Core4 Engineers Limited FY24 audit modified over partnership

Core4 Engineers Limited’s FY24 audit was modified because its predecessor partnership continued to make transactions after the company’s February 3, 2022 conversion and had not been dissolved by June 24, 2024. The restated consolidated financial information later concluded that no adjustment was required for that specific audit matter.

Why was Core4’s FY24 audit modified?

Core4’s FY24 audit was modified because the predecessor Core4 Engineers Partnership firm remained operational after the holding company was formed. ARSV & Associates, the previous auditor, stated that the partnership converted into Core4 Engineers Private Limited on February 3, 2022, but transactions continued in the partnership firm through the March 31, 2024 financial year-end. The partnership also had not been dissolved when ARSV & Associates issued its audit report on June 24, 2024.

The modification covered more than the partnership’s undissolved status. The previous auditor stated that the Group’s FY24 financial statements included all income and expenditure made through the partnership firm until March 31, 2024. The FY24 statements also included all assets and liabilities of the partnership firm through that date, meaning the consolidated reporting captured the predecessor firm’s activity after the February 2022 conversion.

The supplied financial information does not quantify the partnership’s post-conversion transactions, assets or liabilities. It therefore does not establish how much FY24 revenue, expenditure, assets or liabilities arose in the predecessor firm after February 3, 2022. The disclosed issue is instead the continuation of transactions and balances in an entity that the previous auditor said had not been dissolved by June 24, 2024.

Did Core4’s restated accounts change for the partnership matter?

Core4’s restated consolidated financial information says no adjustment was required for the matters that led to the FY24 audit modification. L. U. Krishnan & Co., which examined the restated financial information for the proposed initial public offering, made that statement in paragraph 9 of its September 30, 2026 report. The finding applies to the partnership matter described in the FY24 modified audit report.

That conclusion does not state that the partnership had been dissolved or that it ceased transacting during FY24. The previous auditor recorded that the firm had not been dissolved at its June 24, 2024 report date, while the later examiner concluded that the restatement did not require a numerical adjustment for that issue. The supplied disclosure provides neither a subsequent dissolution date nor a stated plan or timetable for dissolution.

Restated financial information is financial information revised for the proposed offer document using the disclosed accounting policies, grouping and classifications. Core4’s restated consolidated information covers balance sheets at June 30, 2026 and March 31 in 2026, 2025 and 2024, plus profit-and-loss and cash-flow statements for those periods. The Group includes Core4, a subsidiary and two joint ventures.

The examiner also reported that FY24 and FY25 incorporated adjustments for changes in accounting policies, material errors and regrouping or reclassification to align those periods with the accounting treatment used for June 30, 2026. Therefore, no adjustment for the partnership qualification does not mean FY24 figures were unchanged. It means the specific matter involving the continued partnership activity did not produce an adjustment in the restated information.

What separate FY24 restatements did Core4 report?

Core4 reported separate FY24 restatement items involving employee benefits, depreciation, receivables, warranty obligations, income-tax interest and deferred tax. The FY24 schedule lists a Rs 4.23 lakh gratuity provision, a Rs 4.48 lakh depreciation difference, a Rs 58.99 lakh provision for bad and doubtful debts, a Rs 16.23 lakh warranty provision and Rs 18.63 lakh of interest under Section 234 of the Income Tax Act.

The same schedule lists a Rs 7.65 lakh deferred-tax adjustment. It reports FY24 equity before restatement at Rs 6.7927 crore, a net adjustment in equity of Rs 35.81 lakh, and equity under the restated accounts at Rs 6.4543 crore. Those items are separately identified from the audit report’s finding on the predecessor partnership.

Core4 reported FY24 profit after tax before restatement of Rs 3.0527 crore and restated FY24 profit after tax of Rs 2.8857 crore. The schedule identifies a Rs 16.70 lakh net adjustment in the FY24 profit-and-loss account. The disclosed reasons include actuarial recognition of gratuity under Accounting Standard 15, recalculation of depreciation, provisioning for doubtful debts and warranty obligations, regrouping of Section 234 interest from current tax to finance costs, and accounting for deferred tax in previous years.

The reported profit comparison shows that Core4’s restated profit after tax rose from Rs 2.8857 crore in FY24 to Rs 3.8086 crore in FY25 and Rs 12.3661 crore in FY26. Those changes cover the wider consolidated business and cannot be attributed solely to the FY24 audit modification or to the separately listed restatement entries. The audit report provides no calculation that isolates the partnership issue’s effect on profit.

Which periods had no reported audit qualifications?

Core4’s later auditor reported no qualifications in its audit reports for the consolidated financial statements for FY25, FY26 and the period ended June 30, 2026. L. U. Krishnan & Co. distinguished those periods from FY24, whose consolidated financial statements were audited by ARSV & Associates. The disclosed modification is therefore confined to the year ended March 31, 2024 among the periods presented.

The September 30, 2026 report also says the previous auditor was not in a position to examine the 2024 restated consolidated financial information. L. U. Krishnan & Co. stated that it performed procedures adequate to restate the FY24 financial information. Its report is an examination of restated information for the proposed offer document, not a reissuance or redating of the June 24, 2024 audit report.

The report further separates the partnership modification from component-accounting disclosures. For the period ended June 30, 2026, a subsidiary audited by another auditor accounted for Rs 23.0209 crore of total assets and Rs 16.5197 crore of total revenue in the consolidated statements. The report says the consolidated opinion was not modified for that reliance on another auditor’s report.

How do the joint ventures fit into Core4’s consolidated reporting?

Core4’s two joint ventures were included using unaudited financial information furnished by management, a matter that the examiner said did not modify its consolidated opinion. Core4 Engineers Niranjan Enterprises JV reported total assets of Rs 3.8804 crore and revenue of Rs 5.3082 crore for FY24. Core4’s disclosed share of that venture’s FY24 profit was Rs 13.81 lakh.

Core4 Engineers DIPPIL JV reported FY24 total assets of Rs 77.75 lakh, revenue of Rs 34,000 and Core4’s share of profit of Rs 17,000. The report distinguishes these unaudited joint-venture amounts from the predecessor partnership issue, which originated in the FY24 audit report issued by ARSV & Associates. They are different reporting matters, even though both affect the consolidated financial information.

The accounting-policy note says the subsidiary is consolidated line by line because the Group exercises full control, while joint ventures are consolidated using the proportionate consolidation method. Under that method, Core4 includes its share of joint-venture assets, liabilities, income and expenses. The reported FY24 partnership issue concerned transactions and balances of the predecessor firm, rather than the stated basis for reporting the joint ventures.

Conclusion

Core4’s FY24 audit modification arose from a defined conversion issue: the predecessor partnership continued to transact and its assets and liabilities remained included in the Group’s FY24 financial statements after the February 3, 2022 conversion. The September 30, 2026 restatement examination found no adjustment was required for that particular matter, while separately reporting FY24 adjustments including Rs 35.81 lakh in net equity adjustment and Rs 16.70 lakh in net profit-and-loss adjustment.

The next disclosure to watch is any update on the predecessor partnership’s dissolution or activity, because the supplied information gives no later dissolution date or plan. The September 30, 2026 examination report also states that it does not reflect events occurring after the relevant financial-statement dates and that L. U. Krishnan & Co. has no responsibility to update its report for later events or circumstances.