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Central Depository Services (India) Ltd.

BSE: 538434 Sector: Others
NSE: CDSL ISIN Code: INE736A01011
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Central Depository Services (India) Ltd. (CDSL) - Auditors Report

Company auditors report

To the Members of Central Depository Services (India) Limited

Report on the Audit of the Ind AS Financial Statements

Opinion

We have audited the accompanying Ind AS financial statements of CentralDepository Services (India) Limited ("the Company") which comprise the Balancesheet as at March 31 2020 the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and the statement of Changes in Equity for the year thenended and notes to the Ind AS financial statements including a summary of significantaccounting policies and other explanatory information.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Basis for Opinion

We conducted our audit of the Ind AS financial statements in accordancewith the Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the 'Code of Ethics' issued by theInstitute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the financial statements under the provisions of the Act andthe Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Ind AS financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the Ind AS financial statements for thefinancial year ended March 31 2020. These matters were addressed in the context of ouraudit of the Ind AS financial statements as a whole and in forming our opinion thereonand we do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the Ind AS financial statements sectionof our report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Ind AS financial statements.

Key audit matters How our audit addressed the key audit matter
Valuation of investments and its impairment (as described in note 28 of the Ind AS financial statements) Our audit procedures included the following:
Quoted investments and unquoted investments represent the most significant amount on the balance sheet. The total of these aggregating to Rs 52443 Lakhs represented 80% of total assets of the Company as at March 31 2020. There is a risk that the fair value of investments is not determined appropriately. • We assessed the design and implementation of controls over valuation and existence of investments..
• We traced the quantity held from the confirmation provided by Custodian and Fund houses
Accordingly the valuation of investments and its impairment is considered as a key audit matter. • We tested the valuation of the quoted and unquoted investments to independent pricing sources..
• We assessed and tested the management procedures for performing impairment analysis of investments including Covid 19 impact assessed by the management
IT systems and controls
As a Depository the reliability of IT systems plays a key role in the business operations. Since large volume of transactions are processed the IT controls are required to ensure that systems process data as expected and that changes are made in an appropriate manner. Our audit procedures focused on the IT infrastructure and applications relevant to financial reporting including:
The IT infrastructure is critical for smooth functioning of the Company's business operations as well as for timely and accurate financial accounting and reporting. • Assessed the information systems used by the Company for IT General Controls (ITGC) and Application controls;
Due to the pervasive nature and complexity of the IT environment and large volume of transactions we have considered IT systems and controls as a key audit matter. • The aspects covered in the IT systems General Control audit were (i) User Access Management (ii) Program Change Management (iii) Other related ITGCs; - to understand the design and test the operating effectiveness of such controls in the system;
Our audit procedures focused on testing of IT systems IT general controls and specific application controls. • Assessed the changes that were made to the IT landscape during the audit period and assessing changes that have impact on financial reporting;
• Performed tests of controls (including other compensatory controls wherever applicable) on the IT application controls and IT dependent manual controls in the system.
• Tested the design and operating effectiveness of compensating controls where deficiencies were identified and where necessary extended the scope of our substantive audit procedures. In addition we understood where relevant changes were made to the IT landscape during the audit period and tested those changes that had a significant impact on financial reporting.

Information Other than the Financial Statements and Auditor's ReportThereon

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Annual reportbut does not include the Ind AS financial statements and our auditor's report thereon. TheAnnual report is expected to be made available to us after the date of this auditor'sreport.

Our opinion on the Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the Ind AS financial statements or ourknowledge obtained in the audit or otherwise appears to be materially mis-stated.

When we read the Annual report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.

Responsibilities of Management and the Board of Directors for the IndAS Financial Statements

The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with [theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.

In preparing the Ind AS financial statements management is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the Ind AS FinancialStatements

Our objectives are to obtain reasonable assurance about whether the IndAS financial statements as a whole are free from material misstatement whether due tofraud or error and to issue an auditor's report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these Ind AS financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of theInd AS financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.

• Evaluate the overall presentation structure and content of theInd AS financial statements including the disclosures and whether the Ind AS financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the Ind ASfinancial statements for the financial year ended March 31 2020 and are therefore the keyaudit matters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in Annexure 1 a statement on the mattersspecified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid Ind AS financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;

(e) On the basis of the written representations received from thedirectors as on March 31 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company with reference to these Ind AS financialstatements and the operating effectiveness of such controls refer to our separate Reportin Annexure 2 to this report;

(g) In our opinion the managerial remuneration for the year endedMarch 312020 has been paid / provided by the Company to its directors in accordance withthe provisions of section 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:

i. The Company does not have any pending litigations which would impactits financial position;

ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses;

iii. During the year there has been no delay in transferring amountsrequired to be transferred to the Investor Education and Protection Fund by the Company.

Re: Central Depository Services (India) Limited

Annexure 1 referred to in paragraph 1 under the heading "Report onother legal and regulatory requirements" of our report of even date

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) As informed by the management planned physical verification offixed assets could not be performed due to lock down situation in the country and hencewe are unable to comment on the discrepancies if any.

(c) According to the information and explanations given by themanagement the title deeds of immovable properties included in property plant andequipment are held in the name of the Company.

(ii) The Company's nature of business does not require holding of anyinventories and accordingly the requirements under paragraph 3(ii) of the Order are notapplicable to the Company.

(iii) According to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under section189 of the Companies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and(c) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanationsgiven to us there are no loans investments guarantees and securities given in respectof which provisions of section 185 of the Companies Act 2013 are applicable. According tothe information and explanations given to us the Company has complied with the provisionsof 186 of the Companies Act 2013 in respect investments made by the Company.

(v) The Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) To the best of our knowledge and as explained the CentralGovernment has not specified the maintenance of cost records under Section 148(1) of theCompanies Act 2013 for the services rendered by the Company.

(vii) (a) Undisputed statutory dues including provident fundincome-tax service tax goods and service tax cess and other statutory dues havegenerally been regularly deposited with the appropriate authorities though there has beena slight delay in a few cases. As informed the provisions relating to employees' stateinsurance sales-tax duty of custom duty of excise and value added tax are notapplicable to the Company.

(b) According to the information and explanations given to us noundisputed amounts payable in respect of provident fund income-tax service tax goodsand service tax cess and other statutory dues were outstanding at the year end for aperiod of more than six months from the date they became payable. As informed theprovisions relating to employees' state insurance sales-tax duty of custom duty ofexcise and value added tax are not applicable to the Company.

(c) According to the information and explanations given to us thereare no dues of income tax service tax goods and service tax and cess which have not beendeposited on account of any dispute. The provisions relating to employees' stateinsurance sales-tax duty of custom duty of excise and value added tax are notapplicable to the Company

(viii) The Company did not have any outstanding loans or borrowingsfrom financial institution or bank or government or has any debentures outstanding duringthe year.

(ix) According to the information and explanations given by themanagement the Company has not raised any money way of initial public offer or furtherpublic offer or debt instruments or term loans hence reporting under clause (ix) is notapplicable to the Company and hence not commented upon.

(x) Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management we report that no fraud by theCompany or on the Company by the officers and employees of the Company has been noticedor reported during the year.

(xi) According to the information and explanations given by themanagement the managerial remuneration has been paid / provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theCompanies Act 2013.

(xii) In our opinion the Company is not a nidhi company. Theprovisions of clause 3(xii) of the order are therefore not applicable to the Company andhence not commented upon.

(xiii) According to the information and explanations given by themanagement transactions with the related parties are in compliance with section 177 and188 of Companies Act 2013 where applicable and the details have been disclosed in thenotes to the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and onan overall examination of the Balance Sheet the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review and hence reporting requirements under clause 3(xiv) are notapplicable to the Company and not commented upon.

(xv) According to the information and explanations given by themanagement the Company has not entered into any non-cash transactions with directors orpersons connected with him as referred to in section 192 of Companies Act 2013.

(xvi) According to the information and explanations given to us theprovisions of section 45-IA of the Reserve Bank of India Act 1934 are not applicable tothe Company.

Re: Central Depository Services (India) Limited

ANNEXURE 2 referred to in paragraph 2 (f) under the heading"Report on other legal and regulatory requirements" of our report of even date

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of Central Depository Services (India) Limited ("the Company") as ofMarch 312020 in conjunction with our audit of the Ind AS financial statements of theCompany for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting with reference to these Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the "GuidanceNote") and the Standards on Auditing as specified under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting with reference to these Ind AS financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls over financial reporting with reference tothese Ind AS financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these Ind ASfinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlsover financial reporting with reference to these Ind AS financial statements.

Meaning of Internal Financial Controls Over Financial Reporting WithReference to these Financial Statements

A company's internal financial control over financial reporting withreference to these Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingwith reference to these Ind AS financial statements includes those policies and proceduresthat (1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting With Reference to these Ind AS Financial Statements

Because of the inherent limitations of internal financial controls overfinancial reporting with reference to these Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these Ind AS financial statements to future periods are subject to the risk that theinternal financial control over financial reporting with reference to these Ind ASfinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequateinternal financial controls over financial reporting with reference to these Ind ASfinancial statements and such internal financial controls over financial reporting withreference to these Ind AS financial statements were operating effectively as at March 312020 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.

For S.R. Batliboi & Co. LLP
Chartered Accountants
ICAI Firm Registration Number: 301003E/E300005
per Jayesh Gandhi
Partner
Membership Number: 037924
UDIN: 20037924AAAACL4668
Place of Signature: Mumbai
Date: May 16 2020