To the Members of Tracxn Technologies Limited Key audit matters
Report on the Audit of the Financial StatementsOpinion
1. We have audited the accompanying financial statements of Tracxn Technologies Limited ("the Company”), which comprise the Balance Sheet as at March 31, 2024, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the 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 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, and total comprehensive income (comprising of profit and other comprehensive income), 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 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 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.
4. Key audit matters are those matters that, in our professional judgement, 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.
Appropriateness of revenue recognition on sale of servicesNote 15 (Revenue from operations) of the financial statements.
The Company’s revenue principally comprises sale of services from Subscription revenue. Revenue from the sale of services is recognised over time wherein the customer simultaneously receives and consumes the benefits provided by the Company. The progress is measured using the output method which measures revenue by comparing ‘time elapsed’ to the ‘total subscription period’.
We have identified the recognition of revenue as a key audit matter specifically in terms of the risk of error in the timing and amount of revenue recognised. The subscriptions sold are generally non-cancellable. However, based on customary business practices followed by the Company, refunds are issued to customers on case-to-case basis on cancellation. The Company estimates the provision for such cancellations and recognises revenues net of such provision. Revenue recognition is determined to be an area involving significant risk in line with the requirements of Standards of Auditing and requires significant auditor attention.
Considering the above-mentioned factors, appropriateness of revenue recognition has been considered as a key audit matter.
How our audit addressed the key audit matter
Our key audit procedures around revenue recognition included, and not limited to, the following:
• Understood and evaluated the design and tested the operating effectiveness of key manual controls relating to revenue recognition;
• Read the Company’s revenue recognition accounting policy and evaluated the appropriateness of the company’s revenue recognition accounting policy with respect to principles of Ind AS 115 ‘Revenue from Contracts with Customers’;
• Tested reconciliation items between sales register and general ledger;
• Tested sales transactions on a sample basis by examining the underlying documents which inter- alia included sales invoices and related terms and conditions to assess whether revenue was recognised appropriately;
• Evaluated the contract terms for selected samples of customer contract and recalculated the revenue including amount disclosed as deferred revenue to determine appropriateness of the revenue recognised;
• Tested the timing of recognition of revenue including performing cut-off procedures to determine whether revenue is recognised appropriately over a period of time based on satisfaction of performance obligation.;
• Tested reconciliation of deferred revenue to determine whether the revenue has been recognised in the appropriate financial period;
• Tested unusual journal entries if any posted under revenue general ledgers; and
• Evaluated the appropriateness and adequacy of disclosures made in the financial statements in respect of revenue recognition with the applicable accounting standards.
Based on the procedures performed above, we did not note any significant exceptions in the management assessment of revenue recognition for sale of services.
Appropriateness of Assessment of recoverability of Deferred Tax Assets (“DTA”) on tax losses(Refer note 8 to the financial statements.)
The Company has recognised DTA of INR 2,048.88 lakhs on business losses carried forward from the earlier years in the income tax return to the extent it is recoverable based on the Company’s projected probable taxable profits in the forthcoming years.
DTA has been recognised on the basis of the Company’s assessment of availability of future probably taxable profit to be able to utilise such tax losses. The recoverability of the DTA depends upon factors such as the projected probable taxable profits of business, the period considered for such projections, the rate at which those profits will be taxed, the period over which the tax losses will be available for recovery and the likely outcome of disputes pending with the tax authorities if any. The carrying amount of deferred tax assets is reviewed at the end of each reporting period.
The assessment of recoverability of DTA is considered a key audit matter as significant estimates and judgement are required by the Company’s Management in the preparation of forecasts of future probable taxable profits based on the underlying business plans.
How our audit addressed the key audit matter
Our audit procedures, which involved applying materiality and sampling techniques, included the following:
• Evaluating the design and testing of the operating effectiveness of Company’s controls relating to taxation and the assessment of carrying amount of DTA relating to unabsorbed tax losses.
• Evaluating whether the unabsorbed losses, on which deferred tax asset is recognised, has been assessed by the tax authorities and is available for utilisation in accordance with the provisions of Income- tax Act, 1961.
• Assessing the appropriateness of tax rate applied to the taxable profit forecasts.
• Reviewing the Company’s accounting policy in respect of recognizing deferred tax asset on tax losses
• Assessing the reasonableness of the period of projections used in the deferred tax asset recoverability assessment.
• Obtaining the future taxable income projections prepared by the management and evaluating the judgements and assumptions made by the management in determining the projected future taxable income for reasonableness and performing sensitivity analysis on the key assumptions.
• Assessing the adequacy of disclosures made in the financial statements with regard to deferred taxes.
Based on the above procedures performed, our testing did not identify any significant exceptions with respect to the reasonableness of the assumptions and estimates used by the management in assessing the recoverability of DTA recognised in respect of tax losses as at year end.
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 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 financial statements does not cover the other information and we will 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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the 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 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 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 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 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. Those Board of Directors are also responsible for overseeing the Company’s
financial reporting process.
Auditor's responsibilities for the audit of the financial statements
8. 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.
9. As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the 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 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 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.
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 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
13. 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.
14. 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, 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 period April 01, 2023 to August 29, 2023 and except for the matters stated in paragraph 14(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended).
(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 Flows dealt with by this Report are in agreement with the books of account.
(d) In our opinion, the aforesaid 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 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 maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 14(b) above on reporting under Section 143(3)(b) and paragraph 14(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 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 financial statements - Refer Note 28 to the financial statements;
ii. The Company was not required to recognise a provision as at March 31, 2024 under the applicable law or accounting standards, as it does not have any material foreseeable losses on long-term contracts. The Company did not have any derivative contracts as at March 31, 2024.
iii. There were no amounts which were required to be transferred to the
Investor Education and Protection
Fund by the Company during the year
ended March 31, 2024.
iv. (a) The management has represented that, to the best of its knowledge and belief, 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 entities, 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 [Refer Note 35(xi)(A) to the financial statements];
(b) The management has represented that, to the best of its knowledge and belief, 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, 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 [Refer Note 35(xi)(B) to the financial statements]; 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 sub-clause (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account, of which one accounting software has a feature of recording audit trail (edit log) facility and that has operated throughout the year for all relevant transactions recorded in the software. Based on our procedures performed, we did not notice any instance of the audit trail feature being tampered with respect to such software. With respect to a billing software
(cloud based) maintained by a third party service provider and used for certain business process, where service organisation’s auditor’s report does not cover audit trail, we are unable to comment whether the audit trail feature of the aforesaid software was enabled and operated throughout the year and therefore the question of our commenting on whether the audit trail feature was tampered with does not arise.
15. 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.
For Price Waterhouse Chartered Accountants LLP Firm Registration Number: 012754N/N500016 Chartered Accountants
Mohan Danivas S A
Partner
Membership Number: 209136 UDIN: 24209136BKFNEO8549
Place: Bengaluru Date: May 20, 2024
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