The Members of UCO Bank
Report On The Financial Statements
1. We have audited the accompanying financial statements of UCO Bank("theBank") which comprise the Balance Sheet as at 31st March 2019 and the Profit andLoss Account and the Cash Flow Statement for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information in which are incorporated the returns for the year ended on thatdate 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 branchesaudited by overseas local auditors. The branches audited by us and those audited by otherauditors have been selected by the Bank in accordance with the guidelines issued to theBank by the Reserve Bank of India. Also incorporated in the Balance Sheet and the Profitand Loss Account are the returns from 1787 branches which have not been subjected toaudit. These unaudited branches account for 6.49 per cent of advances 36.03 per cent ofdeposits 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 explanationsgiven to us the aforesaid financial statements give the information required by theBanking Regulation Act 1949 in the manner so required for bank and are in conformity withaccounting principles generally accepted in India and give: a. true and fair view in caseof the Balance sheet of the state of affairs of the Bank as at 31st March 2019; b. truebalance 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 thatdate.
Basis for Opinion
2. We conducted our audit of the financial statements in accordance with theStandards on Auditing (SAs) issued by the Institute of Chartered Accountants of India. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Bank in accordance with the code of ethics issued by the Institute ofChartered Accountants of India together with ethical requirements that are relevant to ouraudit of the financial statements and we have fulfilled our other ethical responsibilitiesin accordance with these requirements and the code of ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.
Key Audit Matters
3. Key audit matters are those matters that in our professional judgment were ofmost significance in our audit of the financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements as a wholeand in forming our opinion thereon and we do not provide a separate opinion on thesematters. We have determined the matters described below to be the key audit matters to becommunicated in our report:
|Key Audit Matters ||Auditor's Response to Key Audit Matters |
|Advances- Classification and Provisioning || |
|The advances are classified as performing and non-performing advances (NPA) and provisioning thereon is made in accordance with the prudential norms as prescribed by the Reserve Bank of India (RBI). The classification and provisioning is done by Bank's IT software integrated with its Core Banking Solution (CBS).The extent of provisioning of NPA under the prudential norms are mainly based on its ageing and recoverability of the underlined security. ||We obtained an understanding of the Bank's Software circulars guidelines and directives of the RBI and the Bank's internal instructions and procedures in respect of asset classification and its provisioning and adopted the following audit procedures Evaluation and testing of the effectiveness of the IT software controls and other key internal control mechanisms with respect to the advances monitoring identification/ classification including testing of relevant data quality and review of the data entered in the software. |
|In the event of any improper application of the prudential norms or consideration of the incorrect value of the security as the valuation of the security involves high degree of estimation and judgement the carrying value of the advances could be materially misstated either individually or collectively and in view of the significance of the amount of advances in financial statements the classification of the advances and provisioning thereon has been considered as Key Audit Matter in our audit. ||Review of the documentations operations/ performance and monitoring of the advance accounts on test check basis of the large and stressed advances to ascertain any overdue unsatisfactory conduct or weakness in any advance account to verify that its classification is in accordance with the prudential norms of RBI. |
|Key Audit Matters ||Auditor's Response to Key Audit Matters |
|Deferred Tax Assets ||We assessed and tested the design and operating effectiveness 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. |
|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. || |
|Provisions for Contingent Liabilities ||Our audit procedure in response to this key Audit Matter included |
|The Bank is involved in a number of taxation and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment 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 and to the adequacy of the disclosures in the financial statements. || Assessment of the process and relevant controls implemented to identify legal and tax litigations and pending administrative proceedings. |
| || 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 cases. |
|Because of the judgement required the materiality of such litigations and the complexity of the assessment process the area was a key matter for our audit. || Inquiry with the legal department regarding the status of the most significant disputes and inspection of the key relevant documentation. |
| || Analysis of opinion received from the experts where available. |
| || Review of the adequacy of the disclosures in the notes to the financial statements. |
|IT Systems & Controls || |
|IT systems based on Core Banking Solutions (CBS) and internal controls due to ||We tested the design and operating effectiveness of the Bank IT controls over the information systems that are critical to financial reporting. |
| ||We also tested IT general controls |
|(i) the complexity of IT systems architecture with large volume of transactions processed in location on daily basis ||(a) Logical Access |
| ||(b) Changes Management |
|(ii) Possibilities of Manual Intervention and control overrides in various business process undertaken by the CBS like Trade Finance NPA Management Govt. Business Forex Management including interfacing with swift Treasury Operations etc. ||(c) Aspects of IT Operational Controls The above includes testing of user requests for access to systems whether they were appropriately reviewed and authorized. We have also inspected the requests of change to systems for appropriate approval and authorization. |
| ||We have relied on the IS and other related audit reports and obtained inputs from IS experts in selected areas. |
Information other than the Financial Statements and Auditors' Report Thereon
4. The Bank's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Director's Report Pillar 3 Disclosures under Basel III BusinessResponsibility Report Leverage Ratio Liquidity Coverage Ratio Corporate Governance andShareholders Information but does not include the financial statements and our auditor'sreport thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge in the audit orotherwise appears to be materially misstated.
If based on the work we have performed on the other information obtained prior to thedate of this auditors' report we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
5. The Bank's Board of Directors is responsible with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Bank in accordance with the accountingprinciples generally accepted in India including the Accounting Standards issued by ICAIand provisions of Section 29 of the Banking Regulation Act 1949 and circulars andguidelines issued by the Reserve Bank of India ('RBI') from time to time. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Bank and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements management is responsible for assessing theBank's ability to continue as a going concern disclosing as applicable matters relatedto going concern and using the going concern basis of accounting unless management eitherintends to liquidate the Bank or to cease operations or has no realistic alternative butto do so.
Auditor's Responsibilities for the Audit of the Financial Statements
6. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by 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 bank'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 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'sreport. However future events or conditions may cause the bank to cease to continue as agoing concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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
7. The Balance Sheet and the Profit and Loss Account have been drawn up inaccordance with Section 29 of the Banking Regulation Act 1949;
8. Subject to the limitations of the audit indicated in paragraphs 5 to 6 above andas required by the Banking Companies (Acquisition and Transfer of Undertakings) Act1970/1980 and subject also to the limitations of disclosure required therein we reportthat: a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit and have found them tobe satisfactory; b) The transactions of the Bank which have come to our notice have beenwithin the powers of the Bank; and c) The returns received from the offices and branchesof 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 theBank so far as it appears from our examination of those books and proper returns adequatefor the purpose of our audit have been received from branches not visited by us; b) theBalance Sheet the Profit and Loss Account and the Cash Flow Statement dealt with by thisreport are in agreement with the books of account and with the returns received from thebranches not visited by us; c) the reports on the accounts of the branch offices auditedby branch auditors of the Bank under section 29 of the Banking Regulation Act 1949 havebeen 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 Statementcomply with the applicable accounting standards to the extent they are not inconsistentwith 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 |
Date: 14th May 2019