To the Members of
Security & Intelligence Services (India) Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Security &Intelligence Services India Limited ("the Company") which comprise the BalanceSheet as at March 312019 Statement of Profit and Loss (including Other ComprehensiveIncome) Statement of Changes in Equity and Statement of Cash Flows for the year ended onthat date and notes to the financial statements including a summary of the significantaccounting policies and other explanatory information (hereinafter referred to as"the standalone financial statements").
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 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2019 its profit totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
BASIS FOR OPINION
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements 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 audit opinion on the standalone financial statements.
KEY AUDIT MATTERS
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit ofthe 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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|Accuracy of recognition measurement presentation & disclosures ||How our audit addressed the Key audit matter |
|of revenue |
Auditing standards require us to make a rebuttable presumption that the fraud risk from revenue is a significant risk. A significant proportion of the Company's revenue is derived from contracts with
|Our audit is based on the evaluation of internal control environment and on the other analytical procedures including system-based analysis of certain balance sheet and statement of profit and loss items of the Company. |
|customer and consist of rendering of services. Revenue is measured at the fair value of consideration received or receivable. Revenue is recognized when the control is transferred to the customer and when the Company has completed its performance obligations under the contracts. Revenue is recognized in a manner that depicts the transfer of goods and services to customers at an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. ||We have also tested the operating effectiveness of the key controls over the contract process including contract monitoring billings and approvals and IT controls over certain systems used to generate the information. The basis for the evaluation of internal control has been Company's internal control framework for financial reporting. The testing of controls and amounts has been performed on a sample basis. |
|Further the contractual terms also underpin the measurement and recognition of revenue and profit. The Company is therefore required to make operational and financial assumptions. ||We have completed the following audit procedures: |
Obtained a sample of contracts to confirm that revenue had been appropriately recognized.
|Judgements include: |
Interpretation of complex contract terms;
| Tested a sample of accrued unbilled income balance with supporting documentation which includes attendance records customer acceptance reviewing customer correspondence |
| Allocation of revenue to performance conditions; and ||where necessary and ensuring cut-off had been appropriately |
| Combining of obligations where the services are related. ||applied. |
|The nature of the Services provided by the Company also gives rise to significant amount of variable work which is recorded as accrued unbilled income with corresponding profit recognition. Accrued unbilled income as on March 31 2019 aggregated to ' 1867.31 || Effect of adoption of Ind AS 115 effective from April 012018. |
Based on our audit no significant observations have been noted which have resulted in reporting to the audit committee. Our overall conclusion is that there are in all material respects proper processes
|million. ||in place to recognize the correct billed and unbilled revenue in the financial statement. |
|Key Audit Matter ||Auditor's Response |
|Uncertain tax positions and deferred tax assets ||How our audit addressed the Key audit matter |
|The Company operates in a complex tax environment and is subject to a range of tax risks during the normal course of business. Where the amount of tax payable is uncertain the Company establishes provisions based on management's judgment of the probable amount of the future liability. The company has material certain tax positions including matters under disputes which involves significant judgement to determine the possible outcome of these disputes. ||Obtained details of completed tax assessments and demands for the year ended March 312019 from management. We have checked the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Additionally we considered the effect of new information in respect of uncertain tax positions as at April 1 2018 to evaluate whether any change was required to management's position on these uncertainties. |
|In addition the Company has recognized ' 1216.61 million of deferred tax assets at March 312019. The recognition of deferred tax assets involves judgment by management regarding the likelihood of the realization of these assets. The expectation that these assets will be realized is dependent on a number of factors including whether there will be sufficient taxable profits in future periods to support utilization of these assets. ||In respect of creation of deferred tax assets we have evaluated management's assessment of certain tax benefits under the Income Tax Act 1961 which constitute major part of deferred tax assets. In respect of the recoverability of deferred tax assets we evaluated management's assessment of how these assets will be realized and whether there will be sufficient taxable profits in future periods to support their recognition. We evaluated the Company's future profitability forecast and the process by which they were prepared. Based on our procedures future profitability forecasts supported the recoverability of the deferred tax assets recognized. |
|INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON ||the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error. |
|The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information but does not include the standalone financial statements and our auditor's report thereon. ||In preparing the standalone financial statements management and Board of Directors are responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. |
|Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. ||The Board of Directors is also responsible for overseeing the Company's financial reporting process. |
|In connection with our audit of the standalone financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. ||AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance |
|If based on the work we have performed we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. ||but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic |
|MANAGEMENT'S RESPONSIBILITY FOR THE ||decisions of users taken on the basis of these standalone |
|STANDALONE FINANCIAL STATEMENTS ||financial statements. |
|The Company's management and Board of Directors are responsible for the matters stated in section 134(5) of the Act ||As part of an audit in accordance with SAs we exercise |
|with respect to the preparation of these standalone financial ||professional judgment and maintain professional skepticism |
|statements that give a true and fair view of the state of affairs ||throughout the audit. We also: |
|profits total comprehensive income changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring || 1 dentify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control. |
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the 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 material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 auditor's 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 Section 143(3) of the Act based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) I n our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act read with relevant rules issued thereunder.
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
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 as amended inour opinion and to the best of our information and according to the explanations given tous:
The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - refer note 34;
The Company did not have any long-term contracts including derivatives contractsfor which there were any material foreseeable losses;
There were not amount to be transferred by the Company to the Investor Educationand Protection Fund.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
For Saxena & Saxena
(Firm Regn. No. 006103N)
CA. D.K. Saxena
Membership No. 082118
Date: May 02 2019
Annexure "A" To The Independent Auditors' Report
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' section of our report to the Members of SECURITY & INTELLIGENCE SERVICES(INDIA) LIMITED as of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of SECURITY& INTELLIGENCE SERVICES (INDIA) LIMITED ("the Company") as of March312019 in conjunction with our audit of the Standalone Ind AS financial statements of theCompany for the year ended on that date.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting 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 financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgement
including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with 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.
LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
For Saxena & Saxena
Chartered Accountants (Firm Regn. No. 006103N)
CA. D.K. Saxena
Membership No. 082118
Place: Hyderabad Date: May 02 2019
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 SECURITY & INTELLIGENCE SERVICES(INDIA) LIMITED of even date)
1. a) The Company has maintained proper records
showing full particulars including quantitative details and situation of fixed assets.
b) The fixed assets have been physically verified by the management at reasonableintervals. As informed the discrepancies noticed on physical verification of fixed assetsas compared to book records were not material and have been properly dealt with in thebooks of account.
c) With respect to immovable properties of land and buildings according to theinformation and explanations given to us and the records examined by us and based on theexamination of the registered sale deed / transfer deed / conveyance deed / court ordersapproving schemes of arrangements/amalgamations provided to us we report that the titledeeds of such immovable properties are held in the name of the Company as at the balancesheet date.
2. a) As explained to us inventories have been physically
verified by the management at regular intervals during the year.
b) The discrepancies noticed on physical verification of inventory as compared to bookrecords were not material and have been properly dealt with in the books of account.
3. a) The Company has given unsecured loans to
companies listed in the Register maintained under Section 189 of the Companies Act2013.
b) In our opinion the rate of interest and other terms and conditions of the grant ofsuch loans are not prima facie prejudicial to the Company's interest.
c) I n our opinion and according to the information and explanations given to us theschedule of repayment of principal and payment of interest has been stipulated andrepayments or receipts of principal amounts and interest have been regular as perstipulations.
d) There are no overdue amounts in respect of such loans.
4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurities where applicable.
5. The Company has not accepted any deposits and so the directives issued by theReserve Bank of India and the provisions of section 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed there under do not apply to theCompany.
6. The Central Government has not prescribed maintenance of cost records under subsection (1) of Section 148 of the Companies Act 2013 in respect of the products dealtwith by the Company.
7. a) Statutory dues including provident fund employees'
state insurance income tax goods and service tax professional tax custom duty cessand other statutory dues applicable to the Company have generally been regularly depositedwith the appropriate authorities though there have been some delays in deposit of duesrelating to goods and service tax and Income Tax.
b) There were no outstanding statutory dues as at March 31 2019 for a period of morethan six months from the date they became payable.
c) Details of dues of Income-tax and Service Tax which have not been deposited as onMarch 31 2019 on account of disputes are given below:
|Name of statute ||Nature of dues ||Amount (in ' million) ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service tax ||5.93 ||2009 2012 ||Appellate Authority Tribunal level |
|Finance Act 1994 ||Service tax ||0.86 ||2006 2013 ||Appellate Authority upto Comm. appeal level |
|Finance Act 1994 ||Service tax ||21.33 ||2006 2013 ||Appellate Authority upto Commissioners level |
|Income tax Act 1961 ||Income tax ||4.22 ||2012 2013 ||Appellate Authority upto Comm. appeal level |
8. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to financial institutions banksGovernment or debenture holders.
9. a) The Company has raised term loans during the year
and the same have been applied for the purposes for which they were raised.
b) During the current year the company has not raised moneys by way of initial publicoffer or further public offer.
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.
11. In our opinion and according to the information and explanation given to us and onthe basis of our examination of the records of the Company the Company h as paid/provided for man ag erial remuneration in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Companies Act 2013.
12. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company and therefore paragraph 3 (xii) of the Order is notapplicable.
13. In our opinion and according to the information and explanation given to us and onthe basis of our examination of the records of the Company transactions with relatedparties are in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable and the details have been disclosed in the Standalone Ind AS financialstatements as required by the applicable Indian accounting standards.
14. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly
convertible debentures and therefore paragraph (xiv) of the Order is not applicableto the Company.
15. In our opinion and according to the information and explanation given to us and onthe basis of our examination of the records of the Company the Company has not enteredinto any non-cash transactions with directors or persons connected with them during theyear and therefore paragraph 3 (xv) of the Order is not applicable.
16. The Company is not required to be registered under Section 45 IA of the ReserveBank of India (RBI) Act 1934.
For Saxena & Saxena
(Firm Regn. No. 006103N)
CA. D.K. Saxena
Membership No. 082118
Date: May 02 2019