Report on Audit of the Standalone Financial Statements To the president of India/ the Members of Bank of India Opinion
1) We have audited the accompanying Standalone Financial Statements of Bank of India(the Bank') which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss and the Statement of Cash Flows for the year then ended andnotes to Standalone Financial Statements including Significant Accounting Policies andother explanatory information in which are included returns for the year ended on thatdate of:
(i) 20 branches and Treasury branch audited by us;
(ii) 2387 domestic branches audited by respective Statutory Branch Auditors; and
(iii) 23 Foreign branches audited by respective local Auditors
The branches audited by us and those audited by other auditors have been selected bythe Bank in accordance with the guidelines issued to the Bank by the Reserve Bank ofIndia. Also included in the Balance Sheet the Statement of Profit and Loss and Statementof Cash Flows are the returns from 2675 branches which have not been subjected to audit.These unaudited branches account for 7.01% of advances 21.95% of deposits 5.94% ofinterest income and 20.68% of interest expenses.
2) In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Banking Regulation Act 1949 ("the Act") in the manner so required andare in conformity with the accounting principles generally accepted in India and give trueand fair view:
a) In case of Balance Sheet of the state of affairs of the Bank as at March 312020
b) true balance of loss in case of Profit & Loss account for the year ended onthat date; and
c) true and fair view of the cash flows in the case of Cash Flow Statement for theyear ended on that date.
Basis for Opinion
3) We conducted our audit in accordance with the Standards on Auditing (SAs) issued byThe Institute of Chartered Accountants of India. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of the Bankin accordance with the code of ethics issued by the Institute of Chartered Accountants ofIndia together with ethical requirements that are relevant to our audit of the
Standalone Financial Statements under provision of the Act and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the code ofethics. We believe that the audit evidence obtained by us and audit evidences obtained byother auditors in terms of their reports referred to in "Other Matter" paragraphbelow is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matters
4) a) Note No.7.18 of Schedule-18 of the accompanying
Standalone Financial Statements regarding impact of COVID-19 pandemic. The situationcontinues to be uncertain and the management of the Bank is evaluating the situation andimpact on its Domestic & International business operations of the Bank on an ongoingbasis; and
b) Note No.9 (g) & (h) of Schedule-18 regarding provision made in NPA accounts
Our opinion is not modified in respect of these matters.
Key Audit Matters
5) Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the Key Audit Matters to be communicatedin our report.
|Sl. Key Audit Matters No. ||Audit procedure followed to address the Key Audit Matters |
|1) Compliance of Income Recognition Asset Classification and provisioning norms on advances and investments as per guidelines issued by Reserve Bank of India ||We have carried out the audit of the advances and investments based on the IRAC Norms/Cir- culars and directives issued by Reserve Bank of India and the policy of the Bank. |
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|Advances ||Advances: Our audit procedure includes: |
|Bank has to classify the accounts under performing advances and non performing advances based on the guidelines/ circulars and directives issued by Reserve Bank of India. The guidelines issued by Reserve Bank of India is for all credit facilities given by the bank and is to be mandatorily followed for the purpose of Income Recognition Asset Classification and Provisioning. || |
| ||a) We have communicated to the branch statutory auditors to verify the compliance of IRAC Norms and procedures and the policies adopted by the bank and we have relied on the audit reports given by the branch statutory auditors. |
|Identification of performing and non performing advances is system driven. The software used by the bank identifies the accounts for classification and provisioning as per the guidelines issued by Reserve Bank of India. ||b) Understanding the IT system and controls put in place and logic and validations built in the system by the bank for identification classification and provisioning in case of advances. |
|The Income recognition asset classification and provisioning if not done properly as per the IRAC norms issued by Reserve Bank of India may materially impact the financial statements of the bank. ||c) On sample basis tested whether the classification of advances underperforming and non-performing and provisioning is carried out as per the guidelines of Reserve Bank of India. |
| ||d) During audit of branches allotted to us we have carried out substantive test on major advances including Specially Mentioned Accounts (SMA) and also verified the security aspect by checking the valuation reports. |
| ||e) Reliance is also placed on the internal audit reports concurrent audit reports credit audit system audit and special audits conducted by the bank. |
| ||f) Verification and implementations of MOC's suggested by statutory branch auditors and statutory central auditors during consolidation of financial statements. |
|Investments : ||Investments : |
|Bank has to classify the investments underperforming and non-performing based on the guidelines/circulars and directives issued by Reserve Bank of India. ||Our audit procedure includes: |
| ||a) Understanding the IT system and controls put in place and logic and validations built in the system by the bank for identification classification and provisioning in case of invest- ments. |
|Identification of performing and non performing investments is generally system driven. || |
|The valuation is done as per the guidelines issued by Reserve Bank of India and the valuations are done based on the price quoted on BSE/NSE FIMDA /FBIL rates etc. ||b) On sample basis tested whether the classification and valuation of investments is carried out as per the guidelines of Reserve Bank of India. |
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|The Income recognition asset classification and provisioning if not done properly as per the IRAC norms issued by Reserve Bank of India may materially impact the financial statements of the bank. ||c) On sample basis also verified whether proper provision for depreciation in the value of investments and ensured that provision for depreciation is done as per RBI guidelines. |
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|Advances and Investments constitute 56.15% and 24.14% respectively of total assets of the bank. ||d) Reliance is also placed on the internal audit reports concurrent audit reports and system audit conducted by the bank. |
|As advances and investments form part of a major portion of the business of the bank and the regulatory compliances involved we have considered this aspect as Key Audit Matter. || |
|2) Evaluation of uncertain tax litiaations and continaent liabilities ||Our audit approach involved: |
| ||a) Understanding the current status of the litigations/tax assessments; We went through the current status of the tax litigations and contingent liabilities. |
|Claims against the bank not acknowledged as debt including tax litigations as on March 31 2020 is disclosed in Schedule 12 and Note No.9(a) (i) of Schedule 18 to Standalone Financial Statements. ||b) We obtained the details of latest orders communica- |
|Under Indirect Taxes there are ongoing disputes regarding availability of input credits/ applicability of Reverse Charge Mechanism on certain payments under Service tax act/ Goods and Service Tax Act. ||tion received from various tax authorities and follow up action thereon; |
| ||c) We gathered recent information received on the tax and other litigations for assessing the liabilities. |
|This is a key audit matter due to uncertainty of the outcome which involves significant judgment to determine the possible outcome of these disputes. || |
| ||d) Wherever required reliance is placed on the opinion of legal and tax consultants. |
|3 Assessment of Information Technoloav (IT): ||Our audit procedure includes:- |
| ||a) Understanding and testing |
|IT controls with respect to recording of transactions generating various reports in compliance with RBI guidelines including IRAC preparing financial statements and reporting of compliances to regulators etc. is an important part of the process. Such reporting is highly dependent on the effective working of Core Banking Software and other allied systems. ||of operative effectiveness of the system. |
| ||b) Understanding the coding system adopted by the bank for various categories of customers. |
| ||c) Understanding and testing of different validations available in the system |
| ||d) Checked the user requirements for any changes in the regulations/policy of the bank |
|We have considered this as key audit matter as any control lapses validation failures incorrect input data and wrong extraction of data may result in wrong reporting of data to the management and regulators || |
| ||e) Testing of logic used for extracting the data. |
| ||f) On sample basis reviewed the reports generated. |
| ||g) Reliance is placed on system audit report of the bank. |
|4) Modified Audit Procedures carried out in liaht of COVID-19 outbreak: ||Due to the outbreak of COVID-19 pandemic that caused nationwide lockdown and other travel restrictions imposed by the Central and State Governments/local administration during the period of our audit we could not travel to the Branches /NBG offices and carry out the audit processes physically at the respective offices. Wherever physical access was not possible necessary records/ reports/ documents/ certificates |
|Due to COVID-19 pandemic Nation-wide lockdown and travel restrictions imposed by Central / State Government / Local Authorities during the period of our audit and the RBI directions to Bank to facilitate carrying out audit remotely wherever physical access was not possible audit could not be conducted by visiting the Branch premises NBG offices of the Bank. || |
|As we could not gather audit evidence in person/ physically/ through discussions and personal interactions with the officials at the Branches/NBG offices we have identified such modified audit procedures as a Key Audit Matter. Accordingly our audit procedures were modified to carry out the audit remotely. ||were made available to us by the Bank through digital medium emails and remote access to CBS and other relevant application software. To this extent the audit process was carried out on the basis of such documents reports and records made available to us on which were relied upon as audit evidence for conducting the audit and reporting for the current period. |
| ||Accordingly we modified our audit procedures as follows: |
| ||a) Conducted verification of necessary records/ docu- ments/ CBS/ and other Application software electronically through remote access/emails in respect of some of the Branches / offices and other offices of the Bank wherever physical access was not possible. |
| ||b) Carried out verification of scanned copies of the documents deeds certificates and the related records made available to us through emails and remote access over secure network of the Bank. |
| ||c) Making enquiries and gathering necessary audit evidence through Document Management System (DMS) telephonic communication/confer- ence calls and e-mails. |
| ||d) Resolution of our audit observations telephonically/ through email instead of a face-to-face interaction with the designated officials. |
|5) Recognition of Deferred Tax Assets: ||Our audit procedure includes:- |
| ||a) We have verified that recognition criteria for Deferred Tax Asset as per Accounting Standard 22 Accounting for Taxes on Income issued by The Institute of Chartered Accountants of India have been complied with. |
|As on March 31 2020 the Bank has recognised a net deferred tax asset of Rs.13708.72 Crore. (For Year 2019-2020 recognised DTA Rs.1823.12 Crore) |
Deferred tax assets should be recognised and carried forward only to the extent that
|there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. ||b) Assessed the assumptions and other parameters used by the bank management for recognition of the deferred tax asset. |
|Due to the huge amount of deferred tax assets recognised over a period based on the profit forecasted over future period of time increases the uncertainty and risk of recognition of such asset. || |
|Hence we have considered this as a Key Audit Matter. || |
Information Other than the Financial Statements and Auditors
6) The Bank's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management report and Chairman'sStatement but does not include the Standalone Financial Statements and our Auditor'sreport thereon which is expected to be made available to us after that date.
Our opinion on the Standalone Financial Statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the Standalone Financial Statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated.
When we read the other information if we conclude that there is material misstatementtherein we are required to communicate the matter to those charged with governance anddetermine the actions under the applicable laws and regulations.
Responsibilities of Management and Those Charged with
Governance for the Standalone Financial Statements
7) The Bank's Board of Directors is responsible with respect to the preparation ofthese Standalone Financial Statements that give a true and fair view of the financialposition financial performance and cash flows of the Bank in accordance with theaccounting principles generally accepted in India including the Accounting Standardsissued by The Institute of Chartered Accountants of India and provisions of Section 29 ofthe Banking Regulation Act 1949 and circulars and guidelines issued by the Reserve Bankof India (RBI') from time to time. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Bank and for preventing and detecting frauds and otherirregularities; 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.
I n preparing the Standalone Financial Statements the Board of Directors areresponsible for assessing the Bank's ability to continue as a going concern disclosingas applicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Bank or to cease operationsor has no realistic alternative but to do so. The Board of Directors is also responsiblefor overseeing the Bank's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial
8) Our objectives are to obtain reasonable assurance about whether the StandaloneFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the bank'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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'sreport. However future events or conditions may cause the bank to cease to continue as agoing concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the Standalone Financial Statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the Standalone Financial Statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Financial Statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
9) These Standalone Financial Statements incorporate the relevant returns of 2410branches (including 23 foreign branches) audited by the other auditors specially appointedfor this purpose. These branches audited by other auditors cover total assets ofRs.185126 Crore at 31st March 2020 and total revenue of Rs.17130 Crore for the yearended on that date as considered in the Standalone Financial Statements. The financialstatements / information of these branches have been audited by the other auditors whosereports have been furnished to us and our opinion in so far as it relates to the amountsand disclosures included in respect of these branches is based solely on the report ofsuch other auditors.
Our opinion is not modified 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 Section 29 of the Banking Regulation Act 1949;
11) Subject to the limitations of the audit indicated in paragraphs 7 to 9 above and asrequired by the Banking Companies (Acquisition and Transfer of Undertakings) Act1970/1980 and subject also to the limitations of disclosure required therein we reportthat:
a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes 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; and
c) The returns received from the offices and branches of the Bank have been foundadequate for the purposes of our audit.
12) We further report that:
a) i n 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;
b) the Balance Sheet the Profit and Loss Account and the Statement of Cash Flows dealtwith by this report are in agreement with the books of account and with the returnsreceived from the branches not visited by us;
c) the reports on the accounts of the branch offices audited by branch auditors of theBank under section 29 of the Banking Regulation Act 1949 have been sent to us and havebeen 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 ofCash Flows comply with the applicable accounting standards to the extent they are notinconsistent with the accounting policies prescribed by Reserve Bank of India.
13) As required by letter No. DOS.ARG.No.6270/08.91.001/2019- 20 dated March 17 2020on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks-Reportingobligations for SCAs from FY: 2019-20" read with subsequent communication dated May19 2020 issued by the RBI we further report on the matters specified in paragraph 2 ofthe aforesaid letter as under:
a) In our opinion the aforesaid Standalone Financial Statements comply with theAccounting Standards issued by ICAI to the extent they are not inconsistent with theaccounting policies prescribed by the RBI.
b) There are no observations or comments on financial transactions or matters whichhave any adverse effect on the functioning of the bank.
c) On the basis of the written representations received from the directors as on March31 2020 none of the directors is disqualified as on March 31 2020 from being appointedas a director in terms of sub-section (2) of Section 164 of the Companies Act 2013.
d) There are no qualifications reservations or adverse remarksrelating to themaintenance of accounts and other matters connected therewith.
e) As the Bank has exercised the option to implement "Internal Financial Controlswith reference to the Financial Statements" from the financial year 202021 aspermitted by RBI on May 19 2020 we do not provide any comment in this regard.
|- For Banshi Jain & Associates ||For Chaturvedi &Co. |
|Chartered Accountants ||Chartered Accountants |