To The Members of, AARVI ENCON LIMITED
Report on Consolidated Financial Statements Opinion
We have audited accompanying consolidated financial statements of Aarvi Encon
Limited (the "Holding Company") and its subsidiaries, a list of the same is
annexed herewith by way of an Annexure 2 to this report (collectively the company and its
subsidiaries together referred to as "the Group") which comprise the
Consolidated Balance Sheet as at March 31, 2023, the consolidated Statement of Profit and
Loss including other Comprehensive Income, the Consolidated Cash Flow Statement and the
Consolidated Statement of Changes in Equity for the year then ended, and Notes to the
Consolidated Financial Statements, including a summary of Significant Accounting Policies
and other explanatory information (hereinafter referred to as "the Consolidated
Financial Statements").
In our opinion and to the best of our information and according to the explanations
given to us and based on the consideration of Reports of other Auditors on separate
financial statements and on the other financial information of the subsidiaries, the
aforesaid Consolidated financial statement 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 in conformity with the accounting principles generally accepted in India, of the
consolidated state of affairs of the Group as at March 31st 2023, and profit
including other comprehensive income, their Consolidated Cash Flows and the Consolidated
Statement of Changes in Equities for the year ended on that date.
Basis for Opinion
We conducted our audit of the Consolidated Financial Statements in accordance with the
Standards on Auditing (SAs) specified under section 143(10) of the Act. Our
responsibilities under those Standard are future described in the Auditors
Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the Group in accordance with the "Code of Ethics" issued by the
Institute of Chartered Accountants of India together with the ethical requirements that
are relevant to our audit of the financial statements under the provisions of the Act and
the Rules thereunder, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the Code of Ethics. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion on the Consolidated Financial Statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statement of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. We have determined the matters described below to be
the key audit matters to be communicated in our report.
Key Audit Matter |
Auditors Responses |
1. Revenue Recognition |
Principal Audit Procedures |
| The Companys contracts with customers include contracts with multiple
services. The Company derives revenues from manpower supply and related services. |
Our audit procedures related to the (1) identification of distinct
performance obligations, (2) determination of whether the Company is acting as a principal
or agent included the following among others: |
| The Company assesses the services promised in a contract and identifies
distinct performance obligations in the contract. Identification of distinct obligations
to determine the deliverables and the ability (a) of the customer to benefit independently
from such (b) deliverables involves significant judgement. |
We tested the effectiveness of controls relating to the- performance |
| As certain contracts with customers involve managements judgment in (1)
identifying distinct obligations, (2) determining whether the acting as a principal or an
agent, revenue recognition from these judgments were identified as a key audit matter and
required a higher extent of audit effort. |
identification of distinct performance obligations, |
|
determination of whether the Company is acting as a principal or an agent
and |
|
We selected a sample of contracts with customers and performance
performed the following procedures: |
|
Company is – Obtained and read contract documents for each
selection, including master service agreements, and other documents that were part of the
agreement. |
|
– Identified significant terms and deliverables in the contract |
|
to assess managements conclusions regarding the- |
|
(i) identification of distinct performance obligations (ii) |
|
whether the Company is acting as a principal or an agent. |
2. Evaluation of Uncertain Tax Positions |
Principal Audit Procedures |
| The Company has material uncertain tax positions including matters under
dispute which involves significant judgment to determine the possible outcome disputes. |
Obtained details of completed tax assessments and demands upto the year
ending March 31, 2023 from of these management. We involved our internal experts to
challenge the managements underlying assumptions in estimating the tax provision and the
possible outcome of the disputes. Our internal experts also considered legal precedence
and other rulings in evaluating managements position on these uncertain tax positions. |
Information Other than the Financial Statements and Auditors Report Thereon
The Holding Companys 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, Boards Report including Annexures to Boards Report,
Business Responsibility Report, Corporate Governance and Shareholders Information, but
does not include the consolidated financial statements and our auditors report thereon.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained during the course of our audit or otherwise appears to be
materially misstated.
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.
Managements Responsibility for the Consolidated Financial Statements
The Holding Companys Board of Directors are responsible for the preparation and
presentation of these consolidated financial statements in terms of the requirements of
Act that give a true and fair view of the consolidated financial position, consolidated
financial performance including other comprehensive income, Consolidated cash flows and
consolidated Statement of Changes in Equity of the Group in accordance with the accounting
principles generally accepted in India, including the Accounting Standards (IND AS)
specified under Section 133 of the Act, read with the Companies (Indian Accounting
Standards) Rules, 2015, as amended. The respective Board of Directors of the Company
included in the Group are responsible for maintenance of adequate accounting records in
accordance with the provision of the Act for safeguarding of the assets of the Group and
for preventing and detecting the 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 internal financial
control, that were operating effectively for ensuring the accuracy and completeness of the
accounting records, relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material misstatement, whether
due to fraud or error, which have been used for the purpose of preparation by the
Consolidated Financial Statements by the directors of the Holding Companies as aforesaid.
In preparing the Consolidated Financial Statements, the respective Board of Directors
of the companies included in the Group is responsible for assessing the companys ability
to continue as a going concern, disclosing, as applicable, matters related to going
concern and using basis of accounting unless management either intends to liquidate the
Group or to cease operations, or has no realistic alternative but to do so.
Those respective Board of Directors of the Company included in the Group are also
responsible for overseeing the financial reporting process of the Group.
Auditors Responsibility
Our objectives are to obtain reasonable assurance about whether the Consolidated
Financial Statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an Auditors Report that includes our opinion. Reasonable assurance
is a high level of assurance is not a guarantee that an audit conducted in accordance with
SAs will always detect a material misstatement when it exists. Misstatement 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 decisions of users taken on the
basis of this financial statements. As a part of an audit in accordance with SAs, we
exercise professional judgement and maintain professional skepticism throughout the audit.
We also:
Identify 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
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the
Act, we are Company has adequate internal financial controls with reference to financial
statements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Companys
ability to continue as a going concern, If we conclude that a material uncertainty exists,
we are required to draw attention in our auditors report to the related disclosures in
the 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 auditors
report. However, future events or conditions may cause the Company to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the Financial Statements,
including the disclosure, and whether the Financial Statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the group of which we are the independent auditors
and whose financial information we have audited, to express an opinion on the Consolidated
Financial Statements. We are responsible for the direction, supervision and performance of
the audit of the financial statements of such entities included in the consolidated
financial statements of which we are the independent auditors. For the other entities
included in the Consolidated Financial Statements, which have been audited by other
Auditors, such other Auditors remain responsible for the directions, supervision and
performance of the audits carried out by them. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings. Including any
significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with them
all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards. From the matters communicated with
those charged with governance, we determine those matters that were of most significance
in the audit of the Financial Statements for the financial year ended March 31, 2023 and
are therefore the key audit matters. We describe these matters in our auditors report
unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
We conducted our audit in accordance with the Standards on Auditing Specified under
Section 143(10) of the Act. Those Standards require that we comply with the ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal financial control relevant to the Companys preparations of the
financial statements that give true and fair view, in order to design audit procedures
that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of the accounting
estimates made by Companys management and Board of Directors, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion on the consolidated financial statements.
Other Matters
We did not audit the financial statements of foreign subsidiary Aarvi Encon (FZE),
whose financial statements reflect total assets of Rs. 2,203.28 Lacs (AED 10,141,653/-) as
at 31st March, 2023, total revenue of Rs. 5,303.12 Lacs (AED 24,632,418/-) and
net cash outflow of Rs.70.40 Lacs (AED 6,55,522/-) for the year then ended. These
financial statements have been audited by other auditors whose reports have been furnished
to us and our opinion is based solely on the reports of the other auditors. The audit of
financial statements of other foreign subsidiary Aarvi Encon Resources Ltd whose financial
statements reflect total assets of Rs.88.52 Lacs (GBP 87,162/-) as at 31st
March, 2023, total revenue of Rs.70.47 Lacs (GBP 69,986) and net cash inflow of Rs. 40.53
Lacs (GBP 39,908/-) is not required to be audited as per the statutory requirements of the
respective country. Also, the audit of associate entities, Aarvi Encon Staffing Services
W.L.L. reporting total assets of Rs.24.13 Lacs (QAR 106,983/-) and PT Aarvi Encon
Services, an associate entity of Aarvi Encon (FZE) which is yet to commence its business
operations, has not been done by us and our opinion is based solely on the financial
statements as per the statutory requirements of the respective countries. Our opinion on
the consolidated financial statements, and our report on Other Legal and Regulatory
Requirements below is not modified in respect of the above matters with respect to our
reliance on the work done and the reports of the other auditors.
Report on other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) order, 2020 ("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 the matters specified in paragraph
3(xxi) of the Order.
2. As required by section 143(3) of the Act, based on our audit and the consideration
of report of the other auditors on separate financial statements and the other financial
information of subsidiaries as noted in the other matters paragraph we report to the
extent applicable, that:
a) We / the other auditors whose report we have relied upon have sought and obtained
all the information and explanations which to the best of our knowledge and belief was
necessary for the purpose of our audit of the aforesaid consolidated financial statements;
b) In our opinion proper books of account as required by law relating to preparations
of the aforesaid Consolidation of the Financial Statements have been kept so far as it
appears from our examinations of those books and reports of the other auditors;
c) The consolidated Balance Sheet, the consolidated Statement of Profit and loss
including the statement of other Comprehensive Income, the Consolidated Cash Flow
Statement and Consolidated Statement and Changes in Equity dealt with by this Report are
in agreement with the books of accounts maintained for the purpose of preparation of
Consolidated Financial Statements;
d) In our opinion, the aforesaid Consolidated Financial Statements comply with the
applicable Indian Accounting Standards specified under Section 133 of the Act, read with
Companies (Indian Accounting Standard) Rules, 2015, as amended.
e) On the basis of written representations received from the directors of the Holding
Company as on 31st March, 2023 and taken on record by the Board of Directors of
the holding company and the report of the Statutory Auditors who are appointed under
section 139 of the Act of its subsidiaries, none of the directors of the group companies
incorporated in India is disqualified as on 31 March, 2023, from being appointed as a
director in terms of Section 164(2) of the Act.
f) With respect to the adequacy and the operating effectiveness of the internal
financial controls over financial reporting and the operating effectiveness of such
controls, refer to our report in ‘Annexure 3, which is based on the auditors
reports of the subsidiary companies incorporated in India. g) With respect to the other
matters to be included in the Auditors Report in accordance with the requirements of
section 197(16) of the Act, as amended:
In our opinion and to the best of our information and according to the explanations
given to us, the remuneration paid by the Company to its directors during the year is in
accordance with the provisions of section 197 of the Act. h) With respect to the other
matters to be included in the Auditors Report in accordance with Rule 11 of the Companies
(Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us: i. The group does not have any pending
litigations which would impacts its financial position. ii. The group did not have any
long-term contracts including derivative contracts; as such the question of commenting on
any material foreseeable losses thereon. iii. There were no amounts which were required to
be transferred to the Investor Education and Protection Fund by the group. iv. a) The
respective managements of the Holding Company and its subsidiaries whose financial
statements have been audited under the Act have represented to us and the other auditors
of such subsidiaries respectively that, to the best of its knowledge and belief, no funds
have been advanced or loaned or invested (either from borrowed funds or share premium or
any other sources or kind of funds) by the Holding Company or any of such Subsidiaries to
or in any other person or entity, including foreign entities ("Intermediaries"),
with the understanding, whether recorded in writing or otherwise, that the Intermediary
shall, whether, directly or indirectly lend or invest in other persons or entities
identified in any manner whatsoever by or on behalf of the respective Holding Company or
any of such subsidiaries ("Ultimate Beneficiaries") or provide any guarantee,
security or the like on behalf of the Ultimate Beneficiaries; b) The respective
managements of the Holding Company and its subsidiaries whose financial statements have
been audited under the Act have represented to us and the other auditors of such
subsidiaries respectively that, to the best of its knowledge and belief, no funds have
been received by the Holding Company or any of such Subsidiaries from any person or
entity, including foreign entities ("Funding Parties"), with the understanding,
whether recorded in writing or otherwise, that the Holding Company or any of such
subsidiaries shall, whether, directly or indirectly, lend or invest in other persons or
entities identified in any manner whatsoever by or on behalf of the Funding Party
("Ultimate Beneficiaries") or provide any guarantee, security or the like on
behalf of the Ultimate Beneficiaries; and c) Based on the audit procedures that has been
considered reasonable and appropriate in the circumstances performed by us and those
performed by the auditors of the subsidiaries whose financial statements have been audited
under the Act, nothing has come to our or other auditors notice that has caused us or the
other auditors to believe that the representations under sub-clause (a) and (b) contain
any material misstatement. v. The dividend declared/paid during the year and subsequent to
the year-end by the Holding Company and subsidiary companies, as and where dividend
declared/paid, is in compliance with Section 123 of the Act. vi. Proviso to Rule 3(1) of
the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting
software which has a feature of recording audit trail (edit log) facility is applicable to
the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of
Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended
March 31, 2023.
For Jay Shah & Associates.
Chartered Accountants Firm Reg. No. 135424W
CA. Jay Shah
(Proprietor)
Membership No. 134334
UDINo. : 23134334BGWPFO9673
Place : Mumbai
Date : 29th May, 2023
Annexure to the Independent Auditors Report of Consolidated Financial Statements
Annexure – 1: Referred to In Paragraph 1 under the Heading "Report on Other
Legal and Regulatory Requirements" Of Our Report of Even Date
There are no instances of qualifications or adverse remarks by the respective auditors
in the Companies (Auditors Report) Order, 2020 ("CARO") reports of the companies
included in the consolidated financial statements of the companies. Accordingly, the
requirement to report under Clause 3(xi) is not applicable to the company.
Annexure – 2: Details of the Group A. Parent Company;
Sr. |
Name of the Parent Company |
No. |
|
| 1. |
Aarvi Encon Limited |
B. Subsidiaries held directly
Sr. No. |
Name of the Subsidiary |
| 1. |
Aarvi Engineering and Consultants Private |
|
Limited |
| 2. |
Aarvi Encon (FZE) |
| 3. |
Aarvi Encon Resources Limited |
C. Subsidiaries held indirectly
Sr. No. |
Name of the Subsidiary |
| 1. |
Aarvi Encon LLC, Muscat Sultanate of Oman |
|
[Subsidiary of Aarvi Encon (FZE)] w.e.f. 13th |
|
January, 2021. |
D. Associate Entities
Sr. No. |
Name of the Entity |
| 1. |
PT. Aarvi Encon Services, Indonesia [Associate entity of Aarvi Encon
(FZE) – Stake held 49%] w.e.f. 10th June, 2021. |
| 2. |
Aarvi Encon Staffing Services W.L.L., Qatar [Joint Venture – Stake
held 49%] w.e.f. 02nd March, 2022. |
Annexure – 3:
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of
sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
In conjunction with our Audit of the consolidated Financial Statements of the holding
Company as of and for the year ended 31st March, 2023, we have audited the
internal financial controls over financial reporting of Aarvi Encon Limited (hereinafter
referred to as "the holding company") and its subsidiaries (the holding company
and its subsidiaries together referred as to "the Group"), as of that date.
Managements Responsibility for Internal Financial Controls
The respective Board of Directors of the holding companies and its subsidiaries which
are incorporated in India, are responsible for establishing and maintaining internal
financial controls based on the internal control over financial reporting criteria
established by these entities, considering the essential components of internal control
stated in the Guidance Note on Audit of Internal Financial Controls over Financial
Reporting issued by the Institute of Chartered Accountants of India (‘ICAI). These
responsibilities include the design, implementation and maintenance of adequate internal
financial controls that were operating effectively for ensuring the orderly and efficient
conduct of its business, including adherence to companys policies, the safeguarding of
its assets, the prevention and detection of frauds and errors, the accuracy and
completeness of the accounting records, and the timely preparation of reliable financial
information, as required under the Companies Act, 2013.
Auditors Responsibility
Our responsibility is to express an opinion on the Holding Company and its
Subsidiaries, internal financial controls over financial reporting based on our audit. We
conducted our audit in accordance with the Guidance Note on Audit of Internal Financial
Controls over Financial Reporting (the "Guidance Note") and the Standards on
Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the
Companies Act, 2013, to the extent applicable to an audit of internal financial controls,
both applicable to an audit of Internal Financial Controls and, both issued by the
Institute of Chartered Accountants of India. Those Standards and the Guidance Note require
that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether adequate internal financial controls over financial
reporting was established and maintained and if such controls operated effectively in all
material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of
the internal financial controls system over financial reporting and their operating
effectiveness. Our audit of internal financial controls over financial reporting included
obtaining an understanding of internal financial controls over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. The procedures
selected depend on the auditors judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or
error.
We believe that the audit evidence obtained is sufficient and appropriate to provide a
basis for our audit opinion on the Companys internal financial controls system over
financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A companys internal financial control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal financial control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financial
reporting, including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may occur and not be detected.
Also, projections of any evaluation of the internal financial controls over financial
reporting to future periods are subject to the risk that the internal financial control
over financial reporting may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Holding Company and its Subsidiary companies which are incorporated
in India has, in all material respects, an adequate internal financial controls system
over financial reporting commensurate to its size and nature of business and such internal
financial controls over financial reporting were operating effectively as at 31st
March, 2023, based on the internal control over financial reporting criteria established
by the Company considering the essential components of internal control stated in the
Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by
the Institute of Chartered Accountants of India.
For Jay Shah & Associates. Chartered Accountants Firm Reg. No. 135424W
CA. Jay Shah
(Proprietor)
Membership No. 134334
UDINo. : 23134334BGWPFO9673
Place : Mumbai
Date : 29th May, 2023
+91-9892691696
