The Members of
ICICI SECURITIES LIMITED
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
We have audited the standalone financial statements of ICICI Securities Limited("the Company") which comprise the standalone balance sheet as at 31 March2019 and the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information (togetherreferred as 'standalone financial statements').
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 Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2019 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
Key Audit matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
|Key audit matter ||How the matter was addressed in our audit |
|Transition to Ind AS: changes in accounting policies changes to internal controls framework and Additional disclosures associated with transition || |
|Effective 1 April 2018 the Company adopted the Indian ||Our audit procedures included: |
| ||Design/controls |
|Accounting Standards ("Ind AS") notified by the Ministry of Corporate Affairs with transition date of 1 April 2017. || Assessing the design implementation and operating effectiveness of key internal controls over management's evaluation of transition date choices and exemptions availed in line with the principles under Ind AS 101-First-time Adoption of Indian Accounting Standards and preparation of disclosures; |
|The following are the impact areas for the Company upon transition: || |
|- Classification and measurement of financial assets and financial liabilities; and || |
|- Additional disclosures || |
|Transition adjustments are complex accounting requirements and require determination of new accounting policies including transition option election and practical expedients. ||Substantive tests |
| || Evaluated management's transition date choices and exemptions for compliance/acceptability under Ind AS 101; |
|The changes in accounting framework translates into significant changes in standard operating procedures in respect of impacted areas risk and control framework including internal controls over financial reporting and application of higher degree of management judgement. We identified transition adjustments as a Key audit matter because of significant degree of management judgment and application on the areas noted above. || Evaluate the appropriateness of the accounting policies based on the requirements of the new standards; |
| || Assessed the accuracy of the computations; and |
| || Performed procedures to check appropriate presentation of disclosures. |
| ||Assessed areas of significant estimates and management judgement in line with principles under Ind AS. |
|Information Technology || |
|IT systems and controls ||We focused on General IT controls i.e. access management change management program development and computer operations control and IT application controls i.e. controls on relevant system based reconciliation system generated reports and system/application processing over key financial accounting reporting systems and control systems. |
|The Company's key financial accounting and reporting processes are highly dependent on the automated controls implemented in the Information Technology (IT) systems such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being materially misstated. || |
|The Company uses SAp system as the General Ledger for overall financial reporting which is interfaced with other systems that process transactions which impacts significant accounts. ||Our audit procedures to assess the effectiveness of IT system included the following: |
|We have identified 'IT systems and control' as Key audit matter since for the primary business segment (broking and commission income) the Company relies on automated processes and controls for recording of income. || Performed walkthroughs to evaluate the design and implementation of key automated controls. Involved our IT specialist to test the effectiveness of identified IT automated controls and IT systems. IT specialist tested relevant key controls operating over IT in relation to financial accounting and reporting systems including general controls i.e. system access and system change management program development and computer operations. |
| || IT specialists tested design and operating effectiveness of key controls over user access management which includes granting access right new user creation removal of user rights and other preventive controls. |
| || For a selected group of key controls over financial and reporting system IT specialists independently performed procedures to determine that these controls remained unchanged during the year or were changed following the standard change management process. |
| || Other areas that were independently assessed included password policies security configurations system generated reports and system interface controls. |
| || Evaluating the design implementation and operating effectiveness of identified significant accounts related IT automated controls which are relevant for accuracy of system calculation and consistency of data transmission. |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's Responsibility for the Standalone Financial Statements
The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. 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 designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
I dentify and assess the risks of material misstatement of the standalonefinancial 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
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 Company'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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
The comparative financial information of the Company for the year ended 31 March 2017and the transition date opening balance sheet as at 1 April 2017 included in thesestandalone financial statements are based on the previously issued statutory financialstatements prepared in accordance with the accounting principles generally accepted inIndia including the Accounting Standards specified under section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014 and the Companies (AccountingStandards) Amendment Rules 2016 audited by the predecessor auditor whose report for theyear ended 31 March 2017 dated 20 April 2017 expressed an unmodified opinion on thosestandalone financial statements as adjusted for the differences in the accountingprinciples adopted by the Company on transition to the Ind AS which have been audited byus.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
(A) As required by Section 143(3) of the Act we report 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;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account;
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at 31 March 2019 onits financial position in its standalone financial statements-Refer Note 34 to thestandalone financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material forseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company;
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these financial statements since they do not pertain to thefinancial year ended 31 March 2019.
(C) With respect to the matter to be included in the Auditors' Report under section197(16):
In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm's Registration No. 101248 W/W-100022 |
| ||Milind Ranade |
|Place: Mumbai ||partner |
|Date: 23 April 2019 ||Membership No: 100564 |
Annexure "A" to the Independent Auditor's Report of even date on thestandalone financial statements of IcIcI Securities Limited
The Annexure referred to in the Independent Auditor's Report to the members of ICICISecurities Limited (the "Company") on the standalone financial statements forthe year ended 31 March 2019 we report that:
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich all the fixed assets are verified at the end of the financial year. In our opinionthis periodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies were noticed on suchverification.
(c) The Company does not have any immovable properties. Accordingly para 3(i) (c) ofthe Order is not applicable to the Company.
ii. The Company does not hold any securities in physical form. The securities for tradeheld in dematerialized form are verified with the statement of holding received bymanagement from the custodian at regular intervals. No material discrepancies were noticedon such verification.
iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Act. Accordingly para 3(iii) of the Order is not applicable.
iv. In our opinion and according to the information and explanations given to us theCompany has not granted any loans made investments or provided guarantees and securitiesunder Section 185 and 186 of the Act. Accordingly para 3(iv) of the Order is notapplicable.
v. According to the information and explanation given to us the Company has notaccepted any deposits from the public to which directives issued by Reserve Bank of Indiaand the provisions of Section 73 to Section 76 or any other relevant provisions of the Actand the rules framed thereunder apply. Accordingly para 3(v) of the Order is notapplicable.
vi. The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any services rendered by the Company. Accordinglyparagraph 3(vi) of the Order is not applicable.
vii. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income tax service tax value added tax goods and service tax cess and othermaterial statutory dues have been regularly deposited during the year by the Company withthe appropriate authorities.
To the best of our knowledge and belief the Company was not required to deposit or payany dues in respect of duty of sales tax customs and duty of excise during the year ended31 March 2019. According to the information and explanations given to us no undisputedamounts payable in respect of provident fund employees' state insurance income taxservice tax value added tax goods and service tax cess and other material statutorydues were in arrears as at 31 March 2019 for a period of more than six months from thedate they became payable.
(b) According to the information and explanations given to us the following duesoutstanding of income tax service tax and value added tax have not been deposited by theCompany on account of disputes:
|Name of the statute ||Nature of dues ||Amount (in रmillion) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income tax (including interest but excluding penalty) ||465.7 ||Financial Year ("FY") 2010-2011 to FY 20122013 & FY 2014-15 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961 ||Income tax (including interest but excluding penalty) ||279.8 ||FY 2005-2006 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income tax (including interest but excluding penalty) ||167.9 ||FY 2000-2001 to FY 2009-2010 ||Commissioner of Income Tax |
|Income Tax Act 1961 ||Income tax (excluding interest but including penalty) ||51.6 ||FY 2007-2008 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961 ||Income tax (including interest but excluding penalty) ||0.5 ||FY 2007-2008 to FY 2009-2010 ||Commissioner of Income Tax-TDS |
|Service Tax ||Service tax (excluding interest and penalty) ||118.8 ||FY 2002-2003 to FY 2013-2014 ||Commissioner of Service Tax |
|Service Tax ||Service tax (including interest and penalty) ||6.7 ||FY 2006-2007 to FY 2008-2009 ||Central Excise & Service Tax Appellate Tribunal |
|Service Tax ||Service tax (including interest and penalty) ||356.8 ||FY 2012-2015 ||Central Excise & Service Tax Appellate Tribunal |
|Maharashtra Value Added Tax 2002 ||Value added tax (including interest & penalty) ||1.7 ||FY 2008-2009 ||Commissioner of MVAT (Appeals) |
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans or borrowings to financialinstitutions and banks. The Company did not have any borrowings from Government ordebenture holders during the year.
ix. In our opinion and according to the information and explanations given to us themonies raised by way of debt instruments in the nature of commercial paper by the Companyhave been applied for the purpose for which they were raised. The Company did not raisemoney by way of further public offer.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe year.
xi. According to the information and explanations give to us and based on ourexamination of the books and records of the Company the Company has paid/provided formanagerial remuneration in accordance with the requisite approvals prescribed by theprovisions of section 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
xiii. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company all transactions with the related parties arein compliance with section 177 and 188 of the Act where applicable and the details havebeen disclosed in the standalone financial statements as required by the applicableIndian accounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the books and records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review. Accordingly paragraph 3(xiv) of the Order is notapplicable.
xv. According to the information and explanations given to us and based on ourexamination of the books and records of the Company the Company has not entered into anynon-cash transactions with directors or persons connected with him. Accordingly paragraph3(xv) of the Order is not applicable.
xvi. According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
| ||For B S R & co. LLp |
| ||Chartered Accountants |
| ||Firm's Registration No. 101248 W/W-100022 |
| ||Milind Ranade |
|place: Mumbai ||partner |
|Date: 23 April 2019 ||Membership No: 100564 |
Annexure "B" to the Independent Auditor's Report of even date on standalonefinancial statements of IcIcI Securities Limited
In conjunction with our report of the standalone financial statements of ICICISecurities Limited as of and for the year ended 31 March 2019 we have audited theinternal financial controls over financial reporting of ICICI Securities Limited(hereinafter referred 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 (the 'Guidance Note') issued by the Institute of Chartered Accountants of India(the 'ICAI'). 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 respectivecompanies' policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013(the 'Act').
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note issued by the ICAI and the Standards on Auditing ('theStandards') issued by the ICAI and deemed to be prescribed under section 143(10) of theAct to the extent applicable to an audit of internal financial controls both issued bythe ICAI. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated 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 judgment 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 is sufficient and appropriate toprovide a basis for our audit opinion on the Group's internal financial controls systemover 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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the ICAI.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm's Registration No. 101248 W/W-100022 |
| ||Milind Ranade |
|Place: Mumbai ||Partner |
|Date: 23 April 2019 ||Membership No: 100564 |