Annexure B

 

INDEPENDENT BANK BRANCH AUDITOR’s REPORT

To,

The Statutory Central Auditors,

C/o BANK xxx,

NBG xxx

 

Report on the Audit of the Financial Statements

 

Opinion

 

1. We have audited the Financial Statements of xxx Branchof Bankxxx which comprise the Balance Sheet as at 31^st March 2020, the Statement of Profit and Loss for the year ended 31^st March 2020and other explanatory information/returnsas per closing circular no.HO:FIN:VV:434 dated March 18, 2020.

 

2. In our opinion, and to the best of our information and according to the explanations given to us, read with the Memorandum of Changes (mentioned in paragraph 7 below), except for the effects of the matter described in the Basis for Qualified Opinion section of our report,the aforesaid financial statements give the information required by the Banking Regulation Act, 1949, in the manner so required for bank and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs in case of the Balance Sheet of the branch as at March 31, 2020 and true balance of profit/loss for the year ended on that date.

 

Basis of Opinion

 

3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued by ICAI. 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 bank in accordance with the code of ethics issued by the Institute of Chartered Accountants of India together with ethical requirements that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements and the code of ethics.

 

In view of the Government imposed lockdown due to Covid-19, we have not been able to examine the original books of account and supporting documents including but not limited to the documents relating to advances, cash, security etc.  The management has provided us with the scanned copies of the relevant documents for the purpose our audit which we asked for on test check basis. We were also not able to obtain evidence about the veracity of these scanned documents and were also unable to satisfy ourselves by alternative means.

 

 

 

Accordingly, we were unable to determine whether any adjustment/ disclosure might have been necessary in the financial statements for the year ended and as at 31 March 2020 in in view of the non-availability of the books of account and supporting evidence.

 

Management’s Responsibilities for the Financial Statements

 

4. The Bank’s management is responsible with respect to the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards issued by ICAI, 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 theassets 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, management is responsible for assessing the Bank’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 Bank or to cease operations, or has no realistic alternative but to do so.

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

5. 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.

 

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 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 Companies Act, 2013, 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.

 

• Report that the audit at branch level is not be able to conclude on theappropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained at branch, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability 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.

 

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.

 

Other MattersParagraph

 

6. Scope limitation due to COVID 19

 

The qualifiedopinion expressed in the present report is based on the limited information, facts and inputs made available to us through electronic means by the bank management. We wish to highlight that due to the COVID 19 induced restrictions on physical movement and strict timelines, the entire audit team could not visit the branch for undertaking the required audit procedures as prescribed under ICAI issued Standards on Auditing, including but not limited to:

• Inspection, observation, examination and verification of the original documents/ files;
• Physical verification of cash/gold/stationery items including adequate internal controls thereof;
• Examination of the various documents with regard to primary and collateral security;
• Verification of the valuation and legal reports of the Immovable properties charged to the bank branch;
• Scrutiny of cash credit facility documents files /Stock statements and other QIS submitted by borrowers and timely receipts thereof;
• Scrutiny of the Sanction / Renewals/ Review/ appraisal / disbursement/ compliance and detailed documentation as per laid down procedures including execution of requisite documentation;
• Examination of the Inspection/visit reports of the branch officials;
• Observation with regard to dual custody of cash in hand/ATM;
• Examination of the FA register, physical verification process / Stationery movement records;
• Verification of various bank records in relation to bank guarantees/ Letter of credit/ letter of comforts etc.;
• Adequate audit procedures for various assertions specified in Ghosh & Jilani Committee Reports including its implementation at branch level;
• Observation with regard to access controls and data security;
• Verification for timely receipt of the stock/book statements/FSs/QIR from borrowers and scrutiny thereof;
• Physical verification of investments (If applicable);
• Any other which require physical presence of the audit team.

 

7. No adjustments/provisions have been made in the accounts of the Branch in respect of matters usually dealt with at Head Office, including in respect of:

 

1. Memorandum of Changes (MOCs)
2. Provision for Non-Performing Assets
3. Provision in respect to Restructured Accounts
4. Provision for Standard Assets.
5. Provision for Contingencies.
6. Provision for Other Assetsincluding expired lease and operational fraud.
7. Provision for Interest on Overdue Deposits.
8. Provision for Un-hedged Foreign Currency Exposure
9. Provision for Step Down subsidiaries
10. Provision for Country Risk.
11. Provision as per Accounting Standard 15 “Employee Benefits”
12. Profit/Loss on Revaluations/Restatements as per Accounting Standard 11 “The effects of changes in Foreign Exchange Rates”
13. The Segmental, Earning per Share and other disclosures relating to the Bank as a whole.
14. Provision for interest on borrowing from IDBI/SIDBI

1. Old unreconciled/unlinked entries at debit under various heads comprising Inter branch/office Adjustments;
2. Interest on overdue term deposits;
3. Taxation (Current Tax and Deferred Tax);
4. Any other provision made by Head Office.

 

8. The following is the summary of the Memorandum of Changes submitted by us to the Branch Management.

Memorandum of Changes (Summary)
Particulars	No.	Increase	Decrease
a.    In respect of Income
b.    In respect of Expenditure
c.    In respect of Assets
d.    In respect of Liabilities
e.    In respect of Gross NPAs
f.     In respect of Provision on NPAs
g.    In respect of Classification of Advances
h.    In respect of Risk Weighted Assets
i.      Other Items (if any)

 

 

Report on Other Legal and Regulatory Requirements

 

9. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;

 

10. Subject to the limitations of the audit indicated in paragraphs 4 to 6 above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also to the limitations of disclosure required therein, we report that:

 

1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of the audit and have found them to be satisfactory;
2. The transactions of the branch which have come to our notice have been within the powers of the Bank.
3. the returns received from the branch have been found adequate for the purposes of our audit.

 

11. Further, as required by section 143(3) (i) of the Companies Act 2013, we report that with respect to the adequacy of the internal financial controls over financial reporting of the Branch and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”;

 

 

12. We further report that:

a. 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.

b. The Balance Sheet, and the Profit and Loss Account dealt with by this report are in agreement with the books of account.

c. In our opinion, the Balance Sheet, and the Profit and Loss Account comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.