18 Cr Rs. 18.79 CrRs. 16.32 Cr and Rs. 14.68 Cr respectively; |
|ii. Company's current technology leads to regular disruption of services leading to dissatisfied customers erosion of existing customer base non-payment by customers and finally churning out to competitors; |
|iii. Continued cash losses - mismatch between monthly cash collection and payouts and related credit risks specially from retail customers which are more than 60 days old; |
|iv. Too much dependency on third party collectors with limited controls; delay in depositing collection money by third party collectors; |
|v. Not having formal contracts with agents and payment of agency commission for generating new business without contracts in place; |
|vi. Absence of documented Risk & Control Matrix (RCM) framework for significant and key processes and not having effective and structured governance mechanism for identification of frauds irregularities and control lapses; |
|In view of the above we are unable to comment on the going concern concept adopted by the Company in preparing its financial statements for financial year 2020-21. |
|The service of the CEO and CFO will be terminated on 1st March 2025 and 31st October 2021 respectively if not extended as informed by the Company. |
Responsibilities of the Management and those charged with Governance for the StandaloneFinancial Statements
The Hon'ble National Company Law Tribunal ('NCLT') New Delhi Branch admitted apetition for initiation of CIRP u/s 9 of the Insolvency and Bankruptcy Code 2016 ('IBC')filed by one of the Operational Creditor of the Company vide Order dated 27th November2018 and appointed an Interim Resolution Professional ('IRP') to manage the affairs of theCompany in accordance with the provisions of Indian Bankruptcy Code 2016('IBC ). TheCommittee of Creditors ('CoC') in its meeting held on 7th January 2019 passed aResolution proposing to replace the Interim Resolution Professional('IRP') and appoint aResolution Professional ('RP') which was confirmed by National Company LawTribunal(('NCLT') vide its Order dated 1st February 2019. In view of pendency of the CIRPand in view of suspension of powers of Board of Directors and explained to us the powerof adoption of the Standalone Financial Statements of the Company for the year ended 31stMarch 2021 vests with the Resolution Professional (refer Note No.1 to the StandaloneFinancial Statements).
The Company's Resolution Professional is responsible for the matters stated in section136(5) of the Companies Act 2013('the Act') with respect to the preparation of theseStandalone Financial statements that give a true and fair view of the Financial PositionFinancial Performance including Other Comprehensive Income Change in Equity and Cash Flowof the Company in accordance with Indian Accounting Standard ("IND AS")specified under section 133 of the Act read with Companies(Indian AccountingStandard)Rule2015 as amended and Other Accounting Principle generally accepted inIndia.This responsibility also includes maintenance of adequate Accounting Records inaccordance with the provisions of theAct for safeguarding the Assets of the Company andfor preventing and detecting frauds and other irregularities;selection and application ofappropriate Accounting Policies; making judgements and estimates that are responsible andprudent; and design implementation and maintenance of adequate Internal FinancialControls that were operating effectively for ensuring accuracy and completeness of theAccounting Records relevant to the preparation and presentation of the StandaloneFinancial Statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the Standalone Financial Statements the Resolution Professional 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 Resolution Professional either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.
The Resolution Professional is also responsible for overseeing the Company's FinancialProcess.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our responsibility is to conduct an audit of the Company's Standalone FinancialStatements in accordance with Standards on Auditing issue by the Institute of CharteredAccountants of India ("ICAI") and to issue an Auditor's Report. However becauseof the matters described in the Basis of Disclaimer of Opinion Section of our Report wewere not able to obtain sufficient appropriate audit evidence to provide a basis for anAudit Opinion on these Standalone Financial Statements.
We are independent of the Company in accordance with the Code of Ethics issued by TheInstitute of Chartered Accountants of India (ICAI) and provisions of the Act that arerelevant to our audit if the Standalone Financial Statements in India under the Act and wehave fulfilled our other ethical responsibilities in accordance with the Code of Ethicsissue by The Institute of Chartered Accountants of India(ICAI) and the requirements underthe Act.
In view of the lockdown imposed in India through phased manner due to COVID-19 pandemicand imposition of travel restrictions from April 2021 till the date of signing ofaccounts by us physical verification of books of accounts documents other auditevidences and face to face discussion with Management of the Company in person could notbe carried out by us. We have relied on documents provided to us electronically over mail.We have received the Quarterly Internal Audit Report for the first two quarters offinancial year 2020-21 but due to travel restrictions we are unable to verify theobservations as given by the Internal Auditors and have relied on such Reports of InternalAuditor. We could not verify physical Cash Balance as on 31st March 2021 in differentlocations of the Company and have relied on the Certificate provided by the Management forthe Cash Balance of Rs.44.71 Lac(Previous Year: Rs.46.93 Lac).
Report on Other Legal and Regulatory Requirements
1) As required by the Companies (Auditor's Report) Order 2016("the Order")issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we give in "Annexure-1" a Statement on the Matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
2) As required by section 143(3) of the Act we report that:
a) As described in the basis for Disclaimer of Opinion paragraph we sought but wereunable to obtained all the information and explanation which to the best of our knowledgeand belief were necessary for the purpose of our audit;
b) The Balance Sheet the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account;
c) The matters described under the Basis for Disclaimer of Opinion paragraph andMaterial Uncertainty Related to Going Concern paragraph as above in our opinion mayhave an adverse effect on the functioning of the Company;
d) As the Company is under CIRP power of the Directors are temporarily suspended thusreporting regarding Directors disqualifications under Section 164(2) of the Act is notrequired.
e) Any qualification reservation or adverse remark relating to the maintenance ofaccounts and other matters connected therewith is as stated in the Basis for Disclaimer ofOpinion paragraph above;
f) With respect to the adequacy of the Internal Financial Controls with reference tothe Financial Statements of the Company and the operating effectiveness of such controlswe give our separate Report in "Annexure 2".
g) 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 giving to us :
I. The Company has disclosed the impact of pending litigations on its FinancialPosition in its Standalone Financial Statements-Refer Note Nos. 38 and 47 to theStandalone Financial Statements;
II. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
III. There were no amounts which were required to be transfer to the Investor Educationand Protection Fund by the Company.
Others: Disclaimer of Opinion
Attention is drawn to Note No. 49 to the Standalone Financial Statements regardingnon-recognition of interest subsequent to insolvency commencement date i.e. 27th November2018 and also for the Financial Year 2019-20 and 2020-21 on borrowing from Banks andFinancial Institutions and on 9% Non-Convertible Redeemable Cumulative Preference Shareswhich is not in compliance with the requirements of IND AS-23 on "BorrowingCosts" read with IND AS -109 on "Financial Instruments". Such charges forthe Financial Year 2019-20 and 2020-21 has not been computed and disclosed in Notes toAccounts by the Company. Moreover Rs. 1067.14 Lac towards interest calculated during theFinancial Year 2018-19 which was not considered in Audited Standalone Financial Statementsrelating to the Financial Year 2018-19 2019-20 and 2020-21. Had the aforesaid InterestExpenses been recognised Finance Costs Total Expenses and Loss for the year would havebeen higher by the said amount having consequential impact on Other Current FinancialLiabilities and Other Equity. In support of non-provision of Finance Costs for theFinancial Year 2019-20 and 2020-21 the Company has obtained a Legal Opinion dated 2ndJune 2020 a copy of which has also been submitted to us. However the Legal Opinion doesnot provide any specific conclusion for non-provision of "Finance Cost" inStandalone Financial Statements.
Annexure-I: to the Independent Auditor's Report
Referred to in Paragraph 1 under Report on 'Other Legal and Regulatory Requirements' inthe Independent Auditor's Report of even date to the Members of the Company on theStandalone Financial Statements for the year ended 31st March2021.
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of Property Plant & Equipment's.
(b) According to the information and explanations given to us the Company's Management("Management") could not arrange to physically verify its Property Plant &Equipment's annually due to COVID-19 pandemic. Such physical verification needs to beconducted during FY 2021-22.
(c) The Title Deeds of Immovable Properties recorded in the books of account of theCompany are held in the name of the Company.
(ii) According to the information and explanation given to us the Inventories havebeen partially physically verified by the Management during the year due to COVID-19pandemic. In our opinion the frequency of verification needs to be improved. As explainedto us there were no material discrepancies on physical verification of Inventories ascompared to the book records.
(iii) According to the information and explanations given to us and on the basis of ourexamination of the books of accounts the Company has not granted any Loans Secured orUnsecured to Companies Firms Limited Liability Partnerships or Other Parties covered inthe register maintained under Section 189 of the Act.
(iv) According to the information and explanations given to us in respect of LoansInvestments Guarantees and Security the Company has compiled with the provisions ofSections 185 and 186 of the Act.
(v) According to the information and explanations given to us the Company has notaccepted any Deposits from the Public. Also refer paragraph (f) under 'Basis forDisclaimer of Opinion' section of our Independent Auditor's Report on the StandaloneFinancial Statements of the Company for the year ended 31st March 2021 regardingLiabilities against 'Creditors for Capital Goods' and 'Liability for Operating Expenses'.
(vi) The maintenance of Cost Records has been specified by the Central Government undersub section (1) of Section 148 of the Act. We have been informed by the Management thatthe prescribed Accounts and Records are in the process of being made and maintained.
(vii) According to the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues of Duty of Customs Value Added TaxProfession Tax Cess and any other material statutory dues (except as mentioned hereinbelow) have generally been regularly deposited with the Appropriate Authorities.
According to the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed Provident fund Employees' State Insurance Income TaxServices Tax Goods and Services Tax and Entertainment Tax have not been regularlydeposited with the Appropriate Authorities and there have been significant delays indepositing the same in a large number of cases.
According to the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed Service Tax Goods and Services Tax Income Tax andEntertainment Tax which were outstanding as on the last day of the Financial Year for aperiod of more than six months from the date they became payable are as follows:
|Name of the Statute ||Nature of dues ||Amount (Rs.l n Lac) ||Period to which the amount relates |
|Finance Act 1994 ||Services Tax ||31.83 ||October 2016 to June 20 17 |
|The Central Gocods and Services Tax Act 2017 ||Central Goods and Services Tax ||220.79 ||July 2017 to August 20 18 |
|The Odisha Goods and Services Tax Act 2017 ||State Goods and Services Tax ||992.20 ||July 2017 to August 2018 |
|The Andhra Pradesh Goods and Services Tax Act 2017 ||State Goods and Services Tax ||231.48 ||July 2017 to August 2018 |
|The T elangana Goods and Services T ax Act 2017 ||State Goods and Services Tax ||106.19 ||July 2017 to August 2018 |
|The Chhattisgarh Goods and Services Tax Act 2017 ||State Goods and Services Tax ||76.94 ||July 2017 to August 2018 |
|Income Tax Act 1961 ||Tax Deducted at Source ||343.92 ||April 2018 to Au gust2 018 |
|The Orissa Entertainment Tax Act 1946 ||EntertainmentTax ||0.12 ||April 2017 to June 20 17 |
|Andhra Pradesh Entertainment Tax Act 1939 ||Entertainment Tax ||13. 38 ||April 2017 to June 20 17 |
|Chhattisgarh Entertainments Duty and Advertisement Tax Act 1936 ||EntertainmentTax ||17. 76 ||April 2017 to June 20 17 |
|The Madhya Pradesh Entertainments Duty and Advertisement Tax Act 1936 ||Entertainment Tax ||1.71 ||April 2017 to June 2017 |
According to the information and explanation given to us the dues as at 31st March2021 of IncomeTax Sales Tax Service Tax Custom Duty Excise Duty VAT and GST whichhave not been deposited on account of any dispute are as follows:
|Name of the Statute ||Nature of Dues ||Amoun t (Rs. In Lac) ||Period to which the amount relates (Financial yea r) ||Forum where dispute is pendi ng |
|Income Tax Act 1961 ||Tax and Interest thereon for non-deduction of Tax at Source ||175.15* ||2005-06 2006-07 2008-09 2010-1 1. ||Commissioner of Income Tax (Appeals) Bhubaneswar |
|Finance Act 1994 ||Service Tax and Interest thereon ||241.97 ||2006-07 2007-08 2009-10. ||Commissioner GST & Central Excise Bhubaneswar |
|Finance Act 1994 ||Service Tax and Interest thereon ||1179.29** ||2010-112014-15 ||Customs Excise Service Tax Appellate Tribunal Kolkata |
|Finance Act 1994 ||Service Tax and Interest thereon ||13.00 ||2013-14 ||Addl. Commissioner (Audit) of Central Excise Customs & Service Tax Bhubaneswar |
|Finance Act 1994 ||Service Tax ||338.06 ||2015-16 ||Commissioner GST & Central Excise Bhubaneswar |
|Finance Act 1994 ||Service Tax ||21.10*** ||2012-13 2013-14 ||Commissioner (Appeals) GST & Central Excise and Customs |
|Finance Act 1994 ||Service Tax ||13.00 ||2013-14 ||Commissioner (Appeals) GST & Central Excise and Customs |
|The Orissa Entry Tax Act 2003 ||Entry Tax ||1.00 ||2000-01 ||Hon'ble High Court of Orissa Cuttack |
|The Orissa Entry Tax 2003 ||Entry Tax ||25.25 ||2011-12 ||Commercial Tax Department Odisha |
|The Orissa Entertainment Tax Act 2006 ||Entertainment Tax ||69.75 ||2006-07 ||Commercial Tax Department Odisha |
*Rs. 60.06 Lac has been deposited under protest in this regard.
"Rs. 44.22 Lac has been deposited under protest in this regard.
***Rs. 0.54 Lac has been deposited under protest in this regard.
(viii) The Company is under CIRP and hence repayment of all the Loans from Banks andFIs is on hold.
|Name of the Lenders ||Amount of aggregate default during the year ended 31st March 2018 (Rs. In Lac) ||Period of Default |
|Banks: || || |
|Karnataka Bank Limited ||275.40 ||10 to 264 days |
|UCO Bank ||390.00 ||1 to 275 days |
|Union Bank ||140.00 ||1 to 275 days |
Annexure-II: to the Independent Auditor's Report
[Referred to in Paragraph (2)h under 'Report on Other Legal and RegulatoryRequirements' in our Independent Auditor's Report of even date to the Members of theCompany on the Standalone Financial Statements for the year ended 31st March 2021]
Report on the Internal Financial Controls with reference to Financial Statements underclause (i) of sub - section 3 of Section 143 of the Companies Act 2013 ("the Act'')
We have audited the Internal Financial Controls over Financial Reporting of the Companyas of 31st March 2021 in conjunction with our audit of the Standalone FinancialStatements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Resolution Professional is responsible for establishing and maintainingInternal Financial Controls based on the Internal Control with reference to FinancialStatements criteria established by the Company considering the essential components ofInternal Control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India ("ICAI"). These responsibilities include the designimplementation and maintenance of adequate Internal Financial Controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its Assets the preventionand detection of frauds and errors the accuracy and completeness of the AccountingRecords and the timely preparation of reliable Financial Information as required underthe 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 specified under section143(10) of the Act to the extent applicable to an audit of Internal Financial Controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate Internal Financial Controls with reference to Financial Statements wereestablished and maintained and if such controls operated effectively in all materialrespects.
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 Internal Financial Controls with reference to FinancialStatements included obtaining in understanding of Internal Financial Controls withreference to Financial Statements assessing the risk that a material weakness exists andtesting and evaluating the design and Operating Effectiveness of Internal Control based onthe assessed risk. The procedures selected depend on the Auditor's judgement includingthe assessment of the risks of material misstatement of the Financial Statements whetherdue to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our Qualified Audit Opinion on the Company's Internal FinancialControls with reference to Financial Statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A Company's Internal Financial Control with reference to Financial Statements 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 with reference to Financial Statements includesthose 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/Resolution Professional of theCompany; and
(3) provide reasonable assurance regarding prevention of 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 of the Inherent Limitations of Internal Financial Controls with reference toFinancial Statements including the possibility of collusion or Improper Managementoverride of controls material misstatements due to error or fraud may occur and not to bedetected. Also projections of any evaluation of the Internal Financial Controls withreference to Financial Statements to future periods are subject to the risk that theInternal Financial Controls with reference to Financial Statements may become inadequatebecause of changes in conditions or that the degree of compliance with the Policies orProcedures may deteriorate.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified in the Operating Effectiveness of theCompany's Internal Financial Control with reference to Financial Statements as at 31stMarch 2021:
a) Deficiencies in maintenance of documentation/records including non-availability ofrelevant documents/information records pertaining to issuance of Credit Notes [fullydescribed in paragraph(a) under 'Basis for Disclaimer of Opinion' Section of ourIndependent Auditor's Report on the Standalone Financial Statements of the Company for theyear ended 31st March 2021];
b) Deficiencies in documentation in relation to Borrowings [fully described inparagraphs(c) and (e) under 'Basis for Disclaimer of Opinion' section of our IndependentAuditor's Report on the Standalone Financial Statements of the Company for the year ended31st March 2021];
c) Ageing Analysis etc. Pertaining to Advances given for Supplies/Services[fullydescribed in paragraph (f) under 'Basis for Disclaimer of Opinion' section of ourIndependent Auditor's Report on the Standalone Financial Statements of the Company for theyear ended 31st March2021];
d) Ageing Analysis etc. Pertaining to Liabilities against 'Creditors for Capital Goods'and 'Liability for Operating Expenses '[fully described in paragraph (g) under 'Basis forDisclaimer of Opinion' section of our Independent Auditor's Report on the StandaloneFinancial Statements of the Company for the year ended 31st March 2021];
e) Omission to get Impairment Assessment done in respect of certain Tangible andIntangible Assets and in obtaining Fair Valuation of a Non-Current Investment [fullydescribed in paragraphs (b) and (h) respectively under 'Basis for Disclaimer of Opinion'section of our Independent Auditor's Report on the Standalone Financial Statements of theCompany for the year ended 31st March 2021];
f) Considering the nature of Company's business involving multiple operating locationsand the risks involved during our course of audit we have not come across any Risk &Control Matrix identifying major risks impacting on Standalone Financial Statements ofthe Company and building an appropriate control framework to combat such risks. Hence weare unable to comment on the accuracy and fairness of the numbers reported and disclosuresmade in Financial Statements.
A 'Material Weakness' is a deficiency or a combination of deficiencies in InternalFinancial Controls with reference to Financial Statements such that there is a reasonablepossibility that a material misstatement of the Company's Annual or Interim FinancialStatements will not be prevented or detected on a timely basis.
In our Opinion the Company has in all material respects maintained adequate InternalFinancial controls with reference to Financial Statements as of 31st March 2021 based onthe internal control with reference to Financial Statements criteria established by theCompany considering the essential components of Internal Control stated in the GuidanceNote issued by the ICAI an except for the possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria theCompany's Internal Financial Controls with reference to Financial Statements wereoperating effectively as of 31st March 2021.
We have considered the material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our Audit of the StandaloneFinancial Statements of the Company for the year ended 31st March 2021 and thesematerial weaknesses have affected our opinion on the Standalone Financial Statements andwe have issued a Disclaimer of Opinion on the Standalone Financial Statements of theCompany.