Mazagon Dock Shipbuilders Limited, Mumbai
Report on the Standalone Financial Statements Opinion
We have audited the accompanying Standalone Financial Statements of MAZAGON DOCK SHIPBUILDERS LIMITED
("the Company"), which comprise the Balance Sheet as at 31st March, 2023, the Statement of Profit and Loss Account (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 a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "The Standalone Financial Statement").
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 Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2023 and its profit, total comprehensive income, changes in equity and it's cash flow for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing ("SA"s) specified under section 143(10) of the Companies Act, 2013. 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 ("ICAI") together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and ICAI's 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.
Emphasis of Matter
We draw attention to the following matters in the notes to the standalone Ind AS financial Statements;
1. Registration formalities and renewals of certain Leased hold properties in name of company are pending. (Refer Note 2 Point No. x)
2. Balance of advances to vendors and balances outstanding in trade payables are subject to confirmation.
(Refer Note 34 Point No 1)
3. Balance due from/to Indian Navy (Debtors) is subject to reconciliation and confirmation.
(Refer Note 34 Point No 2 )
Our opinion is not modified in respect of these matters.
Key Audit Matters:
Key audit matters are those matters that, in our professional judgement, 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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Sr. No.
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Key Audit Matter
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How our audit addressed the key audit matter
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1.
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Revenue Recognition for Ship/Submarine Construction & repair contracts
Referred to in Note No. 1 - 2.2(j) of the Financials Statements
The company recognizes the revenue from Ship/ Submarine Construction/ repair contracts when the company satisfies a performance obligation by transferring goods or service to a customer.
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• We have verified the contractual terms with respect to performance obligations and criteria for transfer of control of goods or services to the customer for recognition of revenue.
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Sr. No.
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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 transfers control of goods or service over time, and, therefore, satisfies a performance obligation and recognizes revenue over time after fulfilling one of the criteria mentioned in the aforesaid note.
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• Studied the Cost cycle process for allocating the actual expenses incurred on various projects as per contract. In this regard, we have relied on the data provided by the technical departments.
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When the control of the produced goods and rendered services is transferred over time to the customer, revenue is recognized over time under the percentage of completion method (PoC). Penalties if any, are reduced from the revenue.
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• Verified the Cost sheet determining the Revenue recognition for fixed price contracts and cost plus contracts including the actual cost incurred up to the date and its comparison with overall contract price and further estimated costs provided by the management.
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For the application of the overtime method (PoC method), the measure of the progress towards complete satisfaction of a performance obligation is based on inputs (i.e. cost incurred)
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• Verified the input cost incurred over the time for satisfaction of performance obligation. Conducted Test check of the System and procedures adopted for recording the flow of transactions along with the audit trail.
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Information other than the Standalone Financial Statement and Auditor's Report thereon:
The Company's Board of Directors is responsible for the preparation of other information. The other information comprises the information included in the Director's Report, Overall Business Operations, Management and Corporate Governance 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 or conclusion thereon. In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information identified above 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.
If, based on the work we have perform on the other information that we obtained prior to the date of this auditor's report, 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. When we read the Annual report, if we conclude that there is a material misstatement therein, then we will communicate the matters to those charged with governance.
Management's Responsibility for the Standalone Financial Statements
1. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("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 (including other comprehensive income), change in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act.
2. 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 Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
3. 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.
4. The Management are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone Financial Statement:
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 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 judgment 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 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 Companies Act, 2013, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system 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.
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 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 consolidated 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 in terms of Section 143(11) of the Act, we give in "Annexure I" a statement on the matters specified in paragraph 3 and 4 of the Order.
2. As required by the directions issued by the office of the Comptroller & Auditor General of India under Section 143(5) of the Act, we give in "Annexure II", a statement on the matters referred to in those directions.
3. 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 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 Ind AS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rule, 2014.
e) In view of exemption given vide notification no. G.S.R 463(E) dated June 05, 2015 issued by Ministry of Corporate Affairs, the provision of section 164(2) of the Companies Act, 2013 regarding disqualification of the directors are not applicable to the Government Company.
f) With respect to the adequacy of the internal financial controls with reference to Standalone Financial Statements of the Company and operating effectiveness of such controls, refer to our separate Report in "Annexure III". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the company's internal financial control over financial reporting with reference to Standalone 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, the exemption has been given for the said section vide notification no. G.S.R 463(E) dated June 05, 2015 issued by Ministry of Corporate Affairs.
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 Standalone Financial Statements; (Reference of Note No.33 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. (Reference of Note No 37 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.
iv. a. The Management has represented that, to the
best of its knowledge and belief, other than as disclosed in the Note No. 51 to the Standalone Financial Statements, 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(s) or entity(ies), including foreign entity(ies) ("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 the Note No. 51 to the accounts, no funds (which are material either individually or in the aggregate) have been received by the Company from any person(s) or entity(ies), including foreign entity(ies) ("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 (iv) (a) and (iv) (b) contain any material misstatement.
v. The dividend declared or paid during the year by the Company is in compliance with Section 123 of the Act.
vi. The reporting responsibility on the accounting software for maintaining the books of accounts which has the feature of recording audit trail (edit log) facility is deferred to financial years commencing on or after April 1, 2023 vide MCA notification G.S.R. 235E dated 31st March, 2022. Therefore, reporting under Rule 11(g) of Companies (Audit & Auditor) Rules, 2014 is not applicable for financial year ended on March 31, 2023.
For C. R. Sagdeo & Co,
Chartered Accountants
F.R.N: 108959W
CA. Sachin V. Luthra
Partner
Date: 30th May, 2023 Membership No.: 109127 Place: Mumbai UDIN - 23109127BGQVHZ6233
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