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« Mar 15
Auditor's Report (IFCI) Year End : Mar '16

TO THE MEMBERS OF IFCI LIMITED Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of IFCI Limited (“the Company”), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managements’ Responsibility for the Financial Statements

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 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, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. 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. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

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 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, 2016, its profit and its cash flow for the year ended on that date.

Emphasis of Matter

We draw attention to note number 28 of the standalone financial statements related to litigation with the borrower. Pending adjudication of the matter by the Honourable Supreme Court, in the opinion of the management, no provision or adjustment is required in the books of accounts. Our report is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor Report) Order, 2016 (the Order.) issued by the Central Government of India in terms of Subsection (11) of Section 143 of the Act, we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required under Section 143(5) of the Companies Act, 2013, we enclose herewith, as per Annexure II, our report for the Company on the directions and sub-direction (Part A and B, respectively) issued by the Comptroller & Auditor General of India.

3. 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 Accounts 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 and the Statement of Profit and Loss dealt with by this report are in agreement with the books of accounts;

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

(e) On the basis of the written representations received from the directors, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure III; and

(g) 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:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No. 25.1 to the 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 - Refer Note No. 25.3 to the 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.

Annexure I referred to in paragraph 1 of Report on Other Legal and Regulatory Requirements of our report of even date on standalone financial statements

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets, except for leased

plant and machinery having gross block of Rs. 70.92 crore which have been fully depreciated in the earlier years.

(b) The fixed assets are being physically verified by the management at all its offices in a phased manner at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification. However, the policy with regard to the verification of physical assets and the periodicity thereof needs to be reviewed and approved by the Board.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

(ii) The Company is Non-Banking Financial Company, accordingly it does not hold any inventory. Thus, paragraph 3(ii) of the Order is not applicable.

(iii) According to the information provided and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register mentioned under Section 189 of the Companies Act, 2013. Accordingly, paragraph 3(iii) of the Order is not applicable.

(iv) According to the information and explanations given to us, the Company has not granted any loans, investments, guarantees and security covered under Section 185 of the Companies Act, 2013. The provisions of Section 186 of the Companies Act, 2013 is not applicable on the Company. Accordingly, paragraph 3(iv) of the Order is not applicable.

(v) According to the information provided and explanations given to us, the Company has not accepted any deposits from the public during the year within the meaning of Section 73 to 76 of the Companies Act, 2013.

(vi) According to the information provided and explanation given to us, maintenance of cost records by the Company has not been prescribed by the Central Government under Section 148(1) of the Companies Act, 2013. Thus, paragraph 3(vi) of the Order is not applicable.

(vii) (a) According to the information provided and explanations given to us, the company is generally regular in depositing undisputed statutory dues

including provident fund, employee s state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other material statutory dues applicable to it with the appropriate authorities. There are no outstanding statutory dues existing as at the last day of the financial year for a period of more than six months from the day they became payable.

(b) According to the information and explanations given to us, there were no amounts due as on March 31, 2016 in respect of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess which have not been deposited on account of any dispute other than those indicated below:

Name of the Statute

Nature of disputed dues

Amount (? crore)2

Year to which demand relates

Forum, where dispute is pending

Finance Act, 1994 (Service Tax)#

Service Tax and Penalty demanded

6.98

FY 2004-05 to FY 2007-08

CESTAT, New Delhi

Finance Act, 1994 (Service Tax)#

Service Tax and Penalty demanded

0.30

FY 2008-09 to FY 2010-11

CESTAT, New Delhi

Finance Act, 1994 (Service Tax)#

Service Tax and Penalty demanded

0.45

FY 2005-06 to FY 2007-08

CESTAT, Bangalore

Finance Act, 1994 (Service Tax)

Service Tax and Penalty demanded

0.56

FY 2006-07 to FY 2010-11

An appeal is to be filed before CESTAT, New Delhi

Finance Act, 1994 (Service Tax)

Service Tax and Penalty demanded

0.89

FY 2008-09 to FY 2010-11

Commissioner of Service Tax, New Delhi

MP Commercial Tax Act, 1994

Sales Tax on Lease Transactions

0.01

Board of Revenue (Commercial Transactions Tax Tribunal) Gwalior, M.P.

Annexure II referred to in paragraph 2 of Report on Other Legal and Regulatory Requirements of our report of even date of standalone financial statements:

Part A - Directions

Sl. No.

Directions

Reply

1.

Whether the Company has clear title/lease deed for freehold and leasehold respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available?

According to the information and explanations provided to us by the Company, the Company has clear title/lease deeds for freehold and leasehold land, respectively.

2.

Whether there are any cases of waiver/write off of debtors/loans/interest etc., If yes, the reason there of an amount involved.

According to the information and explanations provided to us by the Company, case(s) of waiver/ write-off of debts/loan/interest etc., are as under:

Sl. No.

Nature of Dues

No. of Cases

Amount (in crore)

A.

Write-off/Technical write-off of loans

28

441.08

B.

Investments write-offs

232

119.40

It was informed that the waiver/write-off is decided on case to case basis with due assessment of the possibility of recovery/realization in each case considering the available security, status of the borrower/investee and pending litigation. The outstanding in technical write-offs/wavier cases was fully provided for in the books of accounts to the extent of the amount of write-off/waiver. In investment write-offs, the amount outstanding is generally fully provided for.

3.

Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from the Govt. or other authorities.

According to the information and explanations provided to us by the Company:

(a) Being a Non-Banking Financial Institution, there is no involvement of any inventories;

(b) The Company has not received any gift/grant(s) from government or any other authorities during the year.

Part B - Sub-Directions

Sl. No.

Sub-Directions

Reply

1.

Employee Benefits: Independent verification may be made of information/inputs furnished to Actuary, viz., number of employees, average salary, retirement age and assumptions made by the Actuary regarding discount rate, future cost increase, mortality rate, etc., for arriving at the provision for liability of retirement benefits, viz., gratuity, leave encashment, post-retirement medical benefits etc.

According to the information and explanations provided to us by the Company, independent verification has been made of information/inputs furnished to Actuary, viz., number of employees, average salary, retirement age and assumptions made by the Actuary regarding discount rate, future cost increase, mortality rate, etc., for arriving at the provision for liability of retirement benefits, viz., gratuity and leave encashment. As informed to us, there are post-retirement medical benefits.

2.

Investments: Whether the titles of ownership in respect of CGS/SGS Bonds/Debentures etc. are available in physical or de-mat form and these, in aggregate, agree with the respective amounts shown in the Company Rs.s books of accounts? if not, details may be stated.

According to the information and explanations provided to us by the Company, the following bonds/debentures, owned by the Company, were not available in physical/de-mat form, having been transferred to the repo buyer under repo transactions, within the extant guidelines of Reserve Bank of India:

Sl. No.

Bond Issuer Company

Quantity

Amount (Rs. crore)

1.

Air India Ltd (Series 1) [9.841 27-Sep-26

159

17.39

2.

Damodar Valley Corporation Ltd [8.691 25-Mar-28

2000

209.00

3.

Food Corporation of India (Series V-B) [8.81 22-Mar-28

465

46.50

4.

India Renewable Energy Development Agency Ltd (Ser V-A) [8.441 10-May-23

1100

110.00

5.

Indian Renewable Energy Development Agency Ltd (Ser V-B) [8.491 10-May-28

940

94.00

6.

Mahanagar Telepone Nigam Ltd [8.571 28-Mar-23

400

40.00

7.

Power Grid Corporation of India Ltd (XLIII Issue-F) [7.93] 20-May-22

150

15.00

8.

Power Grid Corporation of India Ltd (XLIII Issue-G) [7.931 20-May-23

150

15.00

9.

Power Grid Corporation of India Ltd (XLIII Issue-H) [7.931 20-May-24

150

15.00

10.

Power Grid Corporation of India Ltd (XLIII Issue-I) [7.931 20-May-25

150

15.00

11.

Power Grid Corporation of India Ltd (XLIII Issue-J) [7.931 20-May-26

150

15.00

12.

Power Grid Corporation of India Ltd (XLIII Issue-K) [7.931 20-May-27

150

15.00

13.

Power Grid Corporation of India Ltd (XLIII Issue-L) [7.931 20-May-28

150

15.00

14.

8.06% REC (Series 115) 31 May 2023

850

85.00

15.

10% Reliance Capital Ltd (F Series B-264) 03-Nov-17

100

10.05

16.

10% Reliance Capital Ltd (F Series B-272) 20-Dec-17

370

37.19

Annexure III referred to in paragraph 3 of Report on Other Legal and Regulatory Requirements of our report of even date on standalone financial statements:

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of IFCI Limited (“the Company”) as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘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 company’s 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting 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”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over 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 auditor’s 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 Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s 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 company; (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 expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, 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 control 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 Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For ASA & Associates LLP Parveen Kumar For KPMR & Associates S M Yamin Qureshi

Chartered Accountants Partner Chartered Accountants Partner

FRN: 009571N/N500006 Membership No. 088810 FRN: 02504N Membership No. 081750

Place : New Delhi

Date : May 28, 2016

Source : Dion Global Solutions Limited
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