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. () - Auditors Report

Company auditors report

To

The Members of Corporation Bank Mangaluru

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the Standalone Financial Statements of Corporation Bank (‘theBank') which comprise the Balance Sheet as at 31 March 2019 the Statement of Profit andLoss and the Statement of Cash Flows for the year then ended and notes to FinancialStatements including a summary of significant accounting policies and other explanatoryinformation in which are included returns for the year ended on that date of 20 branchesaudited by us and 1477 branches audited by statutory branch auditors. The branches auditedby us and those audited by other auditors have been selected by the Bank in accordancewith the guidelines issued to the Bank by the Reserve Bank of India. Also included in theBalance Sheet the Statement of Profit and Loss and Statement of Cash Flows are thereturns from 935 branches which have not been subjected to audit. These unaudited branchesaccount for 5.33 percent of advances 14.75 percent of deposits 6.93 percent of interestincome and 13.99 per cent 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 in the manner so required for bank and are inconformity with accounting principles generally accepted in India and give:

a. true and fair view in case of the Balance Sheet of the state of affairs of the Bankas at 31st March 2019;

b. true balance of Loss in case of Statement of Profit and Loss for the year ended onthat date; and

c. true and fair view in case of Statement of Cash Flows for the year ended on thatdate.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued bythe Institute of Chartered Accountants of India (ICAI). Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Bank in accordancewith the code of ethics issued by the ICAI together with ethical requirements that arerelevant to our audit of the Financial Statements in India and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the code ofethics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.

4. Emphasis of Matter

Without qualifying our conclusion we draw attention to :

i) Note No. 1 of Schedule 18-C regarding provisioning made on NCLT accounts andprovision made on Nonperforming accounts.

ii) Note No. 8(C) of Schedule 18-B regarding nonrecognition of Deferred Tax Asset oncurrent year tax loss.

5. Key Audit Matters

Key Audit Matters Auditors Response
1 Classification of Advances into Priority & Non Priority Sector Bank has made re-classification of borrowers' accounts between Priority & Non Priority Sector during the year under Audit. We have assessed the efficacy of the system of sector wise classification by the bank.
We relied on the branch and zonal returns branch auditors reports for sector wise classification.
We have selected sample of product wise accounts in priority sector classification to determine the correctness of reporting of sector wise classification.
The system of identification of priority/non-priority sector advances needs review and revalidation.
2 Information Technology System (Finacle) based Financial reporting process We conducted a review and assessment of information and data derived from Core PLUM and treasury to assure that the reported Financial Statements are proper and reliable.
The bank is operating under Core Banking Solution (CBS) the operational and Financial reporting processes are dependent on IT Systems for the large volume of transactions at the front end and at the back end.
Our audit approach consisted of testing operating effectiveness of internal controls as follows:
Obtaining and reviewed the IS Audit conducted during the year.
Core banking for all transactions including for integrated treasury management of the bank has adequate checks balances processes and controls designed for the effective data capturing and reporting. Obtaining an understanding of the Banks IT Control environment IT Policies and key changes during the audit period including the notes placed before the Board.
Reviewed the design implementation and operating effectiveness of the Bank's General IT controls over key IT systems that are critical to Financial reporting on test check basis.
Test checked key automated and manual business cycle controls and system generated reports relevant to audit.

Responsibilities of Management and those charged with Governance for the StandaloneFinancial Statements

6. The Banks Board of Directors is responsible with respect to the preparation of theseStandalone Financial Statements that give a true and fair view of the Financial positionFinancial performance and cash flows of the Bank in accordance with the accountingprinciples generally accepted in India including the Accounting Standards issued by ICAIand provisions of Section 29 of the Banking Regulation Act 1949 (the Act) and circularsand guidelines issued by the Reserve Bank of India (‘RBI') from time to time. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Bank and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 Financial Statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror. In preparing the Financial Statements Management is responsible for assessing theBanks ability to continue as a going concern disclosing as applicable matters relatedto going concern and using the going concern basis of accounting unless Management eitherintends to liquidate the Bank or to cease operations or has no realistic alternative butto do so.

Auditor's Responsibilities for the Audit of the Financial Statements

7. Our objectives are to obtain reasonable assurance about whether the FinancialStatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Financial Statements. As part of an audit in accordance with SAs weexercise professional judgment and maintain 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 FinancialStatements including the disclosures and whether the Financial Statements represent theunderlying transactions and events in a manner that achieves fair presentation.

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 Financial Statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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.

Other Matter

8. We did not audit the Financial Statements of 2412 branches comprising of 1477branches audited by Statutory Branch Auditors and 935 unaudited branches included in theStandalone Financial Statements of the Bank whose Financial Statements reflect totalassets of '168647.62 crore as at 31st March 2019 and Total Revenue of '8666.43 crore forthe year ended on that date as considered in the Standalone Financial Statements. TheFinancial Statements of 1477 branches have been audited by the branch auditors whosereports have been furnished to us and in our opinion in so far as it relates to theamounts and disclosures included in respect of branches is based on the report of suchbranch 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 accordancewith Section 29 of the Banking Regulation Act 1949.

10. Subject to the limitations of the audit indicated in paragraphs 6 to 8 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.

11. We further report that:

a) 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;

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 RBI.

For Datta Singla & Co. For A. K. Sabat & Co. For Pramod & Associates
Chartered Accountants Chartered Accountants Chartered Accountants
FRN - 006185N FRN - 321012E FRN - 001557C
[CA Sanjeev Aggarwal] [CA A. K. Sabat ] [CA Ravindra Raniwala]
Partner Partner Partner
Membership No. 503932 Membership No. 30310 Membership No. 073191
For Chandran & Raman For S. Ramanand Aiyar & Co.
Chartered Accountants Chartered Accountants
FRN - 000571S FRN: 000990N
[CA S. G. Kalyanaraman] [CA Binod C. Maharana]
Partner Partner
Membership No. 10652 Membership No. 056373
Place : Mangaluru
Date : 17 May 2019
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