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ITC Ltd.

BSE: 500875 Sector: Consumer
NSE: ITC ISIN Code: INE154A01025
BSE 00:00 | 24 Apr ITC Ltd
NSE 05:30 | 01 Jan ITC Ltd
OPEN 181.70
PREVIOUS CLOSE 180.75
VOLUME 307133
52-Week high 309.85
52-Week low 134.95
P/E 14.83
Mkt Cap.(Rs cr) 221,260
Buy Price 180.00
Buy Qty 31.00
Sell Price 180.00
Sell Qty 521.00
OPEN 181.70
CLOSE 180.75
VOLUME 307133
52-Week high 309.85
52-Week low 134.95
P/E 14.83
Mkt Cap.(Rs cr) 221,260
Buy Price 180.00
Buy Qty 31.00
Sell Price 180.00
Sell Qty 521.00

ITC Ltd. (ITC) - Auditors Report


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Company auditors report

to the Members of ITC Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of ITC LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2019 and theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information.

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 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31st March 2019 and its profit totalcomprehensive income the changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit of the standalone 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 Standalone Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence obtained by us is sufficient and appropriate to provide a basisfor our audit opinion on the standalone financial statements.

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. We have determined the matters described below to bethe key audit matters to be communicated in our report.

Sr.
Key Audit Matter Auditor's Response
No.
1. Revenue Recognition Principal Audit Procedures
Revenue from the sale of goods (hereinafter referred to as "Revenue") is recognised when the Company performs its obligation to its customers and the amount of revenue can be measured reliably and recovery of the consideration is probable. The timing of such recognition in case of sale of goods is when the control over the same is transferred to the customer which is mainly upon delivery. Our audit approach was a combination of test of internal controls and substantive procedures including: Assessing the appropriateness of the Company's revenue recognition accounting policies in line with Ind AS 115 ("Revenue from Contracts with Customers") and testing thereof.
The timing of revenue recognition is relevant to the reported performance of the Company. The management considers revenue as a key measure for evaluation of performance. There is a risk of revenue being recorded before control is transferred. Evaluating the integrity of the general information and technology control environment and testing the operating effectiveness of key IT application controls.
Evaluating the design and implementation of Company's controls in respect of revenue recognition.
Testing the effectiveness of such controls over revenue cut off at year-end.
Refer Note 1 to the Standalone Financial Statements - Significant Accounting Policies Testing the supporting documentation for sales transactions recorded during the period closer to the year end and subsequent to the year end including examination of credit notes issued after the year end to determine whether revenue was recognised in the correct period.
Performing analytical procedures on current year revenue based on monthly trends and where appropriate conducting further enquiries and testing.
2. Litigations - Contingencies Principal Audit Procedures
The Company has ongoing litigations with various authorities and third parties which could have a significant impact on the results if the potential exposures were to materialise. Our audit approach was a combination of test of internal controls and substantive procedures including:
The amounts involved are significant and the application of accounting standards to determine the amount if any to be provided as a liability or disclosed as a contingent liability is inherently subjective. Assessing the appropriateness of the design and implementation of the Company's controls over the assessment of litigations and completeness of disclosures. Supporting documentation are tested for the positions taken by the management meetings are conducted with in-house legal counsel and / or legal team and minutes of Board and sub-committee meetings are reviewed to confirm the operating effectiveness of these controls.
Claims against the Company not acknowledged as debts are disclosed in the Financial Statements by the Company after a careful evaluation of the facts and legal aspects of the matters involved. The outcome of such litigation is uncertain and the position taken by management involves significant judgment and estimation to determine the likelihood and/or timing of cash outflows and the interpretation of preliminary and pending court rulings. Involving our direct and indirect tax specialists to assess relevant historical and recent judgements passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures.
Refer Note 27 (v) (a) to the Standalone Financial Statements Additionally considering the effect of new information in respect of contingencies as at 1st April 2018 to evaluate whether any change was required in the management's position on these contingencies as at 31st March 2019.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Report on Corporate GovernanceShareholder information and Report of the Board of Directors & Management Discussionand Analysis but does not include the consolidated financial statements standalonefinancial statements and our auditor's report thereon.

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 during the course of our audit or otherwise appears to be materially misstated.

We have nothing to report in this regard.

Management's Responsibility for the Standalone 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 standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibility 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:

Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal financial 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 system in place and the operating effectiveness ofsuch controls.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.

Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.

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 auditor's 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.

Report on Other Legal and Regulatory Requirements

1. As required by section 143(3) of the Act based on our audit 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 Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account.

(d) in our opinion the aforesaid standalone financial statements comply with the IndAS specified under section 133 of the Act.

(e) on the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

(g) 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 opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act. In respect of one directoraggregate remuneration of Rs. 1.17 Crores paid / provided during the year is subject tothe approval of the Members at the forthcoming Annual General Meeting.

(h) 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 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements in accordance with the generally acceptedaccounting practice – also refer Note 27 (v) (a) to the standalone financialstatements.

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

For Deloitte Haskins & Sells
Chartered Accountants
(Firm's Registration No. 302009E)
P. R. Ramesh
Gurugram Partner
13th May 2019 (Membership No. 70928)

Annexure - A to the Independent Auditor's Report

(Referred to in paragraph 1 (f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of ITC Limited 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")

We have audited the internal financial controls over financial reporting of ITCLimited ("the Company") as of 31st March 2019 in conjunction with our auditof the standalone Ind AS financial statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditor's Responsibility

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 on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 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 is sufficient and appropriate toprovide a basis for our audit opinion on the Company'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.

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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31st March 2019 based on the criteria forinternal control over financial reporting established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Deloitte Haskins & Sells
Chartered Accountants
(Firm's Registration No. 302009E)
P. R. Ramesh
Gurugram Partner
13th May 2019 (Membership No. 70928)

Annexure - B to the Independent Auditor's Report

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.

(b) The property plant and equipment were physically verified during the year by theManagement in accordance with a regular programme of verification which in our opinionprovides for physical verification of all the property plant and equipment at reasonableintervals. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.

(c) With respect to immovable properties of acquired land and buildings that arefreehold according to the information and explanations given to us and the recordsexamined by us and based on the examination of the registered sale deed / transfer deed /conveyance deed / court orders approving schemes of arrangements/amalgamations and otherdocuments provided to us we report that the title deeds of such immovable properties areheld in the name of the Company as at the balance sheet date.

(ii) As explained to us the inventories other than material lying with third parties(which have substantially been confirmed) were physically verified during the year by theManagement at reasonable intervals and no material discrepancies were noticed on suchphysical 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 Companies Act 2013.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurities as applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposit during the year and accordingly the question of complying withSections 73 and 76 of the Companies Act 2013 does not arise.

In respect of unclaimed deposits the Company has complied with the provisions ofSections 74 and 75 or any other relevant provisions of the Companies Act 2013. Accordingto the information and explanations given to us no Order has been passed by the CompanyLaw Board or the National Company Law Tribunal or the Reserve Bank of India or any Courtor any other Tribunal on the Company.

(vi) The maintenance of cost records has been prescribed by the Central Governmentunder Section 148(1) of the Companies Act 2013 in respect of specified products of theCompany. For such products we have broadly reviewed the cost records maintained by theCompany pursuant to the Companies (Cost Records and Audit) Rules 2014 as amended andare of the opinion that prima facie the prescribed cost records have been made andmaintained. We have however not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has been regular in depositing undisputed statutory dues includingProvident Fund Employees' State Insurance Income-tax Goods and Services Tax CustomsDuty Excise Duty Cess and other material statutory dues applicable to it with theappropriate authorities.

(b) Details of dues of Income-tax Sales Tax Service Tax Customs Duty Excise Dutyand Value Added Tax which have not been deposited as on 31st March 2019 on account ofdisputes are given below:

Name of statute Nature of dues Amount (Rs. in Crores) Period to which the amount relates Various years covering the period Forum where dispute is pending
Sales Tax and Value Added Tax Laws Sales tax and VAT 23.44 1987-2017 Appellate Authority – upto Commissioners'/ Revisional authorities level
19.88 1994-2015 Appellate Authority – Tribunal level
252.47 2005-2015 High Court
Customs Act 1962 Customs duty 3.60 2011-2017 Appellate Authority – upto Commissioners'/ Revisional authorities level
0.36 2016 Appellate Authority – Tribunal level
40.70 2011-2012 High Court
Central Excise Act 1944 Excise duty 8.74 1996-2017 Appellate Authority – upto Commissioners'/ Revisional authorities level
95.63 1973-2017 Appellate Authority – Tribunal level
4.34 2005-2010 High Court
Finance Act 1994 Service tax 6.05 2006-2017 Appellate Authority – upto Commissioners'/ Revisional authorities level
63.11 2003-2015 Appellate Authority – Tribunal level

Out of the total disputed dues aggregating Rs. 518.32 Crores as above Rs. 374.86Crores pertain to matters which have been stayed for recovery by the relevant authorities.

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions banks and government and dues to debenture holders.

(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause (ix) ofthe Order is not applicable.

(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013. In respect of one director aggregate remuneration of Rs. 1.17 Crorespaid/provided during the year is subject to the approval of the Members at theforthcoming Annual General Meeting.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theOrder is not applicable.

(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Sections 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements etc. as requiredby the applicable Indian accounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or directors of its holding subsidiary or associate company or personsconnected with them and hence provisions of Section 192 of the Companies Act 2013 are notapplicable.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For Deloitte Haskins & Sells
Chartered Accountants
(Firm's Registration No. 302009E)
P. R. Ramesh
Gurugram Partner
13th May 2019 (Membership No. 70928)