INDEPENDENT AUDITOR'S REPORT
the members of
XTGlobal Infotech Limited
(Formerly Frontier Informatics Limited)
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statementsof XTGlobal Infotech Limited (Formerly Frontier Informatics Limited) ("theCompany") which comprise the Balance sheet as at March 31 2020 the Statement ofProfit and Loss including the statement of Other Comprehensive Income the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and notes to thestandalone Ind AS financial statements including a summary of significant accountingpolicies and other explanatory information. In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid standalone Ind ASfinancial statements give the information required by the Companies Act 2013 as amended("the Act") in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2020 its profit including other comprehensiveincome its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements inaccordance with the Standards on Auditing (SAs) as specified under section 143(10) of theAct. Our responsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules there under and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone Ind AS financial statements forthe financial year ended March 31 2020. These matters were addressed in the context ofour audit of the standalone Ind AS financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. For eachmatter below our description of how our audit addressed the matter is provided in thatcontext.
We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the standalone Ind AS financialstatements section of our report including in relation to these matters. Accordingly ouraudit included the performance of procedures designed to respond to our assessment of therisks of material misstatement of the standalone Ind AS financial statements. The resultsof our audit procedures including the procedures performed to address the matters belowprovide the basis for our audit opinion on the accompanying standalone Ind AS financialstatements.
|Key Audit Matter ||Auditor's response |
|Adoption of Ind AS 115 Revenue from Contracts with Customers ||The company is engaged in business of software development and consultancy services in & outside India. We have assessed the process employed by the company to identify the impact of adoption of the new revenue accounting standard. Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:. |
|The application of the revenue accounting standard involves certain key Judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognized over a period. ||- Evaluated the design of internal controls relating to implementation of the new revenue accounting standard |
| ||- Selected a sample of continuing and other contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price |
| ||. - Selected a sample of continuing and other contracts and performed the following procedures: |
| ||- We have verified the Statement of work master service agreements entered by the company with its clients and approval by its clients for work performed by the company. - |
| ||We also verified transaction price charged by the company based on the terms of the contracts. - |
| ||We also verified recognition of revenue on timely basis and historic trend of collections from the customers |
|Receivables and allowances for credit losses ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence: |
|Receivables constitute about 13 % of the total assets (excl investments) as at the balance sheet date. The Company measures expected credit loss on trade receivables based on a provision matrix which is based on significant management judgement and estimates i.e.: ||1. Obtained an understanding of and assessed the design implementation and operating effectiveness of key controls relating to collection monitoring process credit control process (including customer credit approvals) and estimation of expected credit losses. |
|- Payment trend of the Company's customers; ||2. Tested the controls relating to classification of the receivable balances included in the receivables ageing report. For a sample selected tested classification in the ageing report to source documents such as invoice issued contract with the customer. |
|- age analysis of the receivables; ||3. For samples selected circularized independent confirmations and where confirmations were not received performed alternate testing procedures. This includes testing on a sample basis subsequent collections for the outstanding receivables. |
|- relevant current customer specific conditions; and ||4. Assessed the methodology used by management to estimate the expected credit loss provision and its compliance with the relevant accounting standard. |
|- other relevant factors at the reporting date such as subsequent settlement and future collectability. ||5. Assessed the adequacy of disclosures relating to trade receivables and related credit risk. |
|Due to the varying characteristics and payment terms some customers have a higher than average days sales outstanding which increases the credit risk for these customers. Further the outstanding of customers could be impacted by the economic conditions consequent to Covid-19. ||6. . Assessed the appropriateness of accounting policy for expected credit loss as per the relevant accounting standard. |
|We have considered assessment of expected credit loss for receivables as a key audit matter because of the significance of balance of trade receivables to the balance sheet and the significant management judgement involved in its estimation particularly in the context of Covid - 19. || |
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Annual reportbut does not include the standalone Ind AS financial statements and our auditor's reportthereon. Our opinion on the standalone Ind AS financial statements does not cover theother information and we do not express any form of assurance conclusion thereon. Inconnection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management for the Standalone Ind AS FinancialStatements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone Ind ASfinancial statements that give a true and fair view of the financial position financialperformance including other comprehensive income cash flows and changes in equity of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone Ind AS financial statements management isresponsible for assessing the Company's ability t o continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. The Board of Directors are alsoresponsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these individual financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
a. Identify and assess the risks of material misstatement of theindividual financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
b. Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.
c. Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
d. Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
e. Evaluate the overall presentation structure and content of theindividual financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results for our work and to evaluate theeffect of any misstatement in the financial statement.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in the "Annexure 1" a statement on thematters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including theStatement of Other Comprehensive Income the Cash Flow Statement and Statement of Changesin Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financialstatements comply with the Accounting Standards specified under Section 133 of the Actread with Companies (Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from thedirectors as on March 31 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company with reference to these standalone Ind ASfinancial statements and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year endedMarch 31 2020 has been paid/provided by the Company to its directors in accordance withthe provisions of section 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us.
(i) The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone Ind AS financial statements - Refer Notes to thestandalone Ind AS financial statements;
(ii) The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses;
(iii) There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
|Date: 30th April 2020 ||For Niranjan & Narayan |
|Place: Hyderabad ||Chartered Accountants FRN:005899S M. Niranjan Partner Membership No: 029552 UDIN: 20029552AAAADQ8660 |