To the Members of
Tata Consultancy Services Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Tata Consultancy Services Limited (the Company) which comprise the Standalone Balance Sheet as at 31 March 2020 and the Standalone Statement of Profit and Loss (including other comprehensive income) Standalone Statement of Changes in Equity and Standalone Statement of Cash Flows for the year then ended and notes to the standalone financial statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as the standalone financial statements).
In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31 March 2020 and profit and other comprehensive income 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) specified under Section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters (`KAM') are those matters that in our professional judgment were of most significance 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 financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.
Description of Key Audit Matters
|Key audit matters|
How our audit addressed the key audit matter
|Revenue recognition - Fixed price contracts|
|The Company inter alia engages in Fixed-price contracts wherein revenue is recognized using the percentage of completion computed as per the input method based on the Company's estimate of contract costs (Refer Note 4(a) and Note 10 to the standalone financial statements).|
Our audit procedures on revenue recognized from fixed price contracts included:
Obtained an understanding of the systems processes and controls implemented by Company for recording and computing revenue and the associated contract assets unearned and deferred revenue balances.
|We identified revenue recognition of fixed price contracts as a Key Audit Matter since -|
Involved our Information technology (`IT') specialists:
|there is an inherent risk and presumed fraud risk around the accuracy and existence of revenues recognised considering the customised and complex nature of these contracts and significant inputs of IT systems;|
Assessed the IT environment in which the business systems operate and tested system controls over computation of revenue recognised;
|application of revenue recognition accounting standard (Ind AS 115 Revenue from Contracts with customers) is complex and involves a number of key judgments and estimates mainly in identifying performance obligations related transaction price and estimating the future cost-to-completion of these contracts which is used to determine the percentage of completion of the relevant performance obligation;|
Tested the IT controls over appropriateness of cost and revenue reports generated by the system; and
|these contracts may involve onerous obligations which requires critical assessment of foreseeable losses to be made by the Company; and at year-end significant amount of work in specific/ progress (Contract assets) related to these contracts are recognised on the balance sheet.|
Tested the controls pertaining to allocation of resources and budgeting systems which prevent the unauthorized recording/changes to costs incurred and controls relating to the estimation of contract costs required to complete the respective projects.
On selected statistical samples of contracts we tested that the revenue recognized is in accordance with the revenue recognition accounting standard -
Evaluated the identification of performance obligations and the ascribed transaction price;
Tested Company's computation of the estimation of contract costs and onerous obligations if any. We:
assessed that the estimates of costs to complete were reviewed and approved by appropriate designated management personnel;
performed a retrospective analysis of costs incurred with estimated costs to identify significant variations and challenged whether those variations are required to be considered in estimating the remaining costs to complete the contract;
assessed the appropriateness of work in progress (contract assets) on balance sheet date by evaluating the underlying documentation to identify possible changes in estimated costs to complete the remaining performance obligations; and
inspected underlying documents and performed analytics to determine reasonableness of contract costs.
|Evaluation of key tax matters|
|The Company operates in multiple jurisdictions and is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including transfer pricing and indirect tax matters. These involve significant judgment by the Company to determine the possible outcome of the uncertain tax positions consequently having an impact on related accounting and disclosures in the standalone financial statements.|
Our audit procedures include the following substantive procedures:
Obtained an understanding of key tax matters; and
The audit team along with our internal tax experts -
|Refer Note 4(e) and Note 19 to the standalone financial statements.|
read and analysed select key correspondences external legal opinions/ consultations obtained by Company for key tax matters;
evaluated and challenged key assumptions made by the Company in estimating the current and deferred tax balances;
assessed and challenged the Company's estimate of the possible outcome of the disputed cases by considering legal precedence and other judicial rulings; and
|Adoption of Ind AS 116 Leases|
Assessed and tested the presentation and disclosures relating to taxes.
|As described in Note 7 to the standalone financial statements the Company has adopted Ind AS 116 Leases (Ind AS 116) in the current year. The application and transition to this accounting standard is complex and is an area of focus in our audit since the Company has a large number of leases with different contractual terms.|
Our audit procedures on adoption of Ind AS 116 include:
Assessed and tested new processes and controls in respect of the lease accounting standard (Ind AS 116);
Assessed the Company's evaluation on the identification of leases based on the contractual agreements and our knowledge of the business;
|Ind AS 116 introduces a new lease accounting model wherein lessees are required to recognise a right-of-use (ROU) asset and a lease liability arising from a lease on the balance sheet.|
Involved our specialists to evaluate the reasonableness of the discount rates applied in determining the lease liabilities;
|The lease liabilities are initially measured by discounting future lease payments during the lease term as per the contract/ arrangement.|
Upon transition as at 1 April 2019:
Evaluated the method of transition and related adjustments;
|Adoption of the standard involves significant judgements and estimates including determination of the discount rates and the lease term.|
Tested completeness of the lease data by reconciling the Company's operating lease commitments to data used in computing ROU asset and the lease liabilities.
|Additionally the standard mandates detailed disclosures in respect of transition.|
On a statistical sample we performed the following procedures:
|Refer Note 4(h) and Note 7 to the standalone financial statements.|
assessed the key terms and conditions of each lease with the underlying lease contracts; and
evaluated computation of lease liabilities and challenged the key estimates such as discount rates and the lease term.
Assessed and tested the presentation and disclosures relating to Ind AS 116 including disclosures relating to transition.
The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report but does not include the standalone financial statements and our auditors' report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs profit/loss (including other comprehensive income) changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true 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 are responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the standalone 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's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 (the Order) issued by the Central Government of India 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 the Order 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 best of 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 the Company so far as it appears from our examination of those books.
(c) The Standalone Balance Sheet the Standalone Statement of Profit and Loss (including other comprehensive income) the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows dealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act. (e) On the basis of the written representations received from the directors as on 31 March 2020 taken on record by the Board of Directors none of the directors is disqualified as on 31 March 2020 from being appointed as a director in terms of Section 164(2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure B.
(B) With respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and 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 2020 on its financial position in its standalone financial statements
- Refer Note 19 to the standalone financial statements;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company; and
iv. The disclosures in the standalone financial statements regarding holdings as well as dealings in specified bank notes during the period from 8 November 2016 to 30 December 2016 have not been made in these standalone financial statements since they do not pertain to the financial year ended 31 March 2020.
(C) With respect to the matter to be included in the Auditors' Report under Section 197(16) of the Act:
In our opinion and according to the information and explanations given to us the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of
Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.
|For B S R & Co. LLP|
|Firm's Registration No: 101248W/W-100022|
|16 April 2020||Membership No: 049265|