Ircon International Ltd Auditors Report.
TO THE MEMBERS OF IRCON INTERNATIONAL LIMITED
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the standalone Ind AS financial statements of IRCON INTERNATIONAL LIMITED (the company") which comprise the Balance Sheet as at 31st March 2019, the statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information in which are incorporated the Returns for the year ended on that date audited by branch auditors of the Companys branches at Northern Region, J&K region, Eastern Region, Patna Region, Mumbai Region ,South Africa, Algeria, Bangladesh, Sri-Lanka & Malaysia Region.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs 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 standalone Ind AS financial statements.
Emphasis of Matter
We draw attention to Note No. 48 to the standalone Ind AS financial statements regarding non-provision of Rs.6.23 crores towards foreign agency commission/consultancy charges in respect of projects in three foreign countries pending assessment of the performance.
Our report is not qualified in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Ind AS Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS 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
|Key Audit Matter||How our audit addressed the matter|
|a) Revenue Recognition in terms of Ind AS 115 "Revenue from Contracts with Customers" This is a newly applicable Accounting Standard on Revenue which prescribes five steps revenue recognition model.||Our audit procedures included considering the appropriateness of the Companys revenue recognition accounting policies and assessing compliance with the policies in terms of the applicable accounting standards.|
|The Company recognizes revenue for a performance obligation satisfied over time after estimating its progress towards complete satisfaction of the performance obligation.||Evaluated the design of internal controls relating to implementation of the new revenue accounting standard. Selected a sample of contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and satisfaction of performance obligations.|
|The recognition of revenue requires assessments and judgments to be made on changes in work scope, claims (compensation, rebates etc.) and other payments to the extent performance obligation is satisfied.||We also examined costs included within WIP balances on a sample basis and tested their recoverability through comparing the net realizable values as per the agreements with estimated cost to complete.|
|The company measures the performance obligation by applying input method. In the contracts where performance obligation cannot be measured by input method, the output method is applied, which faithfully depict the Companys performance towards complete satisfaction of the performance obligation. During order fulfillment, contractual obligations may need to be reassessed. In addition, change orders or cancelations have to be considered. As a result, total estimated project costs may exceed total contract revenues and therefore require immediate recognition of the expected loss.||We performed following substantive procedures over revenue recognition with specific focus on whether there is single performance obligation or multiple performance obligations in the contract and whether the performance obligation is being satisfied over the period of time or at a point in time:|
| Read, analysed and identified the distinct performance obligations in these contracts.|
| Compared these performance obligations with that identified and recorded by the Company.|
|Ind AS 115 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. In addition, the new standard results into the change in accounting policy related to revenue recognition and requires extensive disclosures.|| Considered the terms of the contracts to verify the transaction price used to allocate to separate performance obligations.|
| Checked whether the performance obligation is being satisfied over the period of time or at a point in time|
| Performed analytical procedures for reasonableness of revenues disclosed.|
|For details refer Note 44 to the Standalone Ind AS Financial Statements.|
|b) System Environment and internal Controls|
|The Company is having SAP system in place but for the foreign projects they are using the Tally system for preparing the financial statement of the foreign projects.||Our procedures included but were not limited to:|
| Discussing with management and IT department on the IT environment and consideration of the key financial processes to understand where IT systems were integral to the financial reporting process.|
|FI-CO module is working since 2012-13 with its limited functionalities with no integration support from any other system like payroll, inventory etc. Further, the SAP project system module (PS) is required to generate the projects invoices with integration support.|| Testing the design of the key IT controls relating to financial reporting systems of the company.|
| We also tested the companys controls around system interfaces, and the transfer of data from one system to another.|
|The IT system in the company are not fully automated and manual interventions are in place in preparing and reporting of financial statements.|| We applied substantive audit procedures to ensure that areas where there are manual controls are operating effectively.|
|c) Evaluation of possible outcome of disputed Income Tax cases|
|The Company has following matters under litigation for Income tax. These matters involve significant management judgement to determine the possible outcome of disputes.||We have discussed with the management for evaluation of possible outcome of disputed Income Tax cases.|
|i. The Company has made provision for tax without considering the deduction under Section 80 IA of Income Tax Act, 1961. However, the ITAT has disposed pending appeal for FY 2000-01 allowing deduction u/s 80 IA and subsequently CIT(A) has allowed deduction for AY 2004-05, 2005-06, 2007-08, 2012-13, 2013-14 and 2014-15. The matters for other assessment years are contested by the company with the concerned authorities.||We obtained details of completed income tax assessments during the year ended March 31, 2019 from the management. Our internal experts also considered legal precedence and other rulings in evaluating managements position on these|
|Income tax cases under litigation.|
|Additionally, we considered the effect of new information in respect of these disputed cases to evaluate whether any change was required to managements position on these uncertainties.|
|ii. The Company is offering global income for tax in India after excluding the income earned by its permanent establishments in foreign countries having Double Taxation Avoidance Agreements (DTAA) with India. CIT||As explained by management and evaluated by us, i. the deduction u/s 80 IA has been allowed by CIT (A) for some of the assessment years in favour of the company. Provisions are continued to be retained in books on conservative principle or shown in contingent liability.|
|(A) denied the treatment of excluding such foreign income. Accordingly, the company has subsequently paid taxes, however the matter is contested by the company with the concerned authorities. For details refer Notes No. 33 of the Standalone Ind AS financial statements.||ii. Company has recognized tax expenses as per tax credit approach. There would neither be future outflow of funds nor any charge on profit in case appeal is decided against the company. Further, at present there are no major foreign projects and consequently quantum of tax on account of this issue is not material.|
Information Other than the Standalone Ind AS Financial Statements and Auditors Report thereon
The 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 Standalone Ind AS financial statements and our auditors report thereon.
Our opinion on the Standalone Ind AS 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 Standalone Ind AS 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.
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.
Responsibilities of Management and Those Charged with Governance for the Standalone Ind AS Financial Statements
The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Indian accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 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.
In preparing the financial statements, management is responsible for assessing the Companys 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.
Those Board of Directors are also responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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, 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 decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 control relevant to the audit in order to design 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 on whether the company has adequate internal financial controls system 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 disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Ind AS financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
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 Standalone Ind AS financial statements of the current period 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.
i) We did not audit the financial statements/information of Ten branches included in the Standalone Ind AS financial statements of the Company whose financial statements/financial information reflect Total Assets of Rs. 6,505.22 Crores (Previous Year Rs.6287.24 Crores) as at 31st March 2019, Total Revenues of Rs.4335.59 Crores (Previous Year Rs. 3792.05 Crores) for the year ended on that date, as considered in the standalone Ind AS financial statements. The financial statements/ information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosure included in respect of these branches, is based solely on the reports of such branch auditors.
ii) The Standalone Ind AS financial statements include Rs.3.39 Crores (Previous Year Rs.16.90 Crores) profit (net), the Companys share in four integrated joint operations (unincorporated) accounts which have been certified by other firms of chartered Accountants.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. 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 best of 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 the Company so far as it appears from our examination of those books and proper returns adequate for the purpose of our Audit has been received from branches not visited by us.
(c) The reports on the accounts of branch offices of the Company audited under section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.
(d) The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), and the Cash Flow Statement and the Statement of Change in Equity dealt with by this Report are in agreement with the books of account.
(e) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
(f) Being a government company, provision of section 164(2) of the Act are not applicable pursuant to the notification No. G.S.R.463(E) dated 5th June, 2015, issued by the Central Government of India.
(g) With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
(h) Being a government company, provision of section 197 of the Act are not applicable vide notification no. GSR 463 (E) dated 5th June 2015, issued by the Central Government of India.
(i) 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 company has disclosed the impact of pending litigations on its financial position in its financial statements refer Note 29 to the standalone Ind AS financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts -Refer Note No.16.3 to the standalone Ind AS financial statements. The Company did not have any derivative contracts for which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred, to the Investor Education and Protection Fund by the Company.
3. As required by Section 143(5) of the Act and as per directions issued by Comptroller and Auditor General of India, we report that:
|Sl. No||Directions||Auditors Replies|
|(i)||Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.||The Company has SAP / Tally system to process all the accounting transactions. For details refer Key Audit Matter on "System environment and internal controls" and our opinion on Internal Financial Control as per Annexure B of Independent Audit Report.|
|(ii)||Whether there is any restructuring of an existing loan or cases of waiver /write off of debts /loans/interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated.||No, Company is having no case of any restructuring of an existing loan or cases of waiver/ write off of debts/ loans /interest etc. made by a lender to the company due to the companys inability to repay the loan|
|(iii)||Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation.||According to the information and explanations given to us and as per our examination of records, no funds have been received/receivable for any specific schemes from central/ state agencies during the financial year 2018-19.|
|For K. G. Somani & Co.|
|Firm Registration No: 06591N|
|Place: New Delhi||Partner|
|Date: 28th May 2019||Membership No: 088155|
"Annexure A" to the Independent Auditors Report of even date on the Standalone Ind AS Financial Statements of Company for the year ended 31st March, 2019
i. a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. In Mumbai Region, Tagging/ Numbering to be done on certain assets and assets with third parties needs to be confirmed. In Northern Region, fixed assets records do not give full particulars including quantitative details and situation of fixed assets.
b) The fixed assets were physically verified by the management during the year. There is a regular program of verification, which in our opinion, is reasonable having regard to the size of the Company and nature of its business. No material discrepancies were noticed on such verifications.
c) The title deeds of immovable properties are held in the name of the Company, except lease hold building at San Martin Marg, New Delhi, Pali Hill, Mumbai and Metro Railway Central Station Building, Kolkata. Documents for the same are yet to be executed.
ii. The inventory has been physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of verification is reasonable. The discrepancies noticed on comparison of physical verification with book records were not material and have been properly dealt with in the books of account.
iii. According to the information and explanation given to us by the management and records produced, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013.Therefore, paragraph 3(iii) of the Order is not applicable to the Company.
iv. In our opinion and according to the information and explanations given to us, in respect of loans, investments, guarantees and security; the provisions of section 185 and 186 of the Companies Act, 2013 have been complied with.
v. According to the information and explanations given to us, and as per our examination of records, the Company has not accepted any deposits from public and therefore, the directives issued by the Reserve Bank of India and the provisions of Section 73 to 76 or any other relevant provision of the Companies Act, 2013, and rules framed there under, are not applicable.
vi. The Company has maintained cost records as required under section 148(1) of the Companies Act, 2013. However, we are neither required to carry out, nor have carried Out any detailed examination of such accounts and records.
vii. a. The Company is generally regular in depositing undisputed statutory dues including provident fund, income tax, goods and service tax, sales tax, service-tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues applicable with the appropriate authorities. Employees State Insurance is not applicable to the Company. According to the information and explanation given to us, there are no undisputed statutory dues which were outstanding as on 31.03.2019 for a period of more than six months from the date the same become payable.
b. According to information and explanation given to us, and as per our examination of records of the Company, following are the particulars of dues on account of sales tax, GST, service tax, entry tax, trade tax, income tax, duty of customs, royalty, provident fund, duty of excise and cess matters that have not been deposited on account of dispute as on 31.3.2019
|Sr No||Name of the statue||Name of Disputed Dues||Amount Outstanding||Period||Forum where dispute is pending|
|(Rs. In Crores)|
|1||Uttar Pradesh VAT Act, 2008||Demand Raised for Sales Tax||0.08||1982-83 & 1989 - 90||Appellate Authority, Jhansi|
|2||Bihar Sales Tax 1981||Sales Tax||1.75||1987-88 and 1994-95||Bihar Sales Tax Tribunal, Khalgaon|
|3||Sales Tax||Sales Tax 1995-96 MRO||1.99||1995-96||Bombay High Court|
|4||Sales Tax||Sales Tax 1996-97 MRO||1.52||1996-97||Bombay High Court|
|5||West Bengal State Sales Tax Act 1994||Sales Tax||0.26||1998-99||Sr. Jt Commissioner (Appeals), Sales Tax, West Bengal|
|6||Central Excise Act, 1944||Levy of Excise Duty on Bracket/Cantilever Assemblies||0.66||1998-99||CESTAT (Dept. Appeal)|
|7||Sales Tax||J&K GST ACT 1962||19.33||1999-00 TO 2005-06||J&K High Court, Deputy Commissioner Commercial Sales tax (apeals) Srinagar|
|8||Odisha VAT Act 2004||VAT||1.09||2002-03||Comm of Sales Tax, Odisha|
|9||Sales Tax||Sales Tax 2003-04-Godhra||5.47||2003-04 -2005-06||Dy. Commissioner Sales Tax authority Vadodara|
|10||West Bengal VAT Act 2003||VAT||0.71||2004-05||Asst. Comm. Of Sales Tax College St. Charge, Kolkata|
|11||Sales Tax||UP TRADE TAX - UP 01||3.74||2004-05 to 2007-08||The Assessing Authority|
|12||Entry Tax||UP TRADE TAX UP 01||0.15||2004-05||The Assessing Authority|
|13||Bihar VAT Act||VAT TDS||5.98||2005-06 & 2006-07||Bihar VAT Department, West Circle Patna|
|14||West Bengal VAT Act 2003||VAT||0.31||2005-06||WB Commercial Taxes Appellate & Revisional Board|
|15||Sales Tax||UPVAT-UP-05||0.01||2005-06||High Court Allahabad|
|16||West Bengal VAT Act 2003||VAT||0.54||2006-07||Jt Commisioner Commercial Taxes, Dharamtala Circle|
|17||Sales Tax||UPVAT-UP-05||1.31||2006-07 to 2007-08||Tribunal Jhansi Bench|
|18||Sales Tax Rewari - Ajmer Project||Works Contract Tax||1.84||2006-07 to 2010 - 11||High Court Rajasthan|
|19||DMRC Sys -II||Demand Raised||1.19||2006-07||VAT Tribunal Chandigarh|
|20||Sales Tax||Sales Tax-AGRP||2.28||2007-08 to 2012-13||The Additional Commissioner, Commercial Taxes, Ghaziabad|
|21||Sales Tax||UPTT-UP-01 (Entry Tax)||0.16||2007 -08||The Assessing Authority|
|22||Sales Tax||UPVAT ACT-UP-01||1.36||2007 08 (1.01.2008 31-03-2008)||The Assessing Authority|
|23||Sales Tax||UPVAT-UP-05||3.26||2007-08 to 2009-10||Tribunal Jhansi Bench|
|24||Sales Tax||Entry Tax-AGRP||0.037||2008-09 to 2010-11 & 2012-13 to 2013-14||The Additional Commissioner, Commercial Taxes, Ghaziabad|
|25||Sales Tax||UPVAT ACT-UP-01 (Entry Tax)||0.147||2008-09||The Appealate Authority|
|26||VAT||Demand Raised||12.51||2008-09 to 2015-16||Deputy Commissioner Lucknow|
|27||Karnataka VAT||Difference in rate of Tax and levy of Interest||0.5||2009-10||Deputy Commisioner (Appeals) Trivandrum|
|28||Service Tax||Service Tax on Agency Fees||5.6||2009-10 to 2013-14||CESTAT|
|29||Sales Tax||UPVAT ACT-UP-01 (Entry Tax)||0.005||2009-10||The Appealate Authority|
|30||Sales Tax||Sales Tax-BE-08 Entry Tax||0.02||2009-10||The Additional Commissioner,Appeal Noida|
|31||Sales Tax||Sales Tax 2010-11 MRO||0.29||2010-11||Sales Tax Office Mumbai|
|32||Service Tax||Service Tax on Agency Fees||12.91||2010-11 to 2014-15||CESTAT|
|33||Bihar VAT Act||VAT||0.07||2010-11||Bihar VAT Department, West Circle Patna|
|34||Sales Tax||UPVAT ACT-UP-01||0.01||2010 11||The Deputy Commisioner|
|35||Sales Tax||Sales Tax GED, GOA||0.54||2010-11 to 2014-15||Asst Commercial Tax Officer, Margao|
|36||Entry Tax||Demand Raised||0.32||2010- 11 to 2013-14||Deputy Commissioner Lucknow|
|37||Sales Tax||Sales Tax 2011-12 MRO||3.68||2011-12||Sales Tax Office Mumbai|
|38||Bihar VAT Act||Sales Tax 2011-12 MRO||29.2||2012-13||Bihar VAT Department, West Circle Patna|
|39||Kerela VAT||Kerela VAT||0.33||2013-14||Asst Commisioner Commercial Tax|
|40||Sales Tax||UPVAT-UP-05||2.31||2013-14 to 2014-15||Dy. Commissioner Sales Tax authority,Orai|
viii. The Company has not defaulted in the repayment of loans or borrowings to any financial institution, banks, Government during the year. The company did not issue any debenture during the year.
ix. The Company has not made any public offer (including debts instruments) during the year. However, consequent upon Govt. of India (GOI) decision to disinvest, 99,05,157 shares of the company were allotted to public on 26th September 2018 and shares of the company listed on NSE & BSE on 28th September 2018. This IPO was for disinvestment of shares held by Government of India so, Companys Share Capital is not affected. The proceeds of the disinvestment have been realized by Govt. of India (GOI). Refer Note 13 of Standalone Financial Statement.
As informed to us term loans were applied for the purposes for which those were raised. However, no fresh term loan has been raised during the year.
x. According to the information and explanations given to us, no fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the course of our audit.
xi. In view of the Government Notification No. GSR 463 (E) dated 5th June, 2015, government companies are exempt from the applicability of section 197 of the Companies Act,2013. Accordingly, clause 3(xi) of the order is not applicable to the Company.
xii. The Company is not a Nidhi Company as specified in the Nidhi Rules, 2014.Thus, the requirements under para 3(xii) of the Companies (Auditors Report) Order 2016 are not applicable to the Company.
xiii. According to the information and explanations given to us, all transactions with related parties are in compliance with section 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the financial statements etc., as required by the applicable accounting standards.
xiv. According to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.
xv. According to the information and explanations given to us, the Company has not entered into non-cash transactions with the directors or persons connected with him, within the provisions of section 192 of the Companies Act, 2013.
xvi. The Company is not a Non-banking finance company, hence registration under section 45-IA of the Reserve Bank of India Act, 1934 does not arise.
|For K. G. Somani & Co.|
|Firm Registration No: 06591N|
|Place: New Delhi||Partner|
|Date: 28th May 2019||Membership No: 088155|
"Annexure B" to the Independent Auditors Report of even date on the Standalone Ind AS Financial Statements of Ircon International Limited for the year ended 31st March, 2019
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial reporting of Ircon International Limited "the Company" as of March 31, 2019 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internal financial controls 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 (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.
Our responsibility is to express an opinion on the Companys 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 prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, 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 financial statements, whether due to fraud or error.
We believe that the audit evidence we have 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.
According to the information and explanations given to us and based on our audit and branch auditors audit report, the following material weaknesses have been identified as at March 31, 2019.
(a) The Company has an integrated ERP system which was not used at its full potential. In the foreign projects the company has not used ERP system for the preparation of financial accounts instead software "Tally" was used for the same. Further, the SAP project system module (PS) is required to generate the projects invoices with integration support.
(b) The Inventory records at some units is maintained manually and the inventory manual in SAP is under consideration. Further continuous identification system of surplus/obsolete/non-moving/ broken assets and material/stores is inadequate and needs to be strengthened.
(c) No maker checker system exists at some of the projects of the Region since the vouchers are prepared and approved by the same finance personnel, affecting efficiency of internal financial control system.
A material weakness is a deficiency, or a combination of deficiencies in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.
In our opinion, except for the effects/ possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, "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".
Emphasis of Matter
Few cases of reduction of bills by the client and accepted by the project without noting therein full reasons/justifications have been observed for which follow up with client needs to be improved.
Our opinion is not modified in report of this matter.
Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal financial controls over financial reporting insofar as it relates to a branches/Region, is based on the corresponding report of other auditors.
We have considered the material weakness identified and reported above in determining the nature, timing and extent of audit procedures applied in our audit of the standalone financial statement of the company for the year ended 31st March, 2019 and this material weakness does not affect our opinion on the Standalone financial statement of the company.
|For K. G. Somani & Co.|
|Firm Registration No: 06591N|
|Place: New Delhi||Partner|
|Date: 28th May 2019||Membership No: 088155|