The Members of Canara Bank
Report on Audit of the Standalone Financial Statements
1. We have audited the standalone financial statements of Canara Bank('the Bank') which comprise the Balance Sheet as at 31st March 2020 theStatement of Profit and Loss and the Statement of Cash Flows for the year then ended andnotes to financial statements including a summary of significant accounting policies andother explanatory information in which are included the returns for the year ended on thatdate of 20 branches Integrated Treasury Wing audited by us and 2784 branches (including 5foreign branches) audited by statutory branch auditors. The branches audited by us andthose audited by other auditors have been selected by the Bank in accordance with theguidelines issued to the Bank by the Reserve Bank of India. Also included in the BalanceSheet the Statement of Profit and Loss and Statement of Cash Flows are the returns from3851 branches which have not been subjected to audit. These unaudited branches account for9.40 percent of advances 27.39 per cent of deposits 11.66 per cent of interest incomeand 28.22 per cent of interest expenses.
2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid standalone financial statements give theinformation required by the Banking Regulation Act 1949 in the manner so required forbank and are in conformity with the accounting principles generally accepted in India and:
a. the Balance Sheet read with the notes thereon is a full and fairBalance Sheet containing all the necessary particulars is properly drawn up so as toexhibit a true and fair view of the State of Affairs of the Bank as at 31stMarch 2020;
b. the Profit and Loss Account read with notes thereon shows a truebalance of loss; and
c. the Cash Flow Statement gives a true and fair view of the cash flowsfor 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"). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Bank in accordance with the Code of Ethics issued by the Institute ofChartered Accountants of India together with ethical requirements that are relevant to ouraudit of the financial statements and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Key Audit Matters
4. Key audit matters are those matters that in our professionaljudgement were of most significance in our audit of the financial statements of thecurrent period. These matters were addressed in the context of our audit of the financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:
|NO Key Audit Matter ||Response to Key Audit Matter |
|1 Adequacy of provisions in respect of Advances. ||Principal Audit Procedures: |
| ||We assessed the Bank's system in place to identify and provide for nonperforming assets. |
|Advances are classified as performing and nonperforming assets in accordance with the prudential norms issued by RBI. The identification of non-performing assets and creation of provision on such advances involves key judgements relating to performance of borrowers determination of security value etc. || |
| ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: |
| || Evaluated the design of internal controls relating to identification and making provision for nonperforming assets. |
|Accordingly our audit was focused on income recognition asset classification and provisioning pertaining to advances due to involvement of management judgement and considering the materiality of the balances. || |
| || Tested the relevant information technology systems used in identification and making provision for such NPA as per the RBI Guidelines. |
| || Evaluated and tested the management estimates and judgements 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 |
| || Test checked the identification and provisioning of nonperforming assets in accordance with RBI Guidelines issued from time to time. |
| || Ensured exceptions noticed during our audit procedures are duly corrected. |
|2 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 BSPL Reporting Package and 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 on test check basis. |
| || 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. |
|3 Modified Audit Procedures carried out considering COVID-19 outbreak: ||Due to the outbreak of COVID-19 pandemic that caused Nation-wide 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/ Circle / Administrative / Corporate Offices and carry out the audit processes physically at the respective offices. |
|DuetoCOVID-19pandemic 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 premises of certain Branches / Circle Offices / Wings in the Corporate Office of the bank. || |
| ||Wherever physical access was not possible necessary records / reports / documents / certificates were made available to us by the Bank through digital medium emails and remote access to CBS BSPL and other relevant application software. To this extent the audit process was carried out based on such documents reports and records made available to us 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: |
|As we could not gather audit evidence in person/ physically / through discussions and personal interactions with the officials at the Branches / Circle / Administrative / Corporate 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. || |
| ||a.We the Statutory Central Auditors and certain Statutory Branch Auditors conducted verification of necessary records / documents/ CBS / BSPL and other Application software electronically through remote access/ emails in respect of certain Branches / Circle Offices / Administrative 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 Video Conferencing dialogues and discussions over phone calls/conference calls emails and similar communication channels. |
| ||d. Resolution of our audit observations telephonically / through email instead of a face- to-face interaction with the designated officials. |
Emphasis of Matter:
5. Attention is drawn to Clause 6.18 of Schedule No 18 to theaccompanying Standalone financial statements which describes the uncertainties due tooutbreak of COVID-19 pandemic and the management's evaluation of its impact on thebusiness operations of the Bank.
Our report is not modified in respect of this matter.
Information other than the Financial Statements and
Auditor's Report thereon:
6. The Bank's Board of Directors is responsible for the otherinformation. The other information comprises the Pillar III Disclosures under the NewCapital Adequacy Framework (BASEL III Disclosures) (but does not include the financialstatements and our auditor's report thereon) Corporate Governance Report which weobtained prior to the date of this Auditor's Report and the Directors Report which isexpected to be made available to us after the date of our auditor's report.
Our opinion on the 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 Standalone Financial Statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be material misstated.
If based on the work we have performed on the other information thatwe obtained prior to the date of this auditor's report we conclude there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and those Chargedwith
Governance for the Standalone Financial Statements
7. The Bank's Board of Directors is responsible with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Bank in accordance withthe accounting principles generally accepted in India including the Accounting Standardsissued by ICAI and provisions of Section 29 of the Banking Regulation Act 1949 andcirculars and guidelines issued by the Reserve Bank of India ('RBI') from time to time.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Banking Regulation Act 1949 for safeguarding of the assets ofthe Bank and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements management is responsible forassessing the Bank's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Bank or to cease operations or has norealistic alternative but to do so.
Auditor's Responsibilities for the Audit ofthe Financial
8. Our objectives are to obtain reasonable assurance about whether thefinancial 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 financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
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 thebank's ability to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the financial statements or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor's report. However future events or conditions may cause the bank to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of thefinancial 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 financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant auditfindingsincluding any significant deficiencies in internal control that we identifyduring our audit.
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 financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
9. We did not audit the financial statements / information of 2784branches included in the standalone financial statements of the Bank whose financialstatements / financial information reflect total assets of '217180.32 Crs as at 31stMarch 2020 and total revenue of '22805.88 Crs for the year ended on that date asconsidered in the standalone financial statements. The financial statements / informationof these branches have been audited by the branch auditors whose reports have beenfurnished to us and in our opinion inso far as it relates to the amounts and disclosuresincluded in respect of branches is 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
10. The Balance Sheet and the Profit and Loss Account have been drawnup in accordance with Section 29 of the Banking Regulation Act 1949;
11. Subject to the limitations of the audit indicated in paragraphs 5to 9 above and as required by the Banking Companies (Acquisition and Transfer ofUndertakings) Act 1970/1980 and subject also to the limitations of disclosure requiredtherein 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 and have found them to be satisfactory;
b) The transactions of the Bank which have come to our notice havebeen within the powers of the Bank; and
c) The returns received from the offices and branches of the Bank havebeen found adequate for the purposes of our audit.
12. As required by Letter No DOS.ARG.No. 6270/08.91.001/2019-20 dated17th March 2020 on "Appointment of Statutory Central Auditors (SCAs) inPublic Sector Banks - Reporting obligations for SCA's from FY 2019-20" read withsubsequent communication dated 19th May 2020 issued by RBI we further reporton the matters specified in paragraph 2 of the aforesaid letter as under:
a) In our opinion the aforesaid Standalone Financial Statements complywith the Accounting Standards issued by ICAI to the extent they are not inconsistent withthe accounting policies prescribed by the RBI.
b) There are no observations or comments on financial transactions ormatters which have any adverse effect on the functioning of the bank.
c) On the basis of the written representations received from thedirectors as on 31st March 2020 none of the directors is disqualified as on31st March 2020 from being appointed as a director in terms of Section 164 (2)of the Companies Act 2013.
d) There are no qualifications reservations or adverse remarksrelating to maintenance of accounts and other matters connected therewith.
e) As the Bank has exercised the option to implement "InternalFinancial Controls with reference to the Financial Statements" from the financialyear 2020-21 as permitted by RBI on May 19 2020 we do not provide any opinion on thismatter.
13. We further report that:
a) in our opinion proper books of account as required by law have beenkept by the Bank so far as it appears from our examination of those books and properreturns adequate for the purposes of our audit have been received from branches notvisited by us.
b) the Balance Sheet the Profit and Loss Account and the Statement ofCashFlows dealt with by this report are in agreement with the books of accounts and withthe returns received from the branches not visited by us;
c) the reports on the accounts of the branch offices audited by branchauditors of the Bank under Section 29 of the Banking Regulation Act 1949 have been sentto 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 andthe Statement of Cash Flows comply with the applicable accounting standards to the extentthey are not inconsistent with the accounting policies prescribed by RBI.
|For Dagliya & Co. ||For Komandoor & Co. LLP. |
|Chartered Accountants ||Chartered Accountants |
|FRN.000671S ||FRN.001420S/S200034 |
|(P Manohara Gupta) ||(K Mohan Acharya) |
|Partner ||Partner |
|Membership Number 016444 ||Membership Number 029082 |
|UDIN:20016444AAAACD9940 ||UDIN:20029082AAAABU8828 |
|For D. K.Chhajer & Co. ||For S N K & Co. |
|Chartered Accountants ||Chartered Accountants |
|FRN.304138E ||FRN. 109176W |
|(Jagannath Prasad Mohapatro) ||(Ankit D Danawala) |
|Partner ||Partner |
|Membership Number 217012 ||Membership Number 119972 |
|UDIN:20217012AAAADE7038 ||UDIN:20119972AAAADC5259 |
Place : Bengaluru
Date : June 24 2020