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Canara Bank

BSE: 532483|NSE: CANBK|ISIN: INE476A01014|SECTOR: Banks - Public Sector
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Auditor's Report (Canara Bank) Year End : Mar '19

Report on Audit of the Standalone Financial Statements Opinion

1. We have audited the accompanying standalone financial statements of Canara Bank (‘the Bank’), which comprise the Balance Sheet as at 31 March 2019, the Profit and Loss Account and the Statement of Cash Flows for the year then ended, and notes to financial statements including a summary of significant accounting policies and other explanatory information in which are included returns for the year ended on that date of 20 branches audited by us and 3857 branches audited by statutory branch auditors. The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also included in the Balance Sheet, the Profit and Loss Account and Statement of Cash Flows are the returns from 2439 branches which have not been subjected to audit. These unaudited branches account for 4.81 percent of advances, 14.93 per cent of deposits, 3.80 per cent of interest income and 15.11 per cent of interest expenses.

2. 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 Banking Regulation Act, 1949 in the manner so required for bank and are in conformity with accounting principles generally accepted in India and give a true and fair view:

a. In case of the Balance sheet, of the state of affairs of the Bank as at 31st March, 2019;

b. In case of Profit and loss account, of the profit for the year ended on that date; and

c. In case of statement of cash flows, of its cash flows for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing (SA’s) issued by the Institute of Chartered Accountants of India (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 in India, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on financial statements.

Key Audit Matters

4. Key audit matters are those matters that, in our professional judgment, were ofmost significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a seperate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Sl. No.

Key Audit Matter

Auditor’s Response to Key Audit Matter

1

Adequacy of classification

Principal Audit Procedures:

and provisions in respect

We assessed the Bank’s

of Advances.

system in place to identify

Advances are classified

and provide for non

as performing and non

performing assets.

Our audit approach

performing assets in

r r

consisted testing of the

accordance with the

design and operating

prudential norms issued

effectiveness of the internal

by RBI. The bank has

controls and substantive

a system of auto

testing as follows:

classification of advances

- Reviewed the design,

as NPA in accordance

implementation and

with the RBI Guidelines.

operating effectiveness

However the identification

of the Bank’s General IT

of NPA and creation of

controls over the key IT

systems for the purpose

provision on such advances

of identification of non

also involves key judgments

performing assets and

relating to performance of

provisioning thereon.

borrowers, determination

- Tested the relevant

of security value, sources of

information technology

repayment, application of

systems used in

regulatory conditions, etc.

identification and

Accordingly, our audit was

making provision for such NPA as per the RBI

focused on income recog

Guidelines including

nition, asset classification

involvement of manual

and provisioning pertain

process and manual

ing to advances due to in

controls in relation to

volvement of management

income recognition,

judgment and considering

asset classification and

the materiality of the bal-

anrpc

provisioning pertaining to advances.

ances.

- Evaluated and tested the management estimates and judgments for the purpose of identification of NPA and adequacy of provision required as per RBI’s Prudential Norms.

- Considered branch audit reports for identification and provisioning for nonperforming assets.

- Ensured exceptions noticed during our audit procedures are duly corrected.

2

Assessment of Deferred

Principal Audit Procedures

tax assets recognized by

performed:

the bank on carryforward

- Considered the taxable

of losses.

profits of the bank

Deferred tax assets on

and taxes paid in the

unabsorbed depreciation

past, obtained details

or carry forward of losses

of carry forward losses

are to be recognized only

under income tax and

when there is a virtual

details of estimates of

certainty supported by

taxable incomes for

convincing evidence that

future periods without

sufficient future taxable

considering further

income will be available

capital infusion, of

against which such

restructuring and

deferred tax assets can be

without considering expected recoveries

realised. Determination

from assets where

of virtual certainty is a

resolution proceedings

matter of judgment based on convincing evidence.

are underway.

- Tested the period over

Considering the involve

which the deferred

ment of manage ment’s

tax assets on such

estimation and judgment

unabsorbed losses

in determining virtual

would be recovered

certainty of sufficient

against future taxable

future taxable income

income.

being available this matter

- Tested the manage

has been determined as a

ment’s under lying

key audit matter.

assumptions and judgm

Refer Para 5.6 of Schedule

ents in estimating the

18 to the Standalone

future taxable incomes

Financial Statements.

against which such unabsorbed losses would be recovered.

- We have reviewed past income tax assessment orders, unresolved tax issues and their current status under litigation, based on our understanding on the likely outcome of the issues on the dispute and the amount of allowable carry forward losses.

3

Key Information technology (IT) systems (Flex Cube - Oracle based) used in financial reporting process.

The Bank’s operational and financial processes are dependent on IT systems due to large volume of transactions that are processed on daily basis and hence considered as a key audit matter.

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 Flexcube Treasury System primarily as relevant for financial reporting.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls as follows:

- Obtained an understanding of the Bank’s IT control environment and IT policies during the audit period.

- Reviewed the design, implementation and operating effectiveness of the Bank’s basic IT controls including application, access controls that are critical to financial reporting.

- Reviewed the IS Audit Reports and discussed with IS Wing on compliance to key IS Controls.

- Tested key automated and business cycle controls and logic for system generated reports relevant to the audit on test check basis.

Information other than the Financial Statements and Auditor’s Report thereon

5. The Bank’s Board of Directors is responsible for the other information. The other information comprises the Pillar III Disclosures under the New Capital Adequacy Framework (BASEL III Disclosures) (but does not include the financial statements and our Auditor’s Report thereon), which we obtained prior to the date of this Auditor’s Report, and the Corporate Governance Report, Directors Report, which is expected to be made available to us after the date of our auditor’s report.

Our opinion on the financial statements does not cover the other information and we do not and will 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 identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements of our knowledge obtained during the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditors report, we conclude there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

6. The Bank’s Board of Directors is responsible 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 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 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, 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

7. 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 scepticism 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.

- 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 bank’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 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 bank to cease 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.

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 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 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 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.

Other Matter

8. We did not audit the financial statements / information of 3857 branches included in the standalone financial statements of the Bank whose financial statements / financial information reflect total advances of Rs.2,59,839.27 Crs as at 31st March 2019 and total revenue of Rs.22,204.30 Crs for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and in our opinion in so far as it relates to the amounts and disclosures included in respect of branches, are based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

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 5 to 7 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:

a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit 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; and

c) The returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

11. 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us.

b) the Balance Sheet, the Profit and Loss Account and the Statement of Cash Flows 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;

c) the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and

d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Statement of Cash Flows comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.

For Dagliya and Co. For Komandoor & Co LLP.

Chartered Accountants Chartered Accountants

FRN.000671S FRN. 001420S/S200034

(P Manohara Gupta) (T. Nagendranadh)

Partner Partner

Membership Number 016444 Membership Number 226246

For D. K. Chhajer & Co. For S N K & Co.

Chartered Accountants Chartered Accountants

FRN. 304138E FRN. 109176W

(Niraj K Jhunjhunwala) (Ankit D Danawala)

Partner Partner

Membership Number 057170 Membership Number 119972

Place : Bengaluru

Date : May 10, 2019

Source : Dion Global Solutions Limited
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