Report On The Financial Statements Opinion
1. We have audited the accompanying financial statements of UCO Bank(“the Bank”), which comprise the Balance Sheet as at 31st March, 2019, and the Profit and Loss Account and the Cash Flow Statement for the year then ended, and notes to the financial statements including a summary of significant accounting policies and other explanatory information in which are incorporated the returns for the year ended on that date of 21 branches inclusive of one treasury branch audited by us and 1278 branches (including Service branches) audited by statutory branch auditors and 2 overseas branches audited by overseas local auditors. The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also incorporated in the Balance Sheet and the Profit and Loss Account are the returns from 1787 branches which have not been subjected to audit. These unaudited branches account for 6.49 per cent of advances, 36.03 per cent of deposits, 13.21 per cent of interest income and 39.01 per cent of interest expenses.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Banking Regulation Act, 1949 in the manner so required for bank and are in conformity 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 Bank as at 31st March, 2019;
b. true balance of loss in case of the Profit and loss account for the year ended on that date; and
c. true and fair view in case of statement of cash flows for the year ended on that date.
Basis for Opinion
2. We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the code of ethics issued by the Institute of Chartered Accountants of India together with ethical requirements that are relevant to our audit of the financial statements 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
3. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report:
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Key Audit Matters
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Auditor’s Response to Key Audit Matters
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Advances- Classification and Provisioning
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We obtained an understanding of the Bank’s Software, circulars,
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The advances are classified as performing and non-performing
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guidelines and directives of the RBI and the Bank’s internal
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advances (NPA) and provisioning thereon is made in accordance
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instructions and procedures in respect of asset classification and
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with the prudential norms as prescribed by the Reserve Bank of
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its provisioning and adopted the following audit procedures
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India (RBI). The classification and provisioning is done by Bank’s
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Evaluation and testing of the effectiveness of the IT software
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IT software integrated with its Core Banking Solution (CBS).The
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controls and other key internal control mechanisms with respect
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extent of provisioning of NPA under the prudential norms are mainly
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to the advances monitoring, identification/ classification, including
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based on its ageing and recoverability of the underlined security.
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testing of relevant data quality, and review of the data entered in
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In the event of any improper application of the prudential norms
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the software.
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or consideration of the incorrect value of the security, as the
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Review of the documentations, operations/ performance and
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valuation of the security involves high degree of estimation and
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monitoring of the advance accounts, on test check basis of the
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judgement, the carrying value of the advances could be materially
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large and stressed advances, to ascertain any overdue
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misstated either individually or collectively, and in view of the
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unsatisfactory conduct or weakness in any advance account, to
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significance of the amount of advances in financial statements,
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verify that its classification is in accordance with the prudential
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the classification of the advances and provisioning thereon has
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norms of RBI.
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been considered as Key Audit Matter in our audit.
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Deferred Tax Assets
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We assessed and tested the design and operating effectiveness
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The Bank reports net deferred tax assets aggregating Rs.8086.37 crores as of 31st March, 2019. Significant assessment/judgment is required in relation to deferred tax assets as their recoverability is dependent on forecasts of future profitability over a number of years.
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of the key controls over financial reporting with respect to the valuation of deferred tax assets. This included controls over the recognition and measurement of deferred tax assets, the assessment and approval of assumptions used in projecting the future taxable profits by the management.
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Provisions for Contingent Liabilities
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Our audit procedure in response to this key Audit Matter included,
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The Bank is involved in a number of taxation and other disputes
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Assessment of the process and relevant controls
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for which final outcomes cannot be easily predicted and which
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implemented to identify legal and tax litigations, and pending
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could potentially result in significant liabilities. The assessment
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administrative proceedings.
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of the risks associated with the litigations is based on complex assumptions, which require the use of judgement and such judgement relates, primarily, to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings
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Assessment of assumptions used in the evaluation of potential legal and tax risks performed by the Bank considering the legal precedence and other rulings in similar
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and to the adequacy of the disclosures in the financial statements.
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cases.
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Because of the judgement required, the materiality of such
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Inquiry with the legal department regarding the status of the
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litigations and the complexity of the assessment process, the area
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most significant disputes and inspection of the key relevant
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was a key matter for our audit.
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documentation.
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Analysis of opinion received from the experts where available.
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Review of the adequacy of the disclosures in the notes to the financial statements.
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We tested the design and operating effectiveness of the Bank IT
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IT Systems & Controls
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controls over the information systems that are critical to financial
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IT systems based on Core Banking Solutions (CBS) and internal
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reporting.
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controls due to
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We also tested IT general controls
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(i) the complexity of IT systems architecture with large volume
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(a)
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Logical Access
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of transactions processed in location on daily basis
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(b)
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Changes Management
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(ii) Possibilities of Manual Intervention and control overrides
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(c)
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Aspects of IT Operational Controls
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in various business process undertaken by the CBS like
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The above includes testing of user requests for access to systems
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Trade Finance, NPA Management, Govt. Business, Forex
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whether they were appropriately reviewed and authorized.
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Management including interfacing with swift, Treasury
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We have also inspected the requests of change to systems for
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Operations etc.
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appropriate approval and authorization.
We have relied on the IS and other related audit reports and obtained inputs from IS experts in selected areas.
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Information other than the Financial Statements and Auditors’ Report Thereon
4. The Bank’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Director’s Report, Pillar 3 Disclosures under Basel III Business Responsibility Report, Leverage Ratio, Liquidity Coverage Ratio, Corporate Governance and Shareholders Information but does not include the financial statements and our auditor’s report thereon.
Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditors’ report, 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.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
5. The Bank’s Board of Directors is responsible with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards issued by ICAI, and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Bank’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 Bank or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
6. Our objectives are to obtain reasonable assurance about whether the 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 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 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.
- 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 bank’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 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 bank to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the 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 financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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
7. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;
8. Subject to the limitations of the audit indicated in paragraphs 5 to 6 above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also to the limitations of disclosure required therein, we report that:
a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit and have found them to be satisfactory;
b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and
c) The returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.
9. We further report that:
a) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from branches not visited by us;
b) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us;
c) the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and
d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.
For R M LALL & CO For M C BHANDARI & CO
Chartered Accountants Chartered Accountants
Registration No. 000932C Registration No. 303002E
(CA R. P. TEWARI) (CA NEERAJ JAIN)
Partner Partner
Membership No. 071448 Membership No.064393
For V SINGHI & ASSOCIATES For RAMA K GUPTA & CO For RAWLA & CO
Chartered Accountants Chartered Accountants Chartered Accountants
Registration No. 311017E Registration No. 005005C Registration No. 001661N
(CA DIBYENDU PAL CHOUDHURY) (CA ANKUR GUPTA) (CA RAJA RAM GUPTA)
Partner Partner Partner
Membership No. 016830 Membership No. 429684 Membership No. 081279
Place: Kolkata
Date: 14th May, 2019
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