We have audited the accompanying standalone financial statements of KAARYAFACILITIES AND SERVICES LIMITED (the “Company”), which comprise the BalanceSheet as at 31st March, 2024, the Statement of Profit and Loss and the Statement ofCash Flows for the year ended on that date and a summary of significant accountingpolicies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us, except for the possible effects of the matters described in the ‘Basis forQualified Opinion' section of our report, the aforesaid financial statements give theinformation required by the Companies Act, 2013 (“the Act”) as amended in themanner 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 atMarch 31, 2024 in the case of the Statement of Profit and Loss, of the Loss of theCompany for the year ended on that date, and in the case of the Cash FlowStatement, of the cash flows for the year ended on that date.
i) We have been informed that considering the nature of business in which thecompany is engaged into, the company acts as an intermediary for supply ofmanpower to its customers and therefore for the years prior to FY 2023-24, thecompany has a policy of making payment of Employee’s and Employer’s contributionto Provident Fund and other components of Employee Benefit Expenses solely basedon the approvals/payments received from the Principal (Customer) or when the said
amount of contribution is demanded by the concerned employee.
Accordingly, the effect of the said policy for payment of Provident Fund for earlieryears in the Statement of Profit and Loss for FY 2023-24 amounts to Rs. 63.26 Lakhs.We are unable to comment on the total amount of Provident Fund Liability pendingfor earlier years.
ii) The Company has outstanding statutory liabilities as on 31-Mar-2024 for variousprevious years as under:
Particulars
Amount
(Rs.)
Goods and Service Tax
3,81,84,458
Since these statutory liabilities attract mandatory interest, the Company is requiredto provide for the interest on accrual basis. However, Company has not provided forthe interest on said statutory liabilities. This has resulted in loss being understated tothe extent of such non-provision.
iii) The Company has made the provision for gratuity liability based on the actuarialvaluation as referred in the Accounting Standard 15 “Employee Benefits” only forlimited Corporate Employees leaving out temporary corporate employee. On thebasis of information and explanations received from the management, the Gratuityprovision has been made only in respect of permanent corporate employees and doesnot cover field staff in view of recoverability of such employee benefits from theprincipal employer. The said practice is at variance with AS -15. The impact of sameon Statement of Profit and Loss is unascertained.
Emphasis of Matter
i) As per the information received from the company, the following statutory liabilitiesfor FY 2023-24 are outstanding as at 31st March, 2024:
Amount (Rs.)
1,93,28,199
Karnataka Labour Welfare Fund
4,560
Provident Fund (Employee & Employer’s Contribution)
1,20,35,856
TDS
3,83,078
ESIC
2,75,391
Profession Tax
4,81,225
The above Statutory Liabilities are in agreement with the books of accounts.
Our opinion is not modified in respect of this matter.
Material Uncertainty Related to Going Concern
We draw attention to disclosure made in Note 1 - Significant Accounting Policies tothe financial statements, which indicates that the Company incurred a net loss of Rs.5,05,81,135/- during the year ended 31st March, 2024 (Previous Year ended 31stMarch, 2023, Loss of Rs. 7,78,70,932/-) and the company's networth has completelyeroded indicating that a material uncertainty exists that may cast significant doubton the Company's ability to continue as a going concern. Our opinion is not modifiedin respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were ofmost significance in our audit of the audited financial statements of the currentperiod. These matters were addressed in the context of our audit of the auditedfinancial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters. In addition to the matter described inthe Basis for Opinion section we have determined the matters described below to be
the key audit matters to be communicated in our report.
Sr.
No.
Key Audit Matter
Auditor's Response
1
Sales Contracts -
Principal Audit Procedures. Our
Accuracy of revenues
audit approach was a combination
and onerous obligations
of test of internal controls and
in respect of fixed price
substantive procedures which
contracts.
included the following: -
Evaluated the design of internalcontrols relating to recording ofefforts incurred and estimation ofefforts required to complete theperformance obligations.
Tested the access and applicationcontrols pertaining to timerecording, allocation and budgetingsystems which preventsunauthorized changes to recordingof efforts incurred.
Selected a sample of contracts andthrough inspection of evidence ofperformance of these controls,tested the operating effectivenessof the internal controls relating toefforts incurred and estimated.
Selected a sample of contracts and
performed a retrospective reviewof efforts incurred with estimatedefforts to identify significantvariations and verify whether thosevariations have been considered inestimating the remaining efforts tocomplete the contract.
Reviewed a sample of contractswith unbilled revenues to identifypossible delays in achievingmilestones, which require changein estimated efforts to complete theremaining performance obligations.
The Company's Board of Directors is responsible for the other information. Theother information comprises of the information included in the ManagementDiscussion and Analysis, Board's Report including Annexures to Board's Report,Business Responsibility Report, Corporate Governance and Shareholder'sInformation, but does not include the consolidated financial statements, standalonefinancial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, ourresponsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the standalone financialstatements or our knowledge obtained during the course of our audit or otherwiseappears 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.
Management's Responsibilities for the Standalone Financial 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 standalone financial statements that give a true and fair view of the financialposition, financial performance, and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the AccountingStandards specified under Section 133 of The Act, read with Rule 7 of TheCompanies (Accounts) Rules, 2014 (‘the Rules') and The Companies (AccountingStandards) Rules, 2021. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design,implementation and maintenance of adequate internal financial controls, that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords, relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement,whether due to fraud or error.
In preparing the standalone financial statements, management is responsible forassessing the Company's ability to continue as a going concern, disclosing, asapplicable, matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement, whether due tofraud 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 anaudit conducted in accordance with SAs will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these standalonefinancial 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 standalone financialstatements, whether due to fraud or error, design and perform audit proceduresresponsive to those risks, and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.
• Obtain an understanding of internal financial control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act, we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operating
effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.
• Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 exists,we are required to draw attention in our auditor's report to the related disclosures in thestandalone financial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Company to ceaseto continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financialstatements, including the disclosures, and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat, individually or in aggregate, makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may beinfluenced. 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 standalone financialstatements.
We communicate with those charged with governance regarding, among othermatters, the planned scope and timing of the audit and significant audit findings,including any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that we havecomplied with the relevant ethical requirements regarding independence, and tocommunicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards.
1. As required by the Companies (Auditor's Report) Order, 2020 (“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.
2. As required by Section 143(3) of the Act, based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the best ofour knowledge and belief were necessary for the purposes of our audit.
b) In our opinion, proper books of accounts 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 the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the AccountingStandards specified under Section 133 of the Act read with rules except for the matters asspecified in the "Basis of Qualified Opinion" Paragraph.
e) On the basis of the written representations received from the directors as on 31st March,2024 taken on record by the Board of Directors, none of the directors are disqualified ason 31st March, 2024 from being appointed as a director in terms of Section 164(2) of theAct.
f) With respect to the adequacy of the internal financial controls with reference to thefinancial statements of the company and the operating effectiveness of such controls,refer to our separate report in “Annexure B”.
g) With respect to the matter to be included in the Auditor's report under Section 197(16)of The Companies Act, 2013:
In our opinion and according to the information and explanation given to us, theremuneration paid during the current year by the Company to its directors is inaccordance with the provisions of Section 197 of the Act read with schedule v. Theremuneration paid to directors by the Company is not in excess of the limit laid downunder Section 197 of the Act read with Schedule v.
h) With respect to the other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in ouropinion 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/contingent liabilitiesas on 31st March, 2024 in its financial statements- Refer note 27 of financialstatements.
ii. The Company did not have long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred in InvestorEducation and Protection Fund by the Company.
iv. Based on our examination which included test checks, the Company has usedaccounting software for maintaining its books of accounts, which has a feature ofrecording audit trail (edit log) facility which has been enabled throughout theFinancial Year 2023-24.
In continuation to the above and based on our examination it is seen that the audittrail provides the list of altered records. Based on our test check, we did not comeacross any instance of the audit trail feature being tampered with.
v. As per Rule 11(e), we report as under:
(a) The Management has represented that, to the best of its knowledge andbelief, no funds (which are material either individually or in the aggregate)have been advanced or loaned or invested (either from borrowed funds orshare premium or any other sources or kind of funds) by the Company to orin any other person or entity, including foreign entity (“Intermediaries”),with the understanding, whether recorded in writing or otherwise, that theIntermediary shall, whether, directly or indirectly lend or invest in otherpersons or entities identified in any manner whatsoever by or on behalf ofthe Company (“Ultimate Beneficiaries”) or provide any guarantee, securityor the like on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge andbelief, no funds (which are material either individually or in the aggregate)have been received by the Company from any person or entity, includingforeign entity (“Funding Parties”), with the understanding, whetherrecorded in writing or otherwise, that the Company shall, whether, directlyor indirectly, lend or invest in other persons or entities identified in anymanner whatsoever by or on behalf of the Funding Party (“UltimateBeneficiaries”) or provide any guarantee, security or the like on behalf of theUltimate Beneficiaries;
(c) Based on the audit procedures that have been considered reasonable andappropriate in the circumstances, nothing has come to our notice that hascaused us to believe that the representations under sub-clause (i) and (ii) ofRule 11(e), as provided under (a) and (b) above, contain any materialmisstatement.
vi. As stated in Notes forming part of the financial statements:
(a) No final dividend was proposed by the company during the previousyear;
(b) No interim dividend was declared and paid by the Company during theyear;
For Shetty Naik & AssociatesChartered Accountants
Firm Registration No.: 124851W
SD/-
CA. Jagdish ShettyPartner
Membership No.: 111936
Place: Mumbai
Date: 30th May, 2024
UDIN: 24111936BKCJBP4064