We have audited the accompanying Standalone Financial Statements of MosChip Technologies Limited ('the Company'), which comprise the Standalone Balance Sheet as at 31 March 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), Standalone Statement of Changes in Equity and Standalone Statement of Cash Flows for the year then ended, and notes forming part of Standalone Financial Statements, including a summary of material accounting policies and other explanatory information (hereinafter referred to as 'the Financials Statements').
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 ('Ind AS') as amended and other accounting principles generally accepted in India, of the State of Affairs of the Company as at 31 March 2024 and its profit, 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 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 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 ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's 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 Financial Statements.
Key audit matters
Key audit matters ('KAM') are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the 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 Matters:
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Key Audit Matter
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Auditor's Response
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1. Revenue Recognition
Revenue of the Company is mainly from information Technology services comprising software development, consulting, and related services. Revenue from these contracts are recognised over a period of time in accordance with the requirements of Ind AS 115, Revenue from contracts with customers.
Due to nature of contracts, revenue recognition involves usage of percentage of completion method, which is determined by survey of work performed, which involves significant judgements, identification of contractual obligations and the Company's right to receive payments for performance completed till date, change in scope and the consequential revised price contract price and recognition of the liability for loss making contract/onerous obligations.
Accordingly, revenue recognition involves aforesaid significant judgement and estimation. Hence, we determine this to be a key audit matter.
Refer note 2.10 to the Financial Statements.
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Our audit procedures includes:
• Obtaining an understanding of the systems, processes and controls for evaluation of fixed price contracts to identify distinct performance obligations and recognition of revenue.
• Evaluation of design and operating effectiveness of internal controls relating to recording of the contract value, determining the transaction price, allocation of consideration to performance obligations, measurement of efforts incurred and process around estimation of efforts required to complete the performance obligations and the most appropriate method to recognise revenue.
• We selected a sample of contracts with customers and performed the following procedures:
• Evaluated the identification of performance obligation.
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Key Audit Matter
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Auditor's Response
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• Considered the terms of the contracts to determine the transaction price, including adjustments for any sum's payable to the customer;
• Determined if the Company's evaluation of the method used for recognition of revenue is appropriate.
• Tested the Company's calculation of efforts incurred, estimation of contract efforts including estimation of onerous obligation, through a retrospective review of efforts incurred with estimated efforts.
• Assessed the appropriateness of the related disclosures in the Financial Statements.
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2. Goodwill on business acquisition:
As detailed in the Note 42 to the Financial Statements the company carries a Goodwill of ?5,511.00 lakhs as at 31 March, 2024.
This Goodwill was recognised on acquisitions over a period, in terms of Ind AS 103 Business Combinations. The Carrying values of the Goodwill are based on the present value of future cash inflows and there exists a risk of impairment if cash flows are not in line with projections.
As per Ind AS 36, 'Impairment of Assets', the goodwill acquired in business combination shall be tested annually for impairment. For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer's cash-generating units (CGU) or groups of cash-generating units, that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.
Valuation of goodwill subject to management assessment of recoverable amount being higher of (i) fair value less costs to sell and (ii) value in use, involving significant judgement and are based on number of variables and estimates including projection of future sales, operating costs and profit margins; appropriate discount rate and terminal value growth rate; and probability of success in applying discounted cashflow valuation methodology.
The assessment of impairment involves significant degree of management judgements and estimates. The management has concluded that the recoverable amount of CGU is higher than its carrying amount and accordingly, no impairment provisions has been recorded as at 31 March 2024. Accordingly, we determined impairment of such goodwill arising from business combination as Key Audit Matter for the current year audit.
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We carried out the following audit procedures:
• Evaluated the design and tested the operating effectiveness of the Company's controls in assessing the recoverable value of goodwill.
• Assessed the Company's methodology applied in determining the CGUs to which these assets are allocated.
• Tested the estimated recoverable value of these assets and assessed the methodologies used by management in deriving the recoverable value and tested the significant assumptions and the underlying data used by the Company in its analysis.
• Where management has used an independent valuer, evaluated the independent valuer's competence, capabilities and objectivity, and assessing the valuation methodology used by the independent valuer to estimate the fair value of investments.
• Compared the significant assumptions to current industry, market and economic trends andrelatedCompany's historical data.
• Performed sensitivity analyse of the significant assumptions to evaluate the potential change in the recoverable values of these assets resulting from hypothetical changes in underlying assumptions.
• Assessed and validated the adequacy and appropriateness of the disclosures made by the management in the Financial Statements.
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Information Other than the 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 Management Discussion and Analysis, Board's Report including Annexures to Board's Report, Business Responsibility and sustainable Report, Corporate Governance and Shareholder's information, but does not include the Consolidated Financial Statements and Standalone Financial Statements and our auditor's report thereon.
Our opinion on the 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 Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the 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 Managementand those charged with Governance for the Financial Statements
The Company's management and Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Financial Statements that give a true and fair view of the Financial Position, Financial Performance, including Other Comprehensive Income, Changes in Equity and Cash Flows of the Company in accordance with the Indian Accounting Standard('Ind AS') specified under section 133 of the Actand other accounting principle generally accepted in India. 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 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 and Board of Directorsare 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors of the company are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of the 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 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 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 controls.
• Obtain an understanding of internal financial controls 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 with reference to Financial Statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and reasonableness of accounting estimates and related disclosures made by 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 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 auditor's 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 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 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 ‘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 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 including Other Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flow dealt with by this report are in agreement with the relevant books of account.
d. In our opinion, the aforesaid Financial Statements comply with the Ind AS specified under Section 133 of the Act.
e. On the basis of the written representations received from the directors as on 31 March 2024 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 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 with reference Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in ‘Annexure-B'. Our report expresses an unmodified opinion on the adequacy and the operating effectiveness of the Company's Internal Financial Controls with reference to Financial Statements.
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.
h. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 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:
i. The Company has disclosed the impact of pending litigations on its financial position in its Financial Statements. Refer Note.33to the Financial Statements.
ii. The Company didn't have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There are no amounts required to be transferred to the Investor Education and Protection Fund (IEPF) by the Company as no dividends are declared by the Company. Hence there are no delays in transfer of amounts to IEPF.
iv. a. The management has represented that, to the best of its knowledge and belief, no funds (which are material
either individually or in the aggregate) 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 or entity, including foreign entity (“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 Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
b. The management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company 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;
c. Based on the audit procedures that have been 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 (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. No dividend is declared or paid during the year by the Company and accordingly, compliance with section 123 of
the Act is not applicable to the Company.
vi. Based on our examination which included test checks, the company has used an accounting software for maintaining
its books of account for the financial year ended 31 March 2024, which has a feature of recording audit trail (edit log)
facility as per Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 we report that the same has operated
throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from 1 April 2023 and reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended 31 March 2024.
For ST Mohite & Co
Chartered Accountants ICAI Firm Registration Number : 011410S
HIMA BINDU SAGALA
Partner
Membership No : 231056
Place: Hyderabad ICAI UDIN : 24231056BKFSLW4085
Date: 06 May 2024
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