To the Members of VirtualSoft Systems Limited Report on the Standalone FinancialStatements Opinion
We have audited the standalone financial statements of VIRTUALSOFT SYSTEMS LIMITED(the Company) which comprise the balance sheet as at 31st March 2020 and thestatement of Profit and Loss (including other comprehensive income) Statement of Changesin Equity and statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2020 its profit/loss (including other comprehensive income) changes in equity andits 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 Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Information other than the financial statements and auditors' report thereon
The Company's board of directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report but does not include the financial statementsand our auditor's report thereon. Our opinion on the financial statements does not coverthe other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Key Audit Matter
Key audit matters are those matters that in our professional judgement 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.
|The key audit matter ||How the matter was addressed in our audit |
|Adoption of Ind AS 116 Leases || |
|As described in Note to the standalone financial statements during the current year the Company has adopted Ind AS 116 Leases ('Ind AS 116') the new standard on lease accounting. The application and transition to this accounting standard is complex and is an area of focus in our audit. ||Our audit procedures on adoption of Ind AS 116 include the following: |
| || Evaluated the design and implementation of the processes and internal controls relating to implementation of the new lease standard. |
|Ind AS 116 introduces a new lease accounting model wherein lessees are required to recognize a right-of-use (ROU) asset and a lease liability arising from a lease on its balance sheet. The lease liabilities are initially measured by discounting future lease payments during the || Based on our evaluation of the contractual agrements entered into and our knowledge of the business assessed the appropriateness of the leases identified by the Company. |
|ured by discounting future lease payments during the lease term as per the contract/ arrangement. Adoption of the standard involves significant judgements and estimates including determination of the discount rates and the lease term. || Involved our internal valuation specialists to evaluate the reasonableness of the discount rates used in computing the lease liabilities. |
| || On transition to Ind AS 116 with effect from 1 April 2019: |
|The Company adopted the modified retrospective approach method to transition to Ind AS 116 consequently comparative financial information was not restated. || Evaluated the method of transition and related adjustments. |
| || Tested completeness of the lease data by reconciling the Company's operating lease commitments as at 31 March 2019 to data used in computing the ROU asset and related lease liabilities. |
|Additionally the standard mandates detailed disclosures with respect of transition.. || Selected samples using the statistical sampling approach. |
| || For such samples selected we assessed the key terms and conditions of each lease with the underlying lease contracts evaluated computation of lease liabilities and challenged the key estimates such as discount rates and the lease term. |
| || For new / modified leases tested the lease accounting and estimates/ judgments used by the Company. |
| || Evaluated the appropriateness of the accounting policy disclosures provided under the new lease standard and assessed the completeness and mathematical accuracy of the relevant disclosures including those related to transition. of the new lease standard. |
|Taxation related matters Determination of tax provisions and assessment of contingent liabilities involves judgment with respect to various tax positions on deductibility of transactions tax incentives/ exemptions interpretation of laws and regulations etc. Judgement is also required in assessing the range of possible outcomes for some of these matters. ||In view of the significance of the matter we applied the following key audit procedures: |
| || Testing the design and operating effectiveness of controls relating to taxation and contingencies. |
| || We evaluated management's judgements in respect of estimates of provisions exposures and contingencies. |
|Management makes an assessment to determine the outcome of these matters and decides to make an accrual or consider it to be a possible contingent liability in accordance with applicable accounting standards. || In understanding and evaluating management's judgements we even considered third party advice received by the Company wherever applicable the status of recent and current tax assessments and enquiries the outcome of previous claims judgmental positions taken in tax returns and developments in the tax environment. |
|Accordingly taxation and contingent liability related matters are areas of focus in the audit. || Additionally we also evaluated the adequacy of disclosures on provisions and contingencies made in the financial statements. |
Emphasis of Matter
Attention is invited to Note No. 7 under Explanatory Notes to Financial Statementsregarding amortization of intangible assets. The company has not provided for amortizationof CRM Software and Website under development.
Attention is invited to Note No. 10 under Explanatory Notes to Financial Statementsregarding investment in subsidiary. The Company is showing investment in the subsidiary atcost whereas the subsidiary is continuously in heavy losses and also has negative networth.
Attention is invited to Note No. 42 under Explanatory Notes to Financial Statementsregarding the financial statements being prepared on a going concern basisnotwithstanding the fact that the company's net worth is eroded (Net Worth as on 31stMarch 2020 is minus Rs. 80582746/- and accumulated losses as on 31st March 2020 isminus Rs.183558746/-). Moreover the company is continuously suffering heavy losses.These events cast significant doubt on the ability of the Company to continue as a goingconcern.
Since the company is under heavy and continuous losses no deferred tax provisions havebeen made as no profit is foreseen in the near future.
Our opinion is not modified in respect of this matter.
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.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 (the Act) with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the accounting Standards specified undersection 133 of the Act. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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 (Auditor's Report) Order 2016 (the Order)issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the 'Annexure A' a statement on the matters specifiedin paragraphs 3 and 4 of the Order to the extent applicable.
A) As required by Section 143 (3) of the Act 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) In 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (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 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 given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition 43 to the Standalone Financial Statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. Followings are the instances of delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company:
|Year ||Amount (Rs.) |
|1997-1998 ||43850/- |
|1996-1997 ||27390/- |
C) With respect to the matter to be included in the Auditor's 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.
For KRISHNA NEERAJ & ASSOCIATES
CA. Krishna K. Neeraj
Membership No. 506669
New Delhi 30th
Annexure- A to the Auditors' Report
The Annexure referred to in paragraph 1 of Our Report on Other Legal andRegulatory Requirements.
We report that:
a. The company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
b. As explained to us fixed assets have been physically verified by the management atreasonable intervals; no material discrepancies were noticed on such verification.
a. According to the information and explanations given to us point (c) is notapplicable as the company does not have any immovable properties.
ii. In respect of its Inventories:
a) As informed and represented to us there were no inventories lying with the companywhich were required to be physically verified during the year by the management atreasonable intervals.
b) As the company does not have inventory point (b) is not applicable.
iii. In respect of loans granted by the company:
a) The company has not granted any loans secured or unsecured to Companies firms orother parties covered in the register maintained under section 189 of the Companies Act2013.
b) Accordingly para (iii)(b) and para 3(iii) (c) of the order is not applicable to theCompany in respect of repayment of the principal amount and interest.
iv. In our opinion and according to the information and explanations given to us thecompany has complied with provisions of section 185 and 186 of the Companies Act 2013with respect to respect of loans and investments made.
v. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposits from the public during the year. Therefore theprovisions of sections 73 to 76 of the Companies Act 2013 and the rules framed thereunderare not applicable to the Company.
vi. We have been informed by the management that no cost records have been prescribedby the Central Government under sub-section (1) of section 148 of the Companies Act 2013for any of the products sold or services rendered by the company.
vii. According to the information and explanations given to us and on the basis ofbooks of accounts the company is not regular in depositing undisputed statutory duesincluding Service Tax Goods and Service Tax Income Tax and other material statutorydues as applicable with appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Income Tax Sales Tax Service Tax Goods andService tax and Excise Duty were outstanding as on 31st of March 2020 for a period ofmore than six months from the date they became payable.
According to the information and explanations given to us there is no amount payablein respect of income tax service tax sales tax goods and service tax customs dutyexcise duty value added tax and cess whichever applicable which have not been depositedon account of any dispute as at March 312018.
viii. I n our opinion and according to the information and explanations given by themanagement the Company has not taken any loans from financial institutions or banks sothere is no default in repayment of dues to financial institutions or banks or bondholders.
ix. According to the information and explanations given to us we report that no fraudby the company or any fraud on the Company by its officers or employees has been noticedor reported during the year.
x. Based on our audit procedures and according to the information given by themanagement the money raised by way of initial public offer or further public offer(including debt instruments) and term loans have been applied for the purpose for whichthey were obtained.
xi. According to the information and explanations given to us and based on ourexamination of records of the company The company has not paid/provided for managerialremuneration in the financial year under consideration.
xii. According to the information and explanations given to us The company is not aNidhi Company. Therefore clause xii) of the order is not applicable to the company.
xiii. According to the information and explanations given to us all transactions withthe related parties are in compliance with sections 177 and 188 of Companies Act 2013where applicable and the details have been disclosed in the Financial Statements etc. asrequired by the applicable accounting standards.
xiv. In our opinion and according to information and explanations given to us and basedon our examination of the records the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review.
xv. In our opinion and according to information and explanations given to us thecompany has not entered into non-cash transactions with directors or persons connectedwith him. Accordingly para 3(xv) of the order is not applicable.
xvi. The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For KRISHNA NEERAJ & ASSOCIATES
CA. Krishna K. Neeraj
Membership No. 506669
30th June 2020
Annexure- B to the Auditors' Report
(Referred to in paragraph 1(A)(f) under 'Report on Other Legal and RegulatoryRequirements'section of our report of even date)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of VIRTUALSOFTSYSTEMS LIMITED (the Company) as of March 31 2019 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating 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 Companies Act 2013
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the Guidance Note) and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls 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 auditor's judgement including the assessment of the risks ofmaterial misstatement of the 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 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 authorizations of management and directors of the company; and
3. provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 312019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For KRISHNA NEERAJ & ASSOCIATES
CA. Krishna K. Neeraj
Membership No. 506669
30th June 2020