TO THE MEMBERS OF HINDUJA GLOBAL SOLUTIONS LIMITED
Report on the Audit of Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of HINDUJA GLOBALSOLUTIONS LIMITED ("the Company") and its subsidiaries (the Company and itssubsidiaries together referred to as "the Group") comprising the ConsolidatedBalance Sheet as at March 312020 and the Consolidated Statement of Profit and Loss(including Other Comprehensive Income) the Consolidated Statement of Changes in Equityand the Consolidated Statement of Cash Flows for the year then ended and a summary ofsignificant accounting policies and other explanatory information in which areincorporated the Returns for the year ended on that date audited by the branch auditors ofthe branch of the Group located at Philippines.
In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of the branch auditors and otherauditors on financial information of the branch and subsidiaries referred to in the OtherMatters section below the aforesaid consolidated financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ('Ind AS') and other accounting principles generallyaccepted in India of the consolidated state of affairs of the Group as at March 31 2020and their consolidated profit their consolidated total comprehensive income theirconsolidated changes in equity and their consolidated cash flows for the year ended onthat date
Basis for Opinion
We conducted our audit of the consolidated financial statements in accordance with theStandards on Auditing specified under section 143 (10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Consolidated Financial Statements section of ourreport. We are independent of the Group in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the consolidated financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence obtained by us and the audit evidence obtainedby the branch auditors and other auditors in terms of their reports referred to in thesub-paragraphs (a) and (b) of the Other Matters section below is sufficient andappropriate to provide a basis for our audit opinion on the consolidated financialstatements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the consolidated financial statements of the current period.These matters were addressed in the context of our audit of the consolidated 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.
|Key Audit Matter ||Auditor's Response |
|1. Impairment Assessment of Goodwill related to UK ||Principal Audit Procedures |
|Operations and HGS Axispoint Health LLC Cash Generating Units (CGUs). ||In relation to management's assessment of the carrying value of goodwill for the UK Operations and HGS Axispoint Health LLC cash generating units our audit procedures included among others: |
| || We tested the effectiveness of controls over management's goodwill impairment evaluation such as controls related to management's forecasts and selection of the discount rates. |
| || Assessing the valuation methodology adopted by management which is disclosed in Note 35 to the consolidated financial statements; |
|We identified goodwill for UK Operations and HGS Axispoint Health LLC CGUs as a key audit matter because of the significant estimates and assumptions management makes to estimate the fair value of UK Operations and HGS Axispoint and the sensitivity of these operations to changes in demand. This required a high degree of auditor judgment and an increased extent of effort including the need to involve our fair value specialists when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to forecasts of future revenues operating margins and selection of the discount rates. || Challenging the reasonableness of key assumptions based on our knowledge of the business and industry; |
| || Analysed the consistency of cash flow forecasts with management's latest estimates presented to the Board of Directors as part of the budget process; |
|The Company determines the fair value of its reporting units using the discounted cash flow model. The determination of the fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to forecasts of future revenues operating margins and discount rates. || We evaluated management's ability to accurately forecast by comparing actual results to management's historical forecasts; |
|As disclosed in Note 35 to the Consolidated Financial Statements as at and for the year ended March 31 2020 the carrying value of goodwill attributable to the UK Operations was Rs. 9818.40 Lakhs. || Compared the cash flow forecasts for financial years 2020-21 to 2021-22 with the business plans used for prior year impairment testing wherever applicable; |
| || Tested the sensitivity of value in use to a change in the main assumptions used by Management; |
| || Reviewed the appropriateness of the disclosures in the financial statements; |
|The UK CGU has losses and management has made a number of key assumptions and assertions to support their assessment of the carrying value of goodwill attributable to this CGU. There is no impairment on goodwill for the UK Operations for the year ended March 31 2020. As disclosed in Note 35 and 49 to the consolidated financial statements as at and for the year ended March 31 2020 the carrying value of goodwill attributable to the HGS Axispoint Health LLC CGU has been impaired during the year ended March 312020 and an impairment loss of Rs. 1794.53 Lakhs has been recognized in the consolidated statement of profit or loss || With the assistance of our fair value specialists we evaluated the discount rates including testing the underlying source information and the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to the discount rates selected by management. |
| || With the assistance of our fair value specialists we evaluated the discount rates and terminal growth rate including testing the underlying source information and mathematical accuracy of the calculations. |
|Key Audit Matter ||Auditor's Response |
|2 Recoverability of Deferred tax Assets on unused tax losses: ||Principal Audit Procedures |
| || |
|The Company recognizes deferred tax assets on unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be used. Future realization of deferred tax assets depends on the existence of sufficient taxable income of the appropriate character. Sources of taxable income include future reversals of deferred tax assets and liabilities expected future taxable income and tax planning strategies. ||Our audit procedures in relation to management's assessment about the realization of the deferred tax assets included among others: |
| || We evaluated management's assessment on the sufficiency of future taxable profits for each tax jurisdiction in support of the recoverability of the deferred tax assets by evaluating the reasonableness of the methods assumptions and judgements used in the managements business plan; |
| || |
|The Management has determined that it is probable that sufficient taxable income will be generated in the future to realize its deferred tax assets. The Company's deferred tax assets as of March 312020 were Rs. 2144.34 lakhs in respect of unused tax losses of HGS Canada Inc. || We evaluated management's ability to accurately estimate taxable income by comparing actual results to management's historical estimates and evaluating whether there have been any changes that would affect management's ability to continue accurately estimating taxable income. |
| || We evaluated existing deferred tax liabilities in the same tax jurisdiction that may be used to offset existing unused tax losses prior to their expiry date; |
| || We analysed the consistency of cash flow forecasts with management's latest estimates presented to the Board of Directors as part of the budget process; |
| || We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the audit |
|We identified management's determination of the recoverability of deferred tax assets in respect of carryforward of unused tax losses as a key audit matter as probability of the realization of these deferred tax assets involves significant judgements and estimates management makes related to taxable income which is based on a number of factors including whether there will be sufficient taxable profits in future periods to support recognition. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management's estimates of taxable income. || We tested the reasonableness of the managements estimate of the business plan data and long-term growth rates accurately reflected those used in the measurement of deferred taxes; |
| || We conducted a critical review of the assumptions used by management to prepare profit and loss forecasts; |
| || We assessed the applicable local fiscal regulations and developments in particular those related to changes in the statutes of limitation since this is a key assumptions underlying the valuation of the deferred tax assets; |
| || We reviewed the adequacy of the Company's disclosures for deferred tax assets. |
|Key Audit Matter ||Auditor's Response |
|3 Revenue recognition and measurement in respect of unbilled revenues as at March 312020 ||Principal Audit Procedures |
| || |
|The Company in its contracts with customers promises to transfer distinct services ('performance obligations') which may be rendered in the form of back office processing claim processing and contact center services. Revenue is recognised upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services ('transaction price'). At each reporting date revenue is accrued for work performed that may not have been invoiced. ||Our audit procedures in relation to management's estimation of unbilled revenues included among others: |
| || We gained an understanding of the Company's processes in collating the evidence supporting delivery of services for quantifying units of services that would be invoiced and the application of appropriate prices for each of such services. |
| || We tested the design and operating effectiveness of controls in collating the units of services delivered and in the application of accurate prices for each of such services. |
|On account of the possible disruption from the pandemic relating to COVID-19 judgment is required to: || |
|- Identify whether the Company's performance have resulted in a billable service that is collectable where the service deliveries have not been acknowledged by customers as at March 31 2020. || We have tested a sample of unbilled revenues as at March 31 2020 with reference to the customer confirmations or reports from information systems that record the inputs relating to the services delivered to confirm the units of services delivered and contractual rates for the application of appropriate price for each of services. |
|- Determine whether the service levels required under the contracts with customers have been met and measure the penalties for non-compliance where applicable. || We extended our audit procedures to the date of approval of financial statements by the Board of |
|Recognition of revenue before acknowledgment of receipt of services by customer and not recognizing penalties for not meeting the service levels defined in the contract where applicable could result in an overstatement of revenue and correspondingly the profit. Accordingly we consider accrual of unbilled revenues as a key audit matter. ||Directors of the Company to verify the subsequent invoicing of the unbilled revenues. We have also determined whether adjustments if any are necessary upon receipt of approvals from customers for services delivered prior to March 31 2020 and / or collections against those. |
| || We have verified the ageing of unbilled receivables recognised to evaluate their reasonableness. |
| || With respect to the impact of possible disruption from the pandemic relating to COVID-19 we held discussions with business heads. We also verified correspondences with customers approving employees to work from home and where applicable waiver of the contractual penalties relating to service levels. |
|3. Measurement of acquired intangible assets ||Principal Audit Procedures |
|We identified the identification and valuation of the intangible assets included in the purchase price allocation on acquisition of CMH Services Subsidiary LLC ( Axispoint Health) USA and Element Solutions LLC USA as a key audit matter as the identification and valuation of intangible assets acquired involves judgements by management on the future cash flows and the discount rate. ||The fair value of the acquired intangible assets are based on valuation techniques built in part on the assumptions around the future cash flows linked to the customer relationships technology customer contracts and noncompete and assumptions made in determining the discount rate. In assessing the purchase price allocation to customer relationships customer contracts technology and non-compete our audit procedures which included among others: |
| || |
|As disclosed in Note 42 to the consolidated financial statements the Company has recognized identified intangible assets of R 2326.21 Lakhs as customer relationships R827.40 Lakhs as technology R 453.90 Lakhs as customer contracts and R119.97 Lakhs as Non-compete. || Evaluated the cash flow forecasts considered by the management supporting the valuation of the intangible assets identified and assessed if these are reasonable; |
| || We engaged our internal fair valuation specialists to assess the appropriateness of the methodology and the key assumptions considered including the discount rate; |
| || Meeting with the independent valuation specialist engaged by the management to understand the methodology and assumptions they used in identification and valuation of the intangible assets acquired; |
| || Evaluated the adequacy of the disclosures. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. Theother information comprises the information included in the Director's report CorporateGovernance report and Management Discussion & Analysis Report but does not includethe consolidated financial statements standalone financial statements and our auditor'sreport thereon. The Director's report Corporate Governance report and ManagementDiscussion & Analysis Report is expected to be made available to us after the date ofthis auditor's report.
Our opinion on the consolidated 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 consolidated financial statements ourresponsibility is to read the other information when it becomes available and considerwhether the other information is materially inconsistent with the consolidated financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated.
When we read the Director's report Corporate Governance report and ManagementDiscussion & Analysis report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance asrequired under SA 720 'The Auditor's responsibilities Relating to Other Information'.
Management Responsibility for the Consolidated Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these consolidated financialstatements that give a true and fair view of the consolidated financial positionconsolidated financial performance including other comprehensive income consolidatedchanges in equity and consolidated cash flows of the Group in accordance with the Ind ASand other accounting principles generally accepted in India. The respective Board ofDirectors of the companies included in the Group are responsible for maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Group and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error which have been used for the purposeof preparation of the consolidated financial statements by the Directors of the Companyas aforesaid.
In preparing the consolidated financial statements the respective Board of Directorsof the companies included in the Group are responsible for assessing the ability of therespective entities to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless therespective Board of Directors either intends to liquidate their respective entities or tocease operations or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group are alsoresponsible for overseeing the financial reporting process of the Group.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidatedfinancial 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 consolidated 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 consolidatedfinancial 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.
Obtain an understanding of internal financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the 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 ability ofthe Group 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 consolidated financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Group to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the consolidatedfinancial statements including the disclosures and whether the consolidated financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Obtain sufficient appropriate audit evidence regarding the financial informationof the branch entities or business activities within the Group to express an opinion onthe consolidated financial statements. We are responsible for the direction supervisionand performance of the audit of the financial statements of such entities or businessactivities included in the consolidated financial statements of which we are theindependent auditors. For the other branch or entities or business activities included inthe consolidated financial statements which have been audited by the branch auditors orother auditors such branch auditors and other auditors remain responsible for thedirection supervision and performance of the audits carried out by them. We remain solelyresponsible for our audit opinion.
Materiality is the magnitude of misstatements in the consolidated financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the consolidated financial statements may be influenced.We consider quantitative materiality and qualitative factors in (i) planning the scope ofour audit work and in evaluating the results of our work; and (ii) to evaluate the effectof any identified misstatements in the consolidated financial statements.
We communicate with those charged with governance of the Company and such otherentities included in the consolidated financial statements of which we are the independentauditors regarding among other matters the planned scope and timing of the audit andsignificant audit findings including any significant deficiencies in internal controlthat 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 consolidated 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.
(a) We did not audit the financial information of a branch included in the standalonefinancial information of the companies included in the Group whose financial statementsreflect total assets of Rs. 92596.64 lakhs as at March 31 2020 and total revenue of Rs.88440.02 lakhs for the year ended on that date as considered in the respectivestandalone financial statements of the companies included in the Group. The financialinformation of this branch has been audited by the branch auditors whose reports have beenfurnished to us and our opinion in so far as it relates to the amounts and disclosuresincluded in respect of this branch and our report in terms of subsection (3) of Section143 of the Act in so far as it relates to the aforesaid branch is based solely on thereport of such branch auditors.
(b) We did not audit the financial information of two subsidiaries whose financialinformation reflect total assets of Rs. 106246.62 lakhs as at March 312020 totalrevenues of Rs. 57475.75 lakhs and net cash (outflows) amounting to Rs. (1212.76) lakhsfor the year ended on that date as considered in the consolidated financial statements..These financial information have been audited by other auditors whose reports have beenfurnished to us by the Management and our opinion on the consolidated financialstatements in so far as it relates to the amounts and disclosures included in respect ofthese subsidiaries and our report in terms of subsection (3) of Section 143 of the Act inso far as it relates to the aforesaid subsidiaries is based solely on the reports of theother auditors.
(c) We did not audit the financial information of eight subsidiaries whose financialinformation reflect total assets of Rs.30804.01 lakhs as at March 312020 total revenuesof Rs. 17064.07 lakhs and net cash inflows amounting to Rs. 2017.64 lakhs for the yearended on that date as considered in the consolidated financial statements. Thesefinancial information have been unaudited and have been furnished to us by the Managementand our opinion on the consolidated financial statements in so far as it relates to theamounts and disclosures included in respect of these subsidiaries is based solely on suchunaudited financial information. In our opinion and according to the information andexplanations given to us by the Management these financial information are not materialto the Group.
Our opinion on the consolidated financial statements above and our report on OtherLegal and Regulatory Requirements below is not modified in respect of the above matterswith respect to our reliance on the work done and the reports of the branch auditors andother auditors and the financial statements certified by the Management.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit and on theconsideration of the reports of the branch auditors and other auditors on the separatefinancial information of the branch and subsidiaries referred to in the Other Matterssection above we report to the extent applicable that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit of the aforesaidconsolidated financial statements.
b) In our opinion proper books of account as required by law relating to preparationof the aforesaid consolidated financial statements have been kept and proper returnsadequate for the purposes of our audit have been received from the branch not visited sofar as it appears from our examination of those books returns and the reports of theother auditors.
c) The reports on the accounts of the branch office of the Companies included in theGroup audited under Section 143(8) of the Act by branch auditors have been sent to usother auditors and have been properly dealt with by us in preparing this report.
d) The Consolidated Balance Sheet the Consolidated Statement of Profit and Lossincluding Other Comprehensive Income the Consolidated Statement of Changes in Equity andthe Consolidated Statement of Cash Flows dealt with by this Report are in agreement withthe relevant books of account maintained for the purpose of preparation of theconsolidated financial statements and with the returns received by us and the otherauditors from the branch not visited by us.
e) In our opinion the aforesaid consolidated financial statements comply with the IndAS specified under Section 133 of the Act.
f) On the basis of the written representations received from the directors of theCompany as on March 312020 taken on record by the Board of Directors of the Company noneof the directors of the Group companies incorporated in India is disqualified as on March31 2020 from being appointed as a director in terms of Section 164 (2) of the Act.
g) With respect to the adequacy of the internal financial controls over financialreporting and the operating effectiveness of such controls refer to our separate Reportin "Annexure A" which is based on the auditors' reports of the company. Ourreport expresses an unmodified opinion on the adequacy and operating effectiveness ofinternal financial controls over financial reporting of those companies.
h) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act.
i) 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 2014as amended inour opinion and to the best of our information and according to the explanations given tous:
i) The consolidated financial statements disclose the impact of pending litigations onthe consolidated financial position of the Group
ii) Provision has been made in the consolidated financial statements as required underthe applicable law or accounting standards for material foreseeable losses if any onlong-term contracts including derivative contracts
iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
| ||For DELOITTE HASKINS & SELLS LLP |
| ||Chartered Accountants |
| ||(Firm's Registration No. 117366W/W-100018) |
| ||Vikas Bagaria |
| ||Partner |
| ||(Membership No.60408) |
| ||UDIN: 20060408AAAABW7973 |
|Place : Bengaluru || |
|Date : July 31 2020 || |
ANNEXURE A TO INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph "g" under Report on Other Legal andRegulatory Requirements' section of our report to the Members of Hinduja Global SolutionsLimited of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
In conjunction with our audit of the consolidated Ind AS financial statements of theCompany as of and for the year ended March 31 2020 we have audited the internal financialcontrols over financial reporting of HINDUJA GLOBAL SOLUTIONS LIMITED (hereinafterreferred to as "the Company") as of that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India ("theICAI"). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to the Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company'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") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls. Those Standardsand the Guidance Note require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe 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.
We believe that the audit evidence we have obtained and the audit evidence obtained bythe branch auditors in terms of reports referred to in the Other matters paragraph belowis sufficient and appropriate to provide a basis for our audit opinion on the Company'sinternal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company'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 company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
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.
In our opinion to the best of our information and according to the explanations givento us and based on the consideration of the reports of the branch auditors referred to inthe Other Matters paragraph below have in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 312020 based on thecriteria for internal control over financial reporting established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
Our aforesaid report under Section 143(3) (i) of the Act on the adequacy and operatingeffectiveness of the internal financials controls over financial reporting insofar as itrelates to one branch is based solely on the corresponding reports of the branch auditors.
Our opinion is not modified in respect of the above matters..
| ||For DELOITTE HASKINS & SELLS LLP |
| ||Chartered Accountants |
| ||(Firm's Registration No. 117366W/W-100018) |
| ||Vikas Bagaria |
| ||Partner |
| ||(Membership No.60408) |
| ||UDIN: 20060408AAAABV5090 |
|Place : Bengaluru || |
|Date : July 31 2020 || |