To
The Members of The Lakshmi Vilas Bank Limited
Report on the Audit of the Financial Statements Qualifi ed Opinion
We have audited the accompanying financial statements of The Lakshmi
Bank Limited ("the Bank"), which comprise the Balance Sheet as at 31st
March 2020, the Profit and Loss Account, the Cash Flow Statement for the year then ended,
and a summary of significant accounting policies and other explanatory information.
Incorporated in these financial statements are the Returns for the year ended on that date
of 21 Branches and departments audited by us and 562 Branches/ offi ces audited by
statutory branch auditors. The Branches audited by us and those audited by other auditors
have been selected by the Bank in accordance of the guidelines issued to the Bank by the
Reserve Bank of India ("RBI").
In our opinion and to the best of our information and according to the
explanations given to us, except for the possible effects of the matters described in the Basis
for Qualifi ed Opinion paragraph, the aforesaid financial statements give the
information required by the Banking Regulation Act,1949 as well as the Companies Act,2013
in the manner so required for banking companies and give a true and fair view in
conformity with the accounting principles generally accepted in India, of the state of
affairs of the Bank as at 31st March 2020, and its losses and its cash flows
for the year ended on that date.
Basis for Qualifi ed Opinion
1. We draw attention to Note 8 of the Schedule 18 – Notes on
Accounts. During the financial year ended 31st March 2018, the Bank had
adjusted loans aggregating to Rs.794 crore extended to RHC Holding Private Limited and
Ranchem Private Limited against deposits of Religare Finvest Limited. The said adjustment
has been contested by Religare Finvest Limited and a suit has been fi led against the Bank
in May 2018 before the Honourable High Court of Delhi. The matter still remains
sub-judice. Further, the Economic Offences Wing, Delhi ("EOW") has initiated
proceedings against the Directors of the Bank and SEBI has sought clarification on the
above matter. However, as per the Bank, based on legal opinions obtained against the suit,
the said appropriation is lawful and tenable and hence not made any specific provision on
this score. The Reserve Bank of India ("RBI") vide letter dated 21st
November 2019, had advised the Bank to maintain provisions, on a prudential basis, to
cover potential losses for the ‘Claim against the Bank not acknowledged as debt
in respect of the above-mentioned matter.
In case of adverse judgment, the Management needs to provide an
additional amount of Rs.594 crore after considering the available contingent provision of
Rs.200 crore provided in the books. Considering the above, the Provisions &
Contingencies would have increased, net loss for the year would have increased,
shareholders funds would have decreased, by Rs.594 crore each and the Capital
Adequacy Ratio (Basel III) would have reduced by 4.50%.
The audit opinion on the financial statements for the years ended 31st
March 2018 and 31st March 2019 was also qualified in respect of this matter.
2. We draw attention to Note 5.1.1 of the Schedule 18 – Notes on
Accounts, which states that the Bank has reversed the cumulative provision of Rs.48.70
crore held towards revision of wages due to employees with effect from November 2017.
While the Bank has cited the withdrawal of mandate given to the Indian Banks
Association ("IBA") to negotiate revision of salary on its behalf, as the basis
for reversing the provision, there is no evidence to suggest that there will not be any
liability for the wage revision with effect from November 2017. While the quantum of wage
revision cannot be determined as on date, it is likely that the provision required would
at least be Rs.48.70 crore. Considering the above, Operating Expenses and the net loss for
the year would have increased by Rs.24 crore each, Other income would have decreased by
Rs.24.70 crore and Other liabilities & Provisions as at 31st March 2020
would have increased by Rs.48.70 crore.
3. We draw attention to Note 4.9 of the Schedule 18 – Notes on
Accounts, which states that the Bank has recognised net deferred tax asset of Rs.1,185.57
crore as at 31st March 2020, of which Rs.326.01 crore was created during the
year ended 31st March 2020. The Bank has decided not to opt for reduced
corporate tax rate under Section 115BAA of the Income Tax Act and the deferred tax asset
and liability have been calculated with the existing tax rate.
As per the requirements of AS 22 "Accounting for Taxes on
Income", deferred tax assets should be recognised and carried forward only to the
extent that there is a virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised. In our opinion,
considering the recurring losses and in the present scenario of the Bank going through the
Prompt Corrective Action imposed by the RBI, there is no certainty that the Bank will have
sufficient future taxable income to justify the creation of deferred tax asset. Had the
deferred tax asset not been created and retained, the net loss for the year would have
been higher by Rs.1,185.57 crore.
We conducted our audit in accordance with the Standards on Auditing
("SAs") specified under Section 143(10) of the Companies Act,2013 ("the
Act"). Our responsibilities under those Standards are further described in the Auditors
Responsibilities for the Audit of the Standalone Financial Results section of our
report. We are independent of the Bank in accordance with the Code of Ethics, as amended,
issued by the Institute of Chartered Accountants of India together with the ethical
requirements that are relevant to our audit of the Financial Results, and we have fulfi
lled our other ethical responsibilities in accordance with these requirements and the Code
of Ethics, as amended. We believe that the audit evidence obtained by us is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
The financial results indicate that the Bank has incurred a loss of
Rs.836.04 crore during the year ended 31st March 2020. The Bank has been
incurring losses for the past 10 Quarters and the Reserve Bank of India has initiated
Prompt Corrective Action in September 2019, which inter alia prescribes the Bank to bring
in additional capital, restrict further lending to corporates, reduce NPAs and improve the
Provision Coverage Ratio to 70%. There has been a steady decline in the Banks
deposit base since September 2019 and increase in the NPA ratios. The Banks Tier 1
Capital ratio has turned negative, at -0.88%, as compared to the minimum requirement of
8.875%. This requires the Bank to take effective steps to augment its capital base in the
year 2020-21. We were informed that the Bank routinely evaluates capital raising options.
In line with the RBIs COVID-19 Regulatory Package dated 27th
March 2020 and 17th April 2020, the Bank has granted a moratorium of three
months on the payment of all instalments and/ or interest, as applicable, falling due
between 1st March 2020 and 31st May 2020 to all eligible borrowers
classified as "Standard", even if overdue, as at 29th February 2020.
In the opinion of the Bank, based on their internal assessment and the
likely capital infusion, the Bank will be able to realise its assets and discharge its
liabilities in its normal course of business and hence the Financial Results have been
prepared on a going concern basis. The said assumption of going concern is dependent upon
the Banks ability to achieve improvements in liquidity, asset quality and solvency
ratios, augment its capital base and mitigate the impact of COVID-19 and thus a material
uncertainty exists that may cast a significant doubt on the Banks ability to
continue as a going concern. However, as stated above, the Bank opines that there are
mitigating factors to such uncertainties.
Our opinion on the financial statements is not modified in respect of
this matter.
Emphasis of Matter
1. We draw attention to Note 9 of the Schedule 18 – Notes on
Accounts, which describes that the Bank has recognised provision on loans and overdrafts
that were overdue but "Standard" as at 29th February 2020, for which
moratorium benefit has been granted, based on the days past due status as on that date in
accordance with the RBIs COVID-19 Regulatory Package.
2. We draw attention to Note 9 of the Schedule 18 – Notes on
Accounts, which describes the uncertainties due to the outbreak of COVID-19 and
Managements evaluation of its impact on the operations of the Bank. In view of these
uncertainties, the impact on the Banks financial results is significantly dependent
on future developments.
3. We draw attention to Note 5.1.1 of the Schedule 18 – Notes on
Accounts, which describes about the reversal of excess provision for employee benefits
amounting Rs.70.37 crore as per the actuarial valuation report as at 31st March
2020 in accordance with AS 15 "Employee benefits" and this reversal of excess
provision is mainly on account of the change in the principal actuarial assumption of
salary escalation rate.
Our opinion on the financial statements is not modified in respect of
any of the above-mentioned matters of emphasis.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most signifi cance 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.
| S. No. Key Audit Matter |
Auditors Response to Key Audit Matter |
| 1 Recognition of Deferred tax assets on carry forward
of losses |
Principal Audit Procedures: |
| Deferred tax assets on unabsorbed depreciation or carry
forward of losses are to be recognized only when there is a virtual certainty supported by
convincing evidence that sufficient future taxable income will be available against which
such deferred tax assets can be realised. Determination of virtual certainty is a matter
of judgement based on convincing evidence. |
• Considered the taxable profits of the Bank and taxes
paid in the past, obtained details of carry forward losses under income tax and details of
estimates of taxable incomes for future periods without considering further capital
infusion, of restructuring and without considering expected recoveries from assets where
resolution proceedings are underway. |
|
• Tested the period over which the deferred tax assets
on such unabsorbed losses would be recovered against future taxable income. |
| Refer Note 4.9 of the Schedule 18 – Notes on Accounts |
• Tested the Managements underlying assumptions in
estimating the future taxable incomes against which such unabsorbed losses would be
recovered. |
| 2 Adequacy of provisions in respect of Advances |
Principal Audit Procedures: |
| Advances are classified as performing and non-performing
assets in accordance with the prudential norms issued by RBI. The identification of
non-performing assets and creation of provision on such advances involves key judgments
relating to performance of borrowers, determination of security value, manual
interventions, management judgement, regulatory level, etc. |
We assessed the Banks system in place to identify and
provide for non-performing assets. |
|
Our audit approach consisted testing of the design and
operating effectiveness of the internal controls and substantive testing as follows: |
|
• Evaluated the design of internal controls relating to
identification and making provision for non-performing assets. |
| Accordingly, our audit was focused on income recognition,
asset classification and provisioning pertaining to advances due to the materiality of the
balances and associated impairment provisions. |
• Tested the relevant information technology systems
used in identification and making provision for such NPA as per the RBI Guidelines
including involvement of manual process and manual controls. in relation to income
recognition, asset classification and provisioning pertaining to advances. |
|
• Considered Branch audit reports for identification and
provisioning for non-performing assets |
|
• Test checked the identification and provisioning of
non-performing assets in accordance with RBI Guidelines issued from time to time. |
|
• Ensured exceptions noticed during our audit procedures
are duly corrected. |
| 3 Information technology (IT) systems (Flex Cube –
Oracle based) used in financial reporting process |
Principal Audit Procedures: |
|
We conducted an assessment and identified key IT
applications, databases and operating systems that are relevant to our audit and have
identified CBS and Treasury System primarily as relevant for financial reporting. |
| The Banks operational and financial processes are
dependent on IT systems due to large volume of transactions that are processed daily. |
Our audit approach consisted testing of the design and
operating effectiveness of the internal controls and substantive testing as follows: |
| Accordingly, our audit was focused on key IT systems and
controls due to the pervasive impact on the financial statements. |
• Obtained an understanding of the Banks IT
control environment, IT policies and key changes during the audit period. |
|
• Reviewed the design, implementation and operating
effectiveness of the Banks General IT controls over the key IT systems that are
critical to financial reporting on test check basis as per the checklist provided by the
ICAI in its latest Guidance Note on Bank Audit. |
|
• Tested key automated and manual business cycle
controls and logic for system generated reports relevant to the audit on test check basis. |
| 4 Valuation of Investments |
Principal Audit Procedures: |
| As per RBI guidelines, Investments are classified into Held
for Trading ("HFT"), Available for Sale ("AFS") and Held to Maturity
("HTM") categories at the time of purchase and HTM investments are at amortised
cost and AFS and HFT are at Mark to Market. |
We conducted an assessment of the policies, controls,
classifi cations and valuation of investments. |
|
• Reviewed the appropriateness of the valuation, by test
checking on the pricing, volatility, discount factors. |
|
• Reviewed if the RBI policies are followed. |
| Accordingly, our audit was focused on the key audit matter,
due to the Managements judgment in determining the value based on the policy of the
Bank, impairment assessments and the impact on the financial statements. |
• Reviewed if the financial statements disclosures
reflect the Banks exposure to investments in line with the RBI policies, and
Accounting Standards. |
| 5 Modifi ed audit procedures carried out in light of
COVID-19 pandemic |
Principal Audit Procedures: |
|
We modified our audit procedures as outlined below: |
| Due to the outbreak of COVID-19 pandemic, nationwide lockdown
has been imposed by the Central Government/ State Governments/ Local authorities, which
had resulted in restrictions on movement of personnel. Hence, physical visit to the
Branches and offi ces was not possible in most of the cases by us and the Branch auditors. |
• Verified the necessary records, reports, documents and
certificates (mostly the scanned images) electronically through e-mails and remote access
to the Branch/ office system and the Core Banking Solution application. |
| Accordingly, our audit procedures were carried out based on
the necessary records, reports, documents and certificates were made available to us by
the Bank through digital medium, e-mail and remote access to the Core Banking Solution
application. |
• Resolved audit observations through discussions,
receipt of digital records, telephonic conversations, video conferencing and e-mails. |
| As we could not gather audit evidence physically or through
meetings with the Banks offi cials, we have identified the modified audit procedure
as a Key Audit Matter. |
|
Other Matter
Audit of most of the Branches have been performed by us and the Branch
auditors, relying on alternative audit procedures, such as through remote access, on
account of restrictions on physical visit to the Branches due to the COVID-19 pandemic.
Our opinion on the financial statements is not modified in respect of
this matter.
Information other than the Financial Statements and Auditors
Report thereon
The Banks Board of Directors is responsible for the preparation
of the other information. The other information comprises of the CSR initiatives,
Directors Report including Annexures to Directors Report, Shareholders
Information, Business Responsibility Report, Corporate Governance Report, Management
Discussion and Analysis Report, List of Branches, Basel III Disclosures, Decade Progress
included in the Banks Annual Report, but does not include the financial statements
and our auditors report thereon.
Our opinion on the financial statements does not cover the other
information and the Basel III disclosures, and accordingly, 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.
Managements Responsibility for the Financial Statements
The Banks 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 financial statements that give a true and fair view of the financial
position, financial performance and cash fl flows of the Bank in accordance with the
accounting principles generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts)
Rules, 2014 and provisions of Section 29 of the Banking Regulation Act,1949 and circulars
and guidelines issued by the Reserve Bank of India ("RBI") from time to time.
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding of the assets of the
Bank 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, the Board of Directors is
responsible for assessing the Banks 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 Management either intends to liquidate the Bank or to cease
operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the
Banks financial reporting process.
Auditors 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 auditors report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted
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
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 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 Act, we are also responsible for expressing
our opinion on whether the Bank has adequate internal financial controls system 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 managements 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 Companys ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors
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 auditors 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 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 infl
uenced. 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 defi ciencies 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 signifi cance 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 auditors 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
The Balance Sheet and the Profit and Loss Account have been drawn up in
accordance with the provisions of Section 29 of the Banking Regulation Act,1949 and
Section 133 of the Companies Act,2013 read with Rule 7 of the Companies (Accounts) Rules,
2014.
As required by sub-section (3) of Section 30 of the Banking Regulation
Act,1949, we report that:
(a) We have obtained all the information and explanations which, to the
best of our knowledge and belief, were necessary for the purpose of our audit except for
the matter described in the Basis for Qualified Opinion paragraph and have found
them to be satisfactory;
(b) The transactions of the Bank, which have come to our notice, have
been within the powers of the Bank;
(c) Since the key operations of the Bank are automated with key
applications integrated to the Core Banking System, the audit is carried out centrally as
all the necessary records and data required for the purpose of our audit are available
therein.
However, during the course of our audit, we have visited 9 Branches and
offices. The returns received from the offi ces and Branches of the Bank have been found
adequate for the purposes of our audit. As mentioned in Other Matter paragraph,
audit of most of the Branches have been performed by us and the Branch auditors, relying
on alternative audit procedures, such as through remote access, on account of restrictions
on physical visit to the Branches due to the COVID-19 pandemic.
Further, as required by Section 143(3) of the Act, we report that:
(i) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the purpose of our audit
except for the matter described in the Basis for Qualifi ed Opinion paragraph;
(ii) In our opinion, proper books of account as required by law have
been kept by the Bank so far as it appears from our examination of those books and proper
returns adequate for the purposes of our audit have been received from Branches not
visited by us;
(iii) The reports on the accounts of the Branches audited by Branch
auditors of the Bank under Section 143(8) of the Act have been sent to us and have been
properly dealt with by us in preparing this report;
(iv) The Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of account and with
the returns received from the Branches not visited by us;
(v) Except for the possible effects of matter described in the Basis
for Qualified Opinion paragraph, in our opinion, the financial statements comply with
the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with the
accounting policies prescribed by RBI;
(vi) On the basis of written representations received from the
Directors as on 31st March 2020 taken on record by the Board of Directors, none
of the Directors is disqualified as on 31st March 2020 from being appointed as
a Director in terms of Section 164 (2) of the Act;
(vii) With respect to the adequacy of the internal financial controls
over financial reporting of the Bank and the operating effectiveness of such controls,
refer to our separate Report in "Annexure A"; and
(viii) With respect to the other matters to be included in the
Auditors 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:
a. The Bank has disclosed the impact of pending litigations on its
financial position in its financial statements - Refer Schedule 18 - Note No. 7 to the
financial statements;
b. The Bank does not have any long term contracts including derivative
contracts - Refer Schedule 18 - Note No. 3.3 to the financial statements;
c. There has been no delay in transferring amounts required to be
transferred to the Investor Education and Protection Fund by the Bank;
d. With respect to the matter to be included in the Auditors
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 Bank being a banking company, Section 197 of the Act,
related to the managerial remuneration is not applicable by virtue of Section 35B(2A) of
the Banking Regulation Act,1949.
|
For M/s. P.CHANDRASEKAR LLP |
|
Chartered Accountants |
|
(Firm Registration No. 000580S/S200066) |
|
LAKSHMY CHANDRASEKARAN |
| Place : Bangalore |
Partner |
| Date : 10th July, 2020 |
Membership No. 028508 |
|
UDIN: 20028508AAAAAU7760 |
Annexure A to the Independent Auditors Report of even date on the
financial statements of The Lakshmi Vilas Bank Limited
Report on the Internal Financial Controls with reference to financial
statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013
We have audited the internal financial controls with reference to
financial statements of The Lakshmi Vilas Bank Limited (‘the Bank) as at 31st
March 2020 in conjunction with our audit of the financial statements of the Bank for the
year ended on that date.
Managements Responsibility for Internal Financial Controls with
reference to financial statements
The Banks Board of Directors is responsible for establishing and
maintaining internal financial controls based on the internal control over financial
reporting criteria established by the Bank considering the essential components of
internal control stated in the Guidance Note on Audit of Internal Financial Controls Over
Financial Reporting ("the Guidance Note") issued by the Institute of Chartered
Accountants of India ("the ICAI").
These responsibilities include the design, implementation and
maintenance of adequate internal financial controls that were operating effectively for
ensuring the orderly and efficient conduct of its business, including adherence to
Banks policies, the safeguarding of its assets, the prevention and detection of
frauds and errors, the accuracy and completeness of the accounting records, and the timely
preparation of reliable financial information, as required under the Companies Act,2013
("the Act").
Auditors Responsibility
Our responsibility is to express an opinion on the Banks internal
financial controls with reference to financial statements based on our audit. We conducted
our audit in accordance with the Guidance Note on Audit of Internal Financial Controls
Over Financial Reporting ("the Guidance Note") issued by the ICAI and the
Standards on Auditing ("the Standards"), prescribed under Section 143(10) of the
Companies Act,2013 to the extent applicable to an audit of internal financial controls.
Those Standards and the Guidance Note require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether adequate internal
financial controls over financial reporting was established and maintained and if such
controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about
the adequacy of the internal financial controls with reference to financial statements and
their operating effectiveness. Our audit of internal financial controls with reference to
financial statements included obtaining an understanding of internal financial controls
with reference to financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the Banks internal financial
controls with reference to financial statements.
Meaning of Internal Financial Controls with reference to financial
statements
A banks internal financial control over fi financial reporting is
a process designed to provide reasonable assurance regarding the reliability of fi
financial reporting and the preparation of fi financial statements for external purposes
in accordance with generally accepted accounting principles. A banks internal
financial control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the bank; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditure of the bank are being made only in accordance with authorizations
of management and directors of the bank; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the
banks assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to
financial statements
Because of the inherent limitations of internal financial controls with
reference to financial statements, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may occur
and not be detected. Also, projections of any evaluation of the internal financial
controls over financial reporting to future periods are subject to the risk that the
internal financial control over financial reporting may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Opinion
In our opinion, the Bank has, in all material respects, adequate
internal financial controls with reference to financial statements and such internal
financial controls with reference to financial statements were operating effectively as at
31st March 2020, based on the internal controls criteria established by the Bank
considering the essential components of internal control stated in the Guidance Note
issued by the ICAI.
|
For M/s. P.CHANDRASEKAR LLP |
|
Chartered Accountants |
|
(Firm Registration No. 000580S/S200066) |
|
LAKSHMY CHANDRASEKARAN |
| Place : Bangalore |
Partner |
| Date : 10th July, 2020 |
Membership No. 028508 |
|
UDIN: 20028508AAAAAU7760 |
+91-9892691696
