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Karnataka Bank Ltd.

BSE: 532652 Sector: Financials
NSE: KTKBANK ISIN Code: INE614B01018
BSE LIVE 15:51 | 17 Aug 148.40 148.40
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NSE 15:53 | 17 Aug 148.50 2.85
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150.75

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OPEN 146.10
PREVIOUS CLOSE 0.00
VOLUME 360498
52-Week high
52-Week low
P/E 9.03
Mkt Cap.(Rs cr) 4,195
Buy Price 0.00
Buy Qty 0.00
Sell Price 148.40
Sell Qty 2.00
OPEN 146.10
CLOSE 0.00
VOLUME 360498
52-Week high
52-Week low
P/E 9.03
Mkt Cap.(Rs cr) 4,195
Buy Price 0.00
Buy Qty 0.00
Sell Price 148.40
Sell Qty 2.00

Karnataka Bank Ltd. (KTKBANK) - Auditors Report

Company auditors report

To

The Members of The Karnataka Bank Limited

Report on the Financial Statements

1. We have audited the accompanying financial statements of The Karnataka Bank Limited('the Bank') which comprise the Balance Sheet as at 31 March 2017 the Profit and LossAccount the Cash Flow Statement for the year then ended and a summary of significantaccounting policies and other explanatory information. Incorporated in these FinancialStatements are the returns of 34 branches audited by us 757 branches/offices audited byBranch Auditors.

Management's Responsibility for the Financial Statements

2. The Bank's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act2013 ('the Act') with respect to the preparation of thesefinancial statements that give a true and fair view of the financial position financialperformance and cash flows of the Bank in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under Section133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014 and provisions ofSection 29 of the Banking Regulation Act 1949 and circulars and guidelines issued by theReserve Bank of India ('RBI') from time to time. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Bank and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these financial statements based onour audit.

4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.

5. We conducted our audit of the Bank including its branches in accordance withStandards on Auditing ('the Standards') specified under Section 143(10) of the Act. ThoseStandards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of materialmisstatements.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Bank's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Bank's Directors as well as evaluating the overall presentation ofthe financial statements.

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

Opinion

8. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theBanking Regulation Act 1949 as well as the Companies Act 2013 in the manner so requiredfor banking companies and give a true and fair view in conformity with accountingprinciples generally accepted in India:

a. In case of the Balance Sheet of the state of affairs of the Bank as at 31 March2017;

b. In case of the Profit and Loss Account of the profit for the year ended on thatdate; and

c. In case of the Cash Flow Statement of cash flows for the year ended on that date.

Emphasis of Matter

9. We draw attention to Note of the Financial Statements regarding deferment of lossof

Rs78.51 crore on sale of advances to Asset Reconstruction Companies.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordancewith the provisions of Section 29 of the Banking Regulation Act 1949 read with Section133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014.

11. As required by sub section (3) of section 30 of the Banking Regulation Act 1949we report that:

(a) we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit and have found them tobe satisfactory;

(b) the transactions of the Bank which have come to our notice have been within thepowers of the Bank;

(c) the returns received from the offices and branches of the Bank have been foundadequate for the purposes of our audit.

12. Further as required by section 143(3) of the Act we further report that:

i. we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;

ii. in our opinion proper books of account as required by law have been kept by theBank so far as it appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from branches not visited by us;

iii. the reports on the accounts of the branch offices audited by branch auditors ofthe Bank under section 143(8) of the Companies Act 2013 have been sent to us and havebeen properly dealt with by us in preparing this report;

iv. The Balance Sheet the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account and with the returnsreceived from the branches not visited by us;

v. in our opinion the aforesaid financial statements comply with the AccountingStandards 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 accountingpolicies prescribed by RBI;

vi. on the basis of written representations received from the directors as on 31 March2017 taken on record by the Board of Directors none of the directors is disqualified ason 31 March 2017 from being appointed as a director in terms of Section 164 (2) of theAct; and vii. with respect to the adequacy of the internal financial controls overfinancial reporting of the Bank and the operating effectiveness of such controls refer toour separate Report in "Annexure A";

viii. with respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

a. the Bank has provided for pending litigations having an impact on its financialstatements - Refer schedule 18 - Note 6;

b. the Bank does not have any long-term contracts including derivative contracts -Refer Schedule 18 - Note 1.3.3(ii) to the financial statements; and

c. there has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Bank.

For Kamath & Rau For Abarna & Ananthan
Chartered Accountants Chartered Accountants
Firm Regn. No. 001689S Firm Regn. No. 000003S
Sd/- Sd/-
Srinivas S Kamath Abarna Bhaskar
Partner Partner
M.No. 201716 M.No. 025145
Place : Mangaluru
Date : 13 May 2017

Annexure - A to the Independent Auditor's Report of even date on the FinancialStatements of The Karnataka Bank Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013

1. We have audited the internal financial controls over financial reporting of TheKarnataka Bank

st

Limited ('the Bank') as at 31 March 2017 in conjunction with our audit of the financialstatements of the Bank for the year ended on that date.

Management's Responsibility for Internal Financial Controls

2. The Bank's Board of Directors is responsible for establishing and maintaininginternal financial controls based on "the internal control over financial reportingcriteria established by the Bank considering the essential components of internal controlstated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting ('the Guidance Note') issued by the Institute of Chartered Accountants of India('the ICAI')".

These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to Bank's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013 ('the Act').

Auditor's Responsibility

3. Our responsibility is to express an opinion on the Bank's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting('the Guidance Note') and the Standards on Auditing ('the Standards') issued by the ICAIand deemed to be prescribed under Section143(10) of the Act to the extent applicable toan audit of internal financial controls both issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Bank's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

6. A bank's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A bank's internal financial control over financialreporting includes those policies and procedures that :

a. pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the bank;

b. provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the bank are being made only inaccordance with authorizations of management and directors of the bank; and

c. provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the bank's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion the Bank has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2017 based on theinternal control over financial reporting criteria established by the Bank considering theessential components of internal control stated in the Guidance Note issued by the ICAI.

For Kamath & Rau For Abarna & Ananthan
Chartered Accountants Chartered Accountants
Firm Regn. No. 001689S Firm Regn. No. 000003S
Sd/- Sd/-
Srinivas S Kamath Abarna Bhaskar
Partner Partner
M.No. 201716 M.No. 025145
Place : Mangaluru
th
Date : 13 May 2017