We have audited the accompanying Standalone Financial Statements of Canarys Automations Limited (formerly known as Canarys Automations Private limited) (“the Company") which comprises the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and notes to the Standalone Financial Statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the Standalone Financial Statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone 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 accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2024, its profit and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of Standalone Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone 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 together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules issued 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 obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the Standalone 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 Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone 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.
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SI.
No.
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Key Audit Matter
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Auditor's Response
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1.
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Revenue recognition - Fixed price
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Principal Audit Procedures Performed included
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contracts using the percentage of completion method
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the following:
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Use of the percentage-of-completion method requires the Company to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or
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Our audit procedures related to the determination of whether revenue is recognized on a straight-line basis or using the percentage of completion method included the following, among others:
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costs to be incurred. The estimation of total
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• We tested the effectiveness of controls relating to the
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efforts or costs involves significant
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determination of whether revenue for certain contracts
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judgement and is assessed throughout the
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is recognized on a straight-line basis or using the
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period of the contract to reflect any changes
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percentage of completion method.
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based on the latest available information.
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• We selected a sample of fixed price contracts with
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We identified the estimate of total efforts or
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customers measured the using percentage-of-
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costs to complete fixed price contracts measured using the percentage of completion
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completion method and performed the following:
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method as a key audit matter as the estimation
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Obtained and read contract documents for each
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of total efforts or costs involves significant
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selection, including service agreements and other
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judgement and is assessed throughout the
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documents that were part of the agreement.
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period of the contract to reflect any changes based on the latest available information.
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Tested the estimate for consistency with the status
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of delivery of milestones and customer acceptances
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This required a high degree of auditor judgment
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and sign-off from customers to identify possible
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in evaluating the audit evidence and a higher extent of audit effort to evaluate the reasonableness of the total estimated amount of revenue recognized on fixed-price contracts.
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delays in achieving milestones.
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2
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Trade Receivables and Provision for
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Principal Audit Procedures Performed included
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doubtful receivables
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the following:
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A significant amount of revenue generated by the company is through telemetry services where a substantial portion of receivables is attributable to government entities, average ageing of which is between 1 and 2 years.
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Our audit procedures related to the determination of whether the realizable value of trade receivables is accurate included the following:
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• We selected a sample of fixed price contracts with
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The company is unable to obtain balance
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customers for which revenue is outstanding for a period
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confirmations regarding the outstanding amount to be received from these entities as on
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between one to two years.
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31 March 2024.
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Observation of the trend of receipts happening
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during the year in order to check against which
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There has been no provision for doubtful debts created against such receivables, as the Company believes, on the basis of past realization trends, indicate a high probability
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invoices the receipts have happened during the year.
On observation of the same, we concur with the
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of receiving these outstanding amounts.
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management’s view that the ageing of receivables received in the current year is around one-two years
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We identified this to be key audit matter as it
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and the same trend is expected to continue in the
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involves high degree of auditor judgment in
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future and accordingly provision for doubtful debts
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evaluating the audit evidence.
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need not be provided for.
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SI.
No.
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Key Audit Matter
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Auditor’s Response
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3
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Intangible Assets under development
Company has estimated the projected revenue based on its evaluation of targeted market share and determination of total costs associated with human resource required for solution developments. We identified the expenditure related to human resource involved in solution development have been capitalized in the FY 2023-24.
This required a high degree of auditor judgment in evaluating the audit evidence since this estimate has a high inherent uncertainty of realization of projected revenues.
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Principal Audit Procedures Performed included the following:
Our audit procedures related to the assessing the reliability of realization of project revenues shared by the management included the following, among others:
• We tested the effectiveness of controls relating to the capitalization of intangible assets under development.
• We selected a sample of employees and evaluated their timesheets with the cost capitalized.
• We obtained the market study and other research conducted by the management and evaluated their source of such research.
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4
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Provision for compensated absences
The company has recorded a provision for compensated absences related to privilege leaves that employees carry forward to subsequent financial year.
The provision is based on the assumption that 50% of these carried-forward leaves will be taken by employees, based on an analysis of past trends.
This estimation involves significant judgment and assumptions regarding future leave utilization patterns of employees, which could materially affect the Standalone Financial Statements.
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Principal audit procedures performed included the
following:
• We gained an understanding of the company’s process for calculating the provision for compensated absences.
• We tested the accuracy and completeness of the data used in the provision calculation.
• We reviewed the disclosures in the Standalone Financial Statements related to the provision for compensated absences to ensure they were adequate and in accordance with relevant accounting standards.
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Information Other than the Standalone Financial Statements and Auditor’s Report Thereon
The Company’s Management and Board of Directors are responsible for the preparation of the other information. The other information comprises the information included in the Director’s Report including Annexures to the Director’s Report but does not include the Standalone Financial Statements and our auditor’s report thereon.
Our opinion on the Standalone 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 Financial Statements, our responsibility is to read the other infoimation 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. The Director’s report is not made available to us as at the date of this Auditor’s report. We have nothing to report in this regard. The secretarial audit report is not made available to us as at the date of this auditor’s report. We have nothing to report in this regard.
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Companies (Accounting Standards) Rules, 2021 specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements 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 Standalone Financial Statements 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 for assessing the Company’s 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.
The Board of Directors is also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statementsas a whole are free from material misstatement, whether due 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 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 Standalone Financial Statements.
As 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 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 Act, 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 the management.
• Conclude on the appropriateness of management’s 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 Company’s ability 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 the Standalone Financial Statements or, if such disclosures are inadequate, to modifyjoun-opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. Hpwever^fittme events or conditions may cause the Company to cease to continue as a going concern. / U . \
• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone 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 Standalone 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 Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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.
Report on Other Legal and Regulatory Requirements
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 Act, we give in the “Annexure A” to the Independent Auditor’s Report, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable
2. (A) As required by Section 143(3) of the Act, we report that:
a. We have sought and obtained all the information and explanations which to the 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.
c. The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
d. In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with relevant rules, as amended:
e. On the basis of the written representations received from the directors as on March 31, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164 (2) of the Act.
f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls as required under Clause (i) of Sub-section 3 of^egtmrTMAof the Act,
refer to our separate Report in “Annexure B” to the Independent Auditor’s Report. /ÝSy' \C\
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g. With respect to the other matters to be included in the Auditor’s 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.
(B) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule II of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:
a. The company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements- Refer Note 29
b. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
c. There is no amount required to be transferred to the Investor Education and Protection Fund by the Company.
d. (i) The management has represented that, to the best of its knowledge and belief, as disclosed in note 36 to the Standalone Financial Statements, 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 Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) The management has represented, that, to the best of its knowledge and belief, as disclosed in note 36 to the Standalone Financial Statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall 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
(iii) Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (d) (i) and (d) (ii) contain any material misstatement.
e. The interim dividend for preference share capital is declared and paid by the Company during the year and until the date of this audit report is in accordance with Section 123 of the Act.
f. Based on our examination which included test checks, except for the instances mentioned below, the Company has used accounting softwares for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective software:
i. The feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes for the accounting softwares used for maintaining the books of account relating to payroll process, property, plant, and equipment.
ii. The feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes for the accounting softwares used for maintaining the books of account relating to inventory.
Further, for the periods where the audit trail (edit log) facility was enabled and operated throughout the year for the respective accounting software, we did not come across any instance of the audit trail feature being tampered with.
for SURESH & CO__
Chartered Account^pfs-S^ <S\
Firm Registratiort^kd^042^E>\
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Udupi Vikram
Partner
Membership No.: 227984
Bengaluru
28 May 2024
UDIN: 24227984BJZWZA8302
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