Opinion
1. We have audited the accompanying Standalone Financial Statements of Siemens Limited (''the Company") which comprise the Standalone Balance Sheet as at 30 September 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information.
2. 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 30 September 2024, total comprehensive income (comprising of profit and other comprehensive loss), changes in equity and its cash flows for the year then ended.
Basis for Opinion
3. We conducted our audit 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 thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matter
4. 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.
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Key audit matter
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How our audit addressed the key audit matter
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Revenue recognition in respect of construction contracts
(Refer notes 34 and 44 to the standalone financial statements)
A significant portion of the Company's business is from construction contracts with its customers, which generally extend over a long period of time.
The contract prices are generally fixed at contract inception, and also include elements of variable consideration such as liquidated damages, claims and multiple performance obligations.
In respect of these contracts, the Company recognises revenue over a period of time in accordance with its accounting policy. Recognition of contract revenue involves determination of percentage completion of the project. The contract revenue is measured based on the proportion of contract costs incurred for work performed till date relative to the estimated total contract costs. This method requires the Company to perform an initial assessment of total estimated cost, compare with actual cost incurred and reassess the total estimated cost for completion of contract at each reporting period to determine the appropriate percentage of completion.
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Our procedures performed included the following:
(a) Obtained an understanding of the business process, evaluated the design and tested the operating effectiveness of key controls, specific to such customer contracts, including determination of contract price, performance obligations, estimation of contract costs, management reviews and approvals thereof;
(b) Assessed the appropriateness of the revenue recognition accounting policies in line with Ind AS 115 'Revenue from Contracts with Customers';
(c) For selected sample of contracts, performed the following:
- Obtained and examined project related documents such as contracts, customer communications and price or scope variation orders;
- Tested the contract revenue, determination of performance obligations, including variable consideration with underlying documents (as explained above) and evaluated management's assessment by reviewing the contractual terms as considered necessary;
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Key audit matter
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How our audit addressed the key audit matter
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The estimation involves exercise of significant judgement by the management in making forecasts of future cost to complete the contract considering future activities to be carried out in the contract, which includes determination and assessment of probability related to contract risk contingencies, cost savings or additional costs, warranty costs, adjustments to contract revenue on account of penalties for breach of contract, liquidated damages and consequential provision for foreseeable losses on onerous performance obligations, if any, after considering specific circumstances of each contract.
Further, based on contractual tenability of claims, price or scope variations and progress of discussions and negotiations with the customers, the Company's management periodically assesses the recoverability of claims and price or scope variations recognised as part of contract revenue, if any, based on certain assumptions.
This has been considered as a key audit matter in view of the following:
- There is an inherent risk and a presumed risk of fraud in revenue recognition, considering also the customised and complex nature of the customer contracts; and
- Revenue recognition is complex and involves significant management judgements and estimates. These relate to identifying performance obligations, transaction price, estimating the balance cost-to-complete the project and determining the percentage of completion for the purpose of recognizing revenue for the relevant performance obligations.
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- Assessed the reasonableness of management's basis for determining the total costs, including changes made during the year by reference to supporting documents and estimates made in relation to cost-to-complete the projects;
- Performed a retrospective analysis of costs incurred with planned costs and margins in respect of completed contracts;
- Performed procedures with respect to management's development of the budgeted project costs, changes between planned and actual costs, the estimated costs to complete and management's assessment of probabilities related to contract risks;
- Tested the mathematical calculation of percentage of completion based on the total estimated cost and the total actual cost incurred and the revenue recognised based on the percentage of completion; and
- Tested contract asset and contract liability balances based on the status of specific contracts, considering the billing done, revenue recognised and advances received from customer, if any, through the reporting date;
- Tested the actual cost incurred and billing done during the year with supporting documents; and
(d) Evaluated the adequacy of the disclosures made in the
standalone financial statements.
Based on the above procedures performed, no material exceptions were noted.
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Key audit matter
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How our audit addressed the key audit matter
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Related Party Transactions and Balances
(Refer note 47 to the standalone financial statements)
The Company has entered into various related party transactions during the year and has outstanding balances at the reporting date.
This has been considered as a key audit matter in view of the following:
- We identified the risk of completeness of disclosure of related party transactions in the standalone financial statements;
- Compliance of related party transactions with the requirements of the Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 ("SEBI LODR") and Ind AS 24 'Related Party Disclosures'; and
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Our procedures performed included the following:
(a) Obtained an understanding of the related party transactions, evaluated the design and tested the operating effectiveness of the controls related to identification of related parties, approval of related party transactions and disclosure of transactions and balances with related parties in the standalone financial statements;
(b) Obtained an understanding of the Company's policies and procedures in respect of evaluating arms-length pricing principle, including approval process by the Audit Committee, the Board of Directors and the Shareholders of the Company, as applicable;
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Key audit matter
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How our audit addressed the key audit matter
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- Significance of transactions and balances with related parties.
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(c) Obtained and reviewed the minutes of the meeting of the Audit Committee, the Board of Directors and the Shareholders;
(d) Obtained an understanding of the Company's process for clearing and settlement of related party transactions and balances (i.e., payments and receipts) through an intermediary, a unit of the ultimate holding company, followed globally within the Siemens AG group;
(e) Obtained management's evaluation of compliance of related party transactions with the relevant provisions of the Companies Act 2013 and SEBI LODR;
(f) On a sample basis, tested the amounts disclosed with the underlying supporting documentation, relevant agreements, confirmations and books and records obtained during the course of our audit;
(g) On a sample basis, evaluated the arms-length pricing principle applied by the management in respect of related party transactions, including segment wise margin analysis study; and
(h) Evaluated the adequacy of the disclosures made in the standalone financial statements.
Based on the above procedures performed, no material
exceptions were noted.
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Key audit matter
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How our audit addressed the key audit matter
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Assessment of Provision for Warranty costs and Accrual for expenses
(Refer notes 2(f), 27, 28, 32 and 43 to the standalone financial statements)
The Company has warranty obligations in respect of its contracts with customers, which generally extend over a period exceeding one year covering both warranty and postwarranty periods. The Company also recognises accruals for expenses in respect of its revenue contracts with customers in line with its accounting policy.
In accordance with Ind AS 37 'Provisions, Contingent Liabilities and Contingent Assets', the Company estimates provision for warranty obligation, considering factors such as portfolio changes, historical trend of warranty claims, costs, and expected pattern of future warranty claims based on the management technical risk assessment and estimated repair and replacement costs. The provision for warranty obligation is by its nature based on management judgement, which in turn involves estimation risk and uncertainties. These estimates are inherently susceptible to change as more relevant information becomes available and may vary from historical experience of actual claims.
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Our procedures performed included the following:
(a) Obtained an understanding, and evaluated and tested the design and operating effectiveness of the controls over estimation and recording of provision for warranty costs and accrual for expenses in respect of revenue contracts with customers;
(b) Obtained an understanding of the contractual terms of warranty provided under the Company's revenue arrangements with its customers;
(c) On a sample basis, assessed management's estimation process by performing a look-back analysis for warranty costs incurred in prior year;
(d) On a sample basis, tested the accrual for expenses in respect of revenue contracts with customers to the supporting documentation and Company's accounting policies;
(e) Evaluated management's method for estimating warranty obligations by testing key inputs/factors such as historical trend, estimation of expected pattern of future warranty claims, estimated repair or replacement costs, technical risk evaluation, etc.;
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Key audit matter
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How our audit addressed the key audit matter
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The Company also recognizes accrual for expenses based on actual or estimated cost in respect of its revenue contracts in accordance with its accounting policy.
This has been considered as a key audit matter in view of the following:
- The provision for warranty costs involves significant management judgements and estimates as described above; and
- The significance of the provision for warranty costs and accrual for expenses in respect of revenue contracts with customers collectively, including presentation and disclosures thereof.
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(f) On a sample basis, tested the computation of provision for warranty costs and accrual for expenses in respect of its revenue contracts with customers; and
(g) Evaluated the adequacy of disclosures made in the standalone financial statements in respect of provision for warranty costs and accrual for expenses in respect of revenue contracts with customers.
Based on the above procedures performed, we identified misstatements relating to provision for warranty cost and accrual for expenses in respect of revenue contracts with customers, which have been adjusted in the financial statements, and we communicated the identified misstatements and internal control observations to the management and those charged with governance.
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Other Information
5. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the standalone financial statements and our auditor's report thereon. The annual report is expected to be made available to us after the date of this auditor's report.
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 information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate action as applicable under the relevant laws and regulations.
Responsibilities of management and those charged with
governance for the standalone financial statements
6. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone 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 Accounting Standards 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 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
7. 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 responsibilities for the audit of the standalone
financial statements
8. Our objectives are to obtain reasonable assurance about whether the standalone 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
Auditor's responsibilities for the audit of the standalone financial statements (Continued)
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.
9. 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 with reference to standalone financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of 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 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 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.
10. 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.
11. 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.
12. 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.
Other Matter
13. The standalone financial statements of the Company for the year ended 30 September 2023 were audited by another firm of chartered accountants under the Act who, vide their report dated 28 November 2023 expressed an unmodified opinion on those standalone financial statements.
Report on other legal and regulatory requirements
14. 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 B", a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
15. 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.
Report on other legal and regulatory requirements (Continued)
(b) In our opinion, proper books of account and books and paper as required by law relating to preparation of the aforesaid standalone financial statements have been kept so far as it appears from our examination of those books, except that the backup of certain books of account and other books and papers maintained in electronic mode has not been maintained on a daily basis on servers physically located in India during the year and the matters stated in paragraph 15(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended) ("the Rules").
(c) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows 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.
(e) On the basis of the written representations received from the directors as on 30 September 2024, taken on record by the Board of Directors, none of the directors is disqualified as on 30 September 2024, from being appointed as a director in terms of Section 164(2) of the Act.
(f) With respect to the maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 15(b) above on reporting under Section 143(3)(b) and paragraph 15(h)(vi) below on reporting under Rule 11(g) of the Rules.
(g) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".
(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, 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 standalone financial statements - Refer note 41 (b) to the standalone 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 including derivative contracts -Refer notes 26 and 43 to the standalone financial statements;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year.
iv. (a) The Management has represented that, to
the best of their knowledge and belief and other than as disclosed in Notes 9 and 18 to the standalone financial statements, as disclosed in Note 64(iii) 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 or entity, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the 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, as disclosed in Note 64(iv) to the standalone financial statements, no funds have been received by the Company from any person or entity, including foreign entities ("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; and
(c) Based on such audit procedures that we considered reasonable and appropriate in
the circumstances, nothing has come to our notice that has caused us to believe that the representations under subclause (a) and (b) contain any material misstatement.
v. The dividend declared and paid during the year by the Company is in compliance with Section 123 of the Act.
vi. Based on our examination, which included test checks, the Company has used multiple accounting software for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and that has operated throughout the year for all relevant transactions recorded in the software, except for the following:
a) In respect of the core accounting software, the audit log is not maintained in case of modification made with specific access and no audit trail has been enabled at the database level;
b) With respect to one application operated by third party service provider for maintaining certain employee records for the period 1 April 2024 to 30 September 2024 in the absence of any information pertaining to audit trail in the independent service auditor's report, we are unable to comment on the audit trail (edit log) feature in that accounting software; and
c) With respect to another application operated by third party service provider for maintaining certain payroll records for the period 1 July 2024 to 30 September, 2024 in the absence of the independent service auditor's report, we are unable to comment on the audit trail (edit log) feature in that accounting software.
During the course of performing our procedures, other than the aforesaid instances of audit trail not maintained, where the question of our commenting does not arise, we did not notice any instance of audit trail feature being tampered with.
16. The Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.
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