Auditor’s Report · •SA 700: Forming an opinion and reporting on financial statements •SA 705: Modifications to the opinion of the independent auditor [s report •SA 706: Emphasis

Bombay Chartered Accountants’ Society Khurshed Pastakia

6th August 2014

Auditor’s Report Recent SA Developments, Fraud Reporting & Other Issues

Agenda

• Auditor’s report

• Recent developments

• Fraud reporting

• Bases of opinion – some illustrations

Auditor’s Report

Reporting standards

• SA 700: Forming an opinion and reporting on financial statements

• SA 705: Modifications to the opinion of the independent auditor’s report

• SA 706: Emphasis of matter paragraphs and other matter paragraphs in the independent auditor’s report

Features of Reporting Standards

• Applies to audits of general purpose FS – Not to reviews, special purpose FS or financial

information

• Fair presentation framework v compliance framework • Opinion on whole set of FS, not on components/

elements, based on overall FS materiality • SA 700 is divided into 2 parts – how to form an

opinion and how to give clean report • Heading asserts auditor independence • Paragraphs have clear headings • Management and auditors’ responsibilities are

elaborated

Features of Reporting Standards

• Basis for modified opinion separated from modified opinion paragraph

• EOM/ OMP not considered as modifications

• Clear guidance on when to give qualified, adverse, and disclaimer opinions & EOM, OMP

• Reporting on true and fair is separated from legal and regulatory requirements

• Possible to use one report for two closely identical frameworks (GAAPs) / auditing standards

• Reference to SAs prohibited unless conditions are met

Auditor’s responsibility… • Our responsibility is to express an opinion on these

financial statements based on our audit • We conducted our audit in accordance with the Standards

on Auditing issued by the ICAI • Those standards require that we comply with the ethical

requirements • And plan and perform the audit • To obtain reasonable assurance about whether the FS are

free from material misstatement • An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the FS • The procedures selected depend on the auditor’s

judgement • Including assessment of risks of material misstatements of

the FS, whether due to fraud or error









SA 200.14, A-14,15,16,17

SQC 1









SAs 300,315, 320,330

High but not absolute

assurance SA 500, 501,505 and all the other 500-series SAs









Application of relevant training, knowledge and experience, within the context provided by auditing

and accounting and ethical standards, in making informed decisions about the courses of

actions that are appropriate in the circumstances of the audit

engagement









….Auditor’s responsibility

• In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and presentation of the FS in order to design audit procedures that are appropriate in the circumstances

• But not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control

• An audit also includes evaluating the appropriateness of the accounting policies used

• And the reasonableness of the accounting estimates made by the management

• As well as evaluating the overall presentation of the financial statements

….Auditor’s responsibility

• In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and presentation of the FS in order to design audit procedures that are appropriate in the circumstances

• But not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control

• An audit also includes evaluating the appropriateness of the accounting policies used

• And the reasonableness of the accounting estimates made by the management

• As well as evaluating the overall presentation of the financial statements

SA 315, 330

SA 540

Free of material misstatements • Sufficient appropriate audit evidence is obtained • Uncorrected misstatements are not material • Requirements of reporting framework are materially

complied with • Management’s estimates and judgements are bias-free

and reasonable • Appropriate accounting policies are consistently followed

& are disclosed • Information presented is relevant, reliable, comparable

and understandable • Disclosures made are adequate for users’ understanding • Terminology used is appropriate & framework is described • FS achieve true and fair presentation: overall structure,

content including notes represent underlying transaction in a manner that is true and fair

When clean opinion cannot be given

• Auditor HAS obtained sufficient appropriate audit evidence

• FS taken as a whole are not free from material misstatement

• Auditor HAS NOT obtained sufficient appropriate audit evidence

• He has no means of concluding that FS taken as a whole are free from material misstatement

If AR wording is prescribed by law

• Auditor evaluates whether

– The minimum elements of an auditor’s report per SAs exist in prescribed format

– Users might misunderstand the assurance obtained from the audit

– Providing additional information or explanation in report can mitigate such misunderstanding

• If not, auditor is not allowed to give reference to the SAs in his report

Legal and regulatory requirements

• Q: Should auditor’s opinion be modified if a legal or regulatory requirement is not met?

• A: Depends on facts – If prescribed accounting standards are not followed

or information and explanation is not available, that may have a bearing on true and fair – the opinion on FS also may have to be modified

– If a requirement like reporting on directors’ disqualification or entering S. 301 transaction in a Register are reported negative, they may not have a bearing on true and fair – the opinion on FS should not be modified

SA 705

Nature of matter giving rise to modification

Auditor’s judgement about effects or possible effects on FS

Material but NOT pervasive

Material AND pervasive

FS are materially misstated

Qualified opinion Adverse opinion

Inability to obtain sufficient appropriate audit evidence

Qualified opinion Disclaimer of opinion

What is

PERVASIVE?

Misstatements Possible misstatements

That are not confined

to specific components

accounts or items

If so confined,

represent a

substantial portion

Where pertaining to

disclosures, are

fundamental to users’

understanding of FS

Misstatement is not merely a recognition and measurement issue, disclosures

and presentation may equally be misstated and require opinion to be modified

After

obtaining

sufficient

appropriate

audit

evidence

Auditor

concludes

that

Individual

misstatements

Aggregate of

misstatements

Are

MATERIAL

but not

PERVASIVE OR

Auditor

cannot

obtain

sufficient

appropriate

audit

evidence

Auditor

concludes

that

Possible

effects of

undetected

misstatements

Are

MATERIAL

but not

PERVASIVE

QUALIFIED

OPINION

After

obtaining

sufficient

appropriate

audit

evidence

Auditor

concludes

that

Individual

misstatements

OR

Aggregate of

misstatements

Are

MATERIAL

AND

PERVASIVE

ADVERSE

OPINION

Auditor

cannot

obtain

sufficient

appropriate

audit

evidence

Auditor

concludes

that

Possible

effects of

undetected

misstatements

Are

MATERIAL

AND

PERVASIVE

DISCLAIMER

OF

OPINION

Multiple

Uncertainties

Auditor

concludes

that

Even after auditor has

obtained audit

evidence

He cannot form

an opinion on FS

due to potential

interaction of the

uncertainties and

their possible

cumulative effect

After accepting

engagement,

management

imposes a

scope

limitation

Auditor assesses

that this may

result in a

qualified opinion

or disclaimer

Auditor requests

management to

remove the scope

limitation

Management does

not

remove it

Auditor communicates

this to TCWG

Considers alternative

procedures

If he cannot obtain

sufficient appropriate

audit evidence, and

concludes that

effect of undetected

misstatements is

Material but not pervasive

Material and pervasive

QUALIFY

RESIGN, if allowed to

GIVE DISCLAIMER

Describe and quantify

effect of misstatement

Say so if quantification

is impracticable

Explain how

disclosures

are misstated

Explain reason why

sufficient appropriate

audit evidence

was unavailable

Non-disclosure Discuss with

TCWG

Describe

omitted

information If permitted

provide the

non-disclosed

information,

if practical

and if

sufficient

appropriate

audit evidence

is obtained

Adverse or

disclaimer

of opinion

expressed

But there are

other matters

that would

have required

modification

Reasons and effects

of such other matters

to be given in Bases

of Modification paragraph

BASIS OF

MODIFICATION

PARAGRAPH

25

Draw users’ attention to matters presented/ disclosed in FS that are fundamental to

users’ understanding of FS

Draw users’ attention to matters not presented/ disclosed in FS that are

relevant to users’ understanding of the audit, auditor’s responsibilities or

auditor’s report

EMP

OMP

SA 706

EOM/ OMP

• Q: Auditor thinks a matter does not deserve qualification. Can he include it in an EOM?

• Q: Would an EOM be appropriate under section on Other Legal & Regulatory?

• Q: Can auditor give information not provided by client in the FS, in OMP?

Recent developments

ICAI announcement on reporting on components

Component Disclosure in principal auditor’s report

Unaudited, not material Disclosure optional; if disclosed – in OMP

Audited by another auditor, not material

Disclosure optional; if disclosed – in OMP

Unaudited, material Report to be modified

Audited by another auditor, material

Disclosure to be made in OMP

ICAI announcement on branch auditor’s report

Omitted earlier from illustrative report format:

“The report on the accounts of the branch offices audited under section 228 by another auditor has been forwarded to us as required by clause (c) of sub-section (3) of section 228 and have been dealt with in preparing our report in the manner considered necessary by us”

ICAI announcement on applicable accounting standards

Until S. 143 of the Companies Act, 2013 became operative, both the following manners of making reference to the Accounting Standards in the independent auditor’s report of a Company [management's responsibility para and in report under S.227(3)] are acceptable:

• Alternative 1: Refer only to S. 211(3C) of the Companies Act, 1956

• Alternative 2: Refer to the Companies Act, 1956 along with reference to the relevant notifications of MCA vide which it had clarified that the Accounting Standards prescribed under the Companies Act, 1956 would continue to apply in respect of S. 133 of the Companies Act, 2013

• After S. 143 became operative (ie for FY beginning 1/4/2014) no additional guidance is yet available from ICAI

• However, a suggested format to be used in LR and other reports, subject to clarification if any in future, is:

– the Accounting Standards specified under the Companies Act, 1956 (which are deemed to be applicable as per Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014) and other accounting principles generally accepted in India

ICAI announcement on auditor’s responsibility para • To prevent auditor taking full responsibility for internal

controls, the auditor’s responsibility para to include:

“….the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.”

• This could change after applicability of S. 143(3)(i) where an auditor reports on “whether the company had adequate internal financial control system in place and the operating effectiveness of such controls”

ICAI announcement on nomenclature of income statement Though Companies Act 2013 requires use of “Statement of Profit and Loss”, until Sec 227 of the 1956 Act continued to be applicable, use of “Profit and Loss Account” is still permitted.

ICAI announcement on non-applicable clauses in CARO • There was mixed practice – some auditors mentioned non-

applicability for each clause separately, and others clubbed all non-applicable clauses in an opening paragraph

• ICAI permits both practices

MCA clarification re applicability of 2013 Cos Act provisions on accounts

• On 26th March MCA notified majority of remaining sections wef 1/4/2014

• Consequently for financial years that began before 1/4/2014, the old 1956 Act will apply and for financial years that commenced after 1/4/2014, the sections of the 2013 Act will apply

• These include sections relating to books of account, preparation, adoption and filing of FS, auditor’s and board’s reports, Sch II on depreciation, and Sch III on format of FS

ICAI announcement on S 143(12)

• S.143(12) requires that if auditor, in the course of performing his duties as auditor, has reason to believe that a fraud is or being committed, he must report it immediately to CG

• Question was whether while doing limited reviews or other work before the annual audit if an auditor comes across such situation, must he report it?

• ICAI has opined that since such work may not be pursuant to requirements of the Companies Act 2013 the provisions of S. 143(12) would prima facie not apply.

• However, they have said that the Institute is in communication with MCA in this regard

ICAI announcement on S. 143(3)(i)

• S. 143(3)(i) requires auditor to report whether the company has adequate internal financial controls in place and the operating effectiveness of such controls

• ICAI has clarified that the section will apply only to audits for financial years commencing on or after 1st April 2014 and not to audits for periods beginning on or before 31st March 2014

Does CARO apply any more?

• CARO, 2003 drew the authority for its existence from S. 227(4A) of Companies Act, 1956.

• Going forward, that section is no more applicable

• S. 143(11) of Companies Act, 2013 reads: – The CG may, in consultation with NFRA, by general or

special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditor’s report shall also include a statement on such matters as may be specified therein

Fraud reporting

Requirements • CARO 2003 required whether any fraud by or on the

company has been noticed or reported during the year. If yes, the nature and amount involved is to be indicated

• Sec 143(12) of the 2013 Act states - Notwithstanding anything contained in this section, if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed

Requirements • Reporting of fraud by auditor shall also extend to branch

auditor to the extent it relates to the branch (Rule 12) • S.143(13) states - No duty to which an auditor of a company

may be subject to shall be regarded as having been contravened by reason of his reporting the matter referred to in sub-section (12) if it is done in good faith

• S.143(14) applies the section mutatis mutandis to practicing cost accountants and company secretaries; practicing internal auditors would also get covered under S.143(12)

• S.143(15) states – If any auditor, cost accountant or company secretary in practice do not comply with the provisions of sub-section 12, he shall be punishable with fine which shall not be less than 1 lakh rupees but which may extend to 25 lakh rupees

Definition of fraud • SA 240 defines fraud as – An intentional act by one or

more individuals among management, TCWG, employees, or 3rd parties, involving the use of deception to obtain an unjust or illegal advantage

• S. 144 does not define fraud. For purposes of S. 447 in prescribing punishment for fraud it is defined as – – “fraud” in relation to affairs of a company or any body

corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss”.

Manner of reporting to CG • Rule 13 of Companies (Audit & Auditors) Rules 2014

states that for the purpose of S 143(12), in case the auditor has sufficient reason to believe that an offence involving fraud, is being or has been committed against the company by officers or employees of the company, he shall report the matter to the Central Government immediately but not later than sixty days of his knowledge and after following the procedure indicated herein below: – auditor shall forward his report to the Board or the Audit

Committee, as the case may be, immediately after he comes to knowledge of the fraud, seeking their reply or observations within forty-five days;

Manner of reporting to CG – on receipt of such reply or observations the auditor shall

forward his report and the reply or observations of the Board or the Audit Committee along with his comments (on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days of receipt of such reply or observations;

– in case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated time of forty-five days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board of the Audit Committee for which he failed to receive any reply or observations within the stipulated time.

Manner of reporting to CG

• The report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same.

• The report shall be on the letterhead of the auditor containing postal address, e-mail address and contact number and be signed by the auditor with his seal and shall indicate his Membership Number.

• The report shall be in the form of a statement as specified in Form ADT – 4

ADT – 4 S.No Particulars

1(a) Name of the Company

1(b) CIN

1(c) Address of the Registered Office

2(a) Name of the auditor or auditor’s Firm

2(b) Membership number

2(c) Address

3 Date of the annual general meeting when the auditor

was appointed or reappointed

4 SRN and date of filing

5 Address of the office or location where the suspected

offence is believed to have been or is being committed

6 Full details of the suspected offence involving fraud

(attach documents in support)


7 Particulars of the officers or employees who are suspected to be involved in the commission of the offence, if any:

7(a) Name (s)

7(b) Designation

7(c) If Director, his DIN

7(d) PAN

8 Basis on which fraud is suspected

9 Period during which the suspected fraud has occurred

10 Date of sending report to the Board or Audit Committee as per rule 13(1)

11 Date of reply received from Board or Audit Committee, if any and if so received, attach copy thereof and give gist of the reply


12 Whether the auditor is satisfied with the reply of the Board or Audit

Committee. Yes … No ….

13 Estimated amount involved in the suspected fraud

14 Details of steps, if any, taken by the company in this regard; (Furnish

full details with references)

15 Any other relevant information.

Verification – I, …., Proprietor / Partner of …., Chartered Accountants do hereby declare that the information furnished above is true, correct and complete in all respects including the attachments to this form.

Questions… • Is the auditor responsible for detection of fraud? • What would be the interpretation of ‘in the course of

performance of his duties as auditor’? • What is the meaning of ‘reason to believe’? • What is ‘fraud against the company’? Should the

auditor report on fraud by the company (management fraud)?

• Given that an auditor performs his audit procedures on the basis of materiality, can the same be adopted for purposes of reporting to CG?

• What is the reporting obligation with respect to frauds detected by the Management or those reported in the public domain or those that are reported u/s 143(12) by others?

…Questions

• Is Section 143(12) applicable with respect to consolidated financial statements?

• If a fraud that is determined dates back to a previous year covered under the 1956 Act, should such frauds also be reported to CG?

• Where there has been a change in the auditor and a fraud dates back to a time period where the auditor was different, should there be a communication to the predecessor auditor?

• Should corruption, bribery, money laundering be reported u/s 143(12)?

Bases of opinion – Some illustrations (PY figures not given)

• Basis for disclaimer of opinion:

Attention is invited to Note xx of the FS re preparation of the FS of the Co on a going concern basis notwithstanding the fact that the Co has been incurring cash losses, its NW has been fully eroded as on B/S date and its CL far exceed its CA as on that date. Further banks and FIs have declared the Co as an NPA, taken possession of certain immovable properties, referred it to the Debt Recovery Tribunal and filed multiple suits for recovery of dues. These situations indicate that there are multiple material uncertainties for the Co to continue as a going concern and consequently, its ability to realise its assets and discharge its liabilities in the normal course of business. In the absence of sufficient appropriate audit evidence to support the preparation of the FS on a going concern basis, we are unable to form an opinion in the matter.

• Basis for qualified opinion:

In respect of a jointly controlled entity whose FS reflect total assets of Rs xxx as at 31.12.2012, total revenue of Rs xxx and net cash outflows of Rs xxx for the year ended on that date, are considered in the CFS based on their unaudited FS. Further, the management has not made any adjustments to such FS for the intervening period from 1.1.2013 to 31.3.2013 as the FS of that entity are not readily available. The FS of the jointly controlled entity were last audited for the year ended 31.12.2011

• Basis of qualified opinion:

In respect of a subsidiary, namely XYZ Ltd, the auditors have qualified their report stating the fact that despite continuing losses incurred by that Co and the accumulated losses exceeding its paid up capital by more than two times, the FS of the Co have been prepared on going concern basis, on which aspect we are unable to express any opinion (See Note xx to the CFS.)


We refer to Note xx to the FS wherein the management of the Co has considered trade receivables amounting to Rs xxxx million as good and fully recoverable. In the absence of external balance confirmations from the customers from whom these amounts are due or other alternate audit evidence to corroborate management’s assessment of recoverability of these balances, we are unable to comment on the extent to which these balances are recoverable.


As explained in note no xxx the Co has not consolidated the financial statements of its new joint venture, XXX Pvt Ltd. The management has represented to us that the same is yet to commence the operations. As the financial statements are not available for consolidation, the effect of the same on the financial statements cannot be determined.


As stated in note XX, the Co has not performed impairment assessment of its fixed assets and hence impairment loss, if any, has not been provided as required under Accounting Standard (AS) 28, “Impairment of Assets”. In the absence of any such impairment assessment we are unable to comment on recoverability of the carrying value of such assets, and any consequent adjustment to such value that may be required.

• Basis for qualified opinion: Attention is invited to note XX wherein it is stated that the Company’s management is confident that, given the nature of business, steps taken by the management and after considering the future projections taken on record by the Board of Directors, sufficient future taxable income will be available against which deferred tax asset of Rs. ..... as on 31st March, 20X2, created on account of unabsorbed business losses, will be realized in future. Accordingly, the Company has recognized such deferred tax credit in these accounts. However, in our opinion, there is insufficient evidence with regard to virtual certainty requirement of Accounting Standard 22 “Accounting of Taxes on Income”, to justify the recognition of the full amount of deferred tax credit. Had such deferred tax credit not been recognized, loss for the year ended 31st March, 20X2 would have been higher by Rs....., the debit balance in the statement of profit and loss as on 31st March, 20X2 would be higher by Rs. .... and deferred tax assets on 31st March, 20X2 would have been lower by Rs. .... Our report for the previous year ended 31st March, 20X1 was similarly qualified.


The Club has not provided for Income Tax on interest income in respect of earlier years amounting to Rs..... which had to be provided in view of the decision of the Hon’ble Supreme Court, dated XX January 20X2, regarding applicability of Income Tax on interest income. Had such accrual been made, Tax Expense would have increased by Rs..... and Surplus after tax and Reserves and Surplus would have reduced by the same amount.

• Basis for qualified opinion: As on 30/09/20X2, FAs include Intangible Assets aggregating to INR .... under the head “Knowhow and New Brand Development” representing intangibles internally generated by the Company through expenditure on advertisement and promotional expenses. Such recognition is not in accordance with Accounting Standard (AS) 26, “Intangible Assets”. Had the Company complied with requirements of AS-26, FAs would have been lower by INR ......, the net profit after taxes for the quarter would be converted into net loss after taxes of INR ......, net profit for the six months period ended 30/09/20X2 would be converted into net loss after taxes of INR ...... (net of tax of INR ......) and Reserves and Surplus would be lower by INR ......

• Bases for qualified opinion:

1. Attention is invited to Note xx to the FS wherein no provision amounting to Rs.....has been made towards an “Onerous Contract” entered into for off take of Carbon Emission Reduction (CER) at a certain minimum fixed price as, in the view of the management, discussions are on to renegotiate the terms of the contract.

2. As indicated in note yy of the FS, no provision has been made for MODVAT balance amounting to Rs..... which has lapsed. Had such provision been made, the profits for the year and the reserves and surplus would have been lower by Rs. ..... millions.

• Emphasis of matter:

Attention is invited to Note xx of the financial statements relating to the disallowance of Sales Commission by the Revenue Authorities for the financial year 2009-10 relevant to the Assessment Year 2010-11 and the potential Income Tax liability (including the relevant interest) of Rs.xxxx on such disallowance being disclosed under “Contingent Liabilities” for the reasons stated in the said Note.

Our opinion is not qualified in respect of this matter


Attention is invited to Note xx of the financial statements regarding remuneration paid to Joint Managing Directors in excess of the relevant provisions of the Act by Rs. xx lakhs for which the Central Government approval is awaited.

Our opinion is not qualified in respect of this matter.


We draw attention to note xx of the Statement wherein it is stated that the Digital Addressable System (DAS) subscription fee has not yet been finalised and the revenue on account of the same has been recognised based on certain estimates which, in the management’s view, are reasonable.



We draw attention to Note xx to the financial statements regarding investments made in certain subsidiaries and a joint venture which have accumulated losses and the loans and advances / debts due from these entities, where the provision made for diminution, other than temporary, in the value of investments is considered to be adequate, for the reasons stated in the said Note.



We refer to Note xx regarding preparation of financial statements of the Company on going concern basis for the reasons stated therein. The appropriateness of assumption of going concern is dependent upon implementation of an alliance with the Strategic Partner and/or the Company’s ability to raise requisite finance/ generate cash flows in future to meet its obligations, including financial support to its subsidiary.



We draw attention to Note No. xx to the financial statements with respect to uncertainties related to costs to come and the approval of variations with regard to a major complex project.


• Emphasis of matter: An amount of Rs. xx is carried as goodwill on consolidation in respect of four Indian subsidiary companies whose net worth has been fully eroded as at 31 March 2013 as per the audited financial statements of these entities. As stated in Note xx of the CFS, the Company has carried out an evaluation of the goodwill in respect of these subsidiaries, taking into account the expected cash flows based on future business projections and the Management plans for reviving the operations of these subsidiaries. Based on the same, duly considering the long term nature of the investments in these subsidiaries, the nature of the industry, gestation period, etc. no provision for impairment has been considered necessary by the Management in respect of the carrying amount of goodwill. Our opinion is not qualified in respect of the above matter


We draw attention to Note xx regarding the management’s assessment that the amounts recoverable from one of its subsidiaries are good and that there is no diminution, other than temporary, in the carrying value of its investment in the said subsidiary and hence no provision has been made at this stage for the reasons stated therein.



We draw attention to Note No. xx with respect to total contract cost being ascertained based on the contract costs incurred and cost to completion of contracts which is arrived at by the management based on current technical data, forecast and estimate of net expenditure to be incurred in future. Owing to the technical nature of the contracts, we have relied on the management estimates relating to the technical aspects/components and other technical inputs/matters considered in the determination of expected cost to completion of the contracts.

Our report is not qualified in this regard.


We draw attention to Note xx to the financial statements which describe the uncertainty related to the penalty of Rs. xxx crores imposed by the Competition Commission of India for alleged cartelization by certain xxxx (item) manufacturing companies including the Company, for which, based on a legal opinion, no provision has been made.


• Other matter: The consolidated financial results includes the interim financial results of seven subsidiaries and one jointly controlled entity which have not been reviewed/audited by their auditors, whose interim financial results reflect, total revenue of Rs. xxx Million for the Quarter ended June 30, 2013 and total loss after tax of Rs. xxx Million for the Quarter ended June 30, 2013, as considered in the consolidated financial results. These interim financial results have been certified by the Management of the Company and, our report on the Statement, in so far as it relates to the amounts included in respect of these entities, is based solely on such certified interim financial results. Any adjustment to these interim financial results could have consequential effects on the attached Statement. However, the size of these entities in the context of the Group is not material. Our report is not qualified in respect of this matter above.

Q?

Auditor’s Report · •SA 700: Forming an opinion and reporting on financial statements •SA 705: Modifications to the opinion of the independent auditor [s report •SA 706: Emphasis

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