Mar 31, 2023
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Aavas Financiers Limited (âthe Companyâ), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (âthe Actâ) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (âInd ASâ) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditorâs Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (âICAIâ) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
Key audit matters |
How our audit addressed the key audit matter |
Expected Credit Losses (ECL) on loan assets At 31 March 2023, the Company reported total gross loans of C 1,154,788 lakhs (2022: C 911,774 lakhs) and C 7,161 lakhs of expected credit loss provisions (2022: C 6,432 lakhs). |
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Ind AS 109 - Financial Instruments (âInd AS 109â), requires the Company to provide for impairment of its financial assets using the expected credit loss (âECLâ) approach involving an estimation of probability of loss on such financial assets, considering reasonable and supportable information about past events, current conditions and forecasts of future economic conditions which could impact the credit quality of the Companyâs loan assets. Expected credit loss cannot be measured precisely but can only be estimated through use of statistics. The estimation of impairment loss allowance on loan assets involves significant judgement and estimates and applying appropriate measurement principles in case of loss events, including additional considerations on account of Reserve Bank of India guidelines in relation to COVID-19 regulatory package and restructuring. |
Our audit focused on assessing the appropriateness of managementâs judgment and estimates used in the expected credit losses through the following procedures, but were not limited to the following procedures: ⢠Examined the Board Policy approving methodology for computation of ECL that addresses policies and procedures for assessing and measuring credit risk on the lending exposures of the Company in accordance with the requirements of Ind AS 109. Also, obtained the policy on moratorium and restructuring of loans approved by the Board of Directors pursuant to the RBI circulars/guidelines and ensured such policy is in compliant with the requirements of the RBI circulars / guidelines; |
Key audit matters |
How our audit addressed the key audit matter |
The expected credit loss is calculated using the percentage |
⢠Performed a walkthrough of the impairment loss allowance |
of probability of default (PD), loss given default (LGD) and |
process, and assessed the design and tested operating |
exposure at default (EAD) for each of the stages of loan portfolio. |
effectiveness of the key controls over completeness and |
Additional management overlay is estimated considering non |
accuracy of the key inputs (including loan book as at 31 |
prediction and long-term future impact. |
March 2023) and assumptions considered for calculation, |
The Expected Credit Loss (âECLâ) is measured at 12-month |
recording and monitoring of the impairment loss recognized; |
ECL for Stage 1 loan assets and at lifetime ECL for Stage 2 |
⢠Tested the completeness of loans and advances included in |
and Stage 3 loan assets. Significant management judgment |
the Expected Credit Loss calculations as of 31 March 2023 by |
and assumptions involved in measuring ECL is required with |
reconciling it with the balance as per loan balance register. |
respect to: |
We tested the data used in the PD and LGD model for ECL |
⢠Segmentation of loan book in buckets |
calculation by reconciling it to the source system. We tested assets in stage 1, 2 and 3 on a sample basis to verify that they |
⢠determining the criteria for a significant increase in credit risk |
were allocated to the appropriate stage; ⢠Obtained an understanding of the modelling techniques |
⢠factoring in future economic assumptions |
adopted by the Company including the key inputs and |
⢠techniques used to determine probability of default, loss |
assumptions; |
given default and exposure at default. |
⢠Tested the appropriateness of determining Exposure at |
These parameters are derived from the Companyâs internally |
Default (EAD), PD and LGD, on sample basis. For exposure |
developed statistical models with the help of management |
determined to be individually impaired, we tested samples of |
experts and other historical data. |
loans and advances and examined managementâs estimate of future cash flows, assessed their reasonableness and checked |
Considering the significance of the above matter to the standalone financial statements and since the matter required |
the resultant provision calculations; |
our significant attention to test the calculation of expected |
⢠Performed an overall assessment of the ECL provision |
credit losses, we have identified this as a key audit matter for |
levels at each stage, including managementâs assessment |
current year audit. |
and provision on account of the Companyâs portfolio, risk profile, credit risk management practices as well as the macroeconomic environment; ⢠Ensured compliance with RBI Master Circular on âPrudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to advancesâ (âIRACPâ) read with RBI circular on âPrudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Clarificationsâ dated 12 November 2021, in relation to identification, upgradation and provisioning of nonperforming assets (NPAs); and ⢠Assessed the appropriateness and adequacy of the related presentation and disclosures in the accompanying financial statements in accordance with the applicable accounting standards and related RBI circulars and Resolution Framework. |
Key audit matters |
How our audit addressed the key audit matter |
Information Technology (âITâ) Systems and Controls for the financial reporting process |
|
The Company is highly dependent on its Information Technology |
Our key audit procedures with the involvement of our IT |
(âITâ) systems for carrying on its operations which require large |
specialists included, but were not limited to the following: |
volume of transactions to be processed in numerous locations |
⢠Obtained an understanding of the Companyâs IT related |
on a daily basis. Among other things, management also uses |
control environment and conducted risk assessment and |
the information produced by the IT systems for accounting and |
identified IT applications, data bases and operating systems |
preparation and presentation of the financial statements. |
that are relevant to our audit. |
The Companyâs accounting and financial reporting processes |
⢠Tested the design and operating effectiveness of the |
are dependent on automated controls enabled by IT systems |
Companyâs IT controls over the IT applications as identified |
which impacts key financial accounting and reporting items such as loans, interest income, EIR computation, impairment on |
above; |
loans, computation of daily DPD, assignment of loans amongst |
⢠On such in-scope IT systems, we have tested key IT general |
others. The controls implemented by the Company in its IT |
controls with respect to the following domains: |
environment determine the integrity, accuracy, completeness |
a. Program change management which includes controls |
and validity of data that is processed by the applications and is |
on moving program changes to production environment |
ultimately used for financial reporting. |
as per defined procedures and relevant segregation of |
Our areas of audit focus included user access management, |
environments |
changes to the IT environment and segregation of duties |
b. User access management which includes user access |
Further, we focused on key automated controls relevant for |
provisioning, de-provisioning, access review, password |
financial accounting and reporting systems. |
management, sensitive access rights and segregation of |
Accordingly, since our audit strategy included focus on key IT |
duties |
systems and controls due to pervasive impact on the financial |
c. Other areas that were assessed under the IT control |
statements, we have determined the âIT Systems and Controls for the financial reporting processâ as a key audit matter for |
environment included batch processing and interfaces. |
current year audit. |
⢠Evaluated the design and tested the operating effectiveness of key automated controls within various business processes. This included testing of configuration and other application layer controls identified during our audit and report logic for system generated reports relevant to the audit mainly for loans, interest income and impairment of loan assets for evaluating completeness and accuracy. ⢠Where deficiencies were identified, tested compensating controls or performed alternative procedures. |
Information other than the Financial Statements and Auditorâs Report thereon
6. The Companyâs Board of Directors are responsible for the other information. The other information comprises the information included in the Directorâs report, but does not include the standalone financial statements and our auditorâs report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The accompanying standalone financial statements have been approved by the Companyâs Board of Directors. The Companyâs Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the financial statements, the Board of Directors are responsible for assessing the Companyâs ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Companyâs financial reporting process.
Auditorâs Responsibilities for the Audit of the Standalone Financial Statements
10. 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 auditorâs 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 Standards on Auditing 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.
11. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act 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;
⢠Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
⢠Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
⢠Conclude on the appropriateness of Board of Directorsâ 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 Companyâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditorâs 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 auditorâs report. However, future events or conditions may cause the Company to cease to continue as a going concern; and
⢠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.
12. 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.
13. 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.
14. 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 auditorâs 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
15. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditorâs Report) Order, 2020 (âthe Orderâ) issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
17. Further to our comments in Annexure A, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;
b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The standalone financial statements dealt with by this report are in agreement with the books of account
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2023 from being appointed as a director in terms of section 164(2) of the Act;
f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2023 and the operating effectiveness of such controls, refer to our separate Report in Annexure B wherein we have expressed an unmodified opinion; and
g) With respect to the other matters to be included in the Auditorâs Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanations given to us
i. the Company, as detailed in note 36 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2023;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2023;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2023;
iv. a. The management has represented that, to the
best of its knowledge and belief, as disclosed in note 48.13 to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities (âthe intermediariesâ), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the Company (âthe Ultimate Beneficiariesâ) or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 48.13 to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (âthe Funding Partiesâ), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended 31 March 2023.
vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 requires all companies which use accounting software for maintaining their books of account, to use such an accounting software which has a feature of audit trail, with effect from the financial year beginning on 1 April 2023 and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 (as amended) is not applicable for the current financial year.
For Walker Chandiok & Co LLP
Chartered Accountants
Firmâs Registration No.: 001076N/N500013
Manish Gujral
Partner
Membership No.: 105117
UDIN: 23105117BGRNME3528
Place: Mumbai
Date: 03 May 2023
Mar 31, 2022
1 . We have audited the accompanying standalone financial statements of Aavas Financiers Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2022, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (''the Act'') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (''Ind AS'') specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2022, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (''ICAI'') together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5. We have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matters How our audit addressed the key audit matter Expected Credit Losses (ECL) on loan assets At 31 March 2022, the Company reported total gross loans of H 911,774 lakhs (2021: H 757,287 lakhs) and H 6,432 lakhs of expected credit loss provisions (2021: H 4,958 lakhs). |
|
Ind AS 109 - Financial Instruments (''Ind AS 109''), requires the Company to provide for impairment of its financial assets using the expected credit loss (''ECL'') approach involving an estimation of probability of loss on such financial assets, considering reasonable and supportable information about past events, current conditions and forecasts of future economic conditions which could impact the credit quality of the Company''s financial assets. Expected credit loss cannot be measured precisely but can only be estimated through use of statistics. The estimation of impairment loss allowance on loan assets involves significant judgement and estimates and applying appropriate measurement principles in case of loss events, including additional considerations on account of Reserve Bank of India guidelines in relation to COVID-19 regulatory package and restructuring. |
Our audit focused on assessing the appropriateness of management''s judgment and estimates used in the expected credit losses through the following procedures, but were not limited to the following procedures: ⢠Examined the Board Policy approving methodology for computation of ECL that addresses policies and procedures for assessing and measuring credit risk on the lending exposures of the Company in accordance with the requirements of Ind AS 109. Also, obtained the policy on moratorium and restructuring of loans approved by the Board of Directors pursuant to the RBI circulars/guidelines and ensured such policy is in compliant with the requirements of the RBI circulars / guidelines; |
Key audit matters |
How our audit addressed the key audit matter |
|
The expected credit loss is calculated using the percentage of |
⢠|
Performed a walkthrough of the impairment loss allowance |
probability of default (PD), loss given default (LGD) and exposure |
process, and assessed the design and tested operating |
|
at default (EAD) for each of the stages of loan portfolio. Additional |
effectiveness of the key controls over completeness and |
|
management overlay is estimated considering non prediction and |
accuracy of the key inputs (including loan book as at 31 |
|
long-term future impact. |
March 2022) and assumptions considered for calculation, |
|
The Expected Credit Loss ("ECL") is measured at 12-month ECL for |
recording and monitoring of the impairment loss recognized; |
|
Stage 1 loan assets and at lifetime ECL for Stage 2 and Stage 3 |
⢠|
Obtained an understanding of the modelling techniques |
loan assets. Significant management judgment and assumptions |
adopted by the Company including the key inputs and |
|
involved in measuring ECL is required with respect to: |
assumptions. Since, modeling assumptions and parameters |
|
⢠Segmentation of loan book in buckets ⢠determining the criteria for a significant increase in credit risk |
are based on historical data, we assessed whether historical experience was representative of current circumstances and was relevant in view of the recent impairment losses incurred |
|
⢠factoring in future economic assumptions |
within the portfolios; |
|
⢠techniques used to determine probability of default, loss given default and exposure at default. |
⢠|
Evaluated the appropriateness of the Company''s determination of significant increase in credit risk in accordance with Ind |
These parameters are derived from the Company''s internally |
AS 109 considering the impact of COVID-19 on account of |
|
developed statistical models with the help of management experts |
benefit extended by the Company to select borrowers and the |
|
and other historical data. |
basis for classification of various exposures into various stages |
|
Considering the significance of the above matter to the standalone financial statements and since the matter required our significant |
by evaluating management''s assessment of parameters such as PD or LGD; |
|
attention to test the calculation of expected credit losses, we have identified this as a key audit matter for current year audit. |
⢠|
Ensured compliance with RBI Master Circular on ''Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to advances'' (''IRACP'') read with RBI circular on ''Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Clarifications'' dated 12 November 2021, in relation to identification, upgradation and provisioning of nonperforming assets (NPAs); |
⢠|
Ensured that the Company complied with the minimum provision requirements under RBI circular on "Resolution Framework 2.0 - Resolution of Covid-19 related stress of Micro, Small and Medium Enterprises (MSMEs)" dated 5 May 2021;and |
|
⢠|
Assessed the appropriateness and adequacy of the related presentation and disclosures in the accompanying financial statements in accordance with the applicable accounting standards and related RBI circulars and Resolution Framework. |
Key audit matters |
How our audit addressed the key audit matter |
Information Technology ("IT") Systems and Controls for the financial reporting process |
|
The Company is highly dependent on its Information Technology |
Our key audit procedures with the involvement of our IT specialists |
("IT") systems for carrying on its operations which require large volume of transactions to be processed in numerous locations |
included, but were not limited to the following: ⢠Obtained an understanding of the Company''s IT related |
on a daily basis. Among other things, management also uses |
control environment and conducted risk assessment and |
the information produced by the IT systems for accounting and |
identified IT applications, data bases and operating systems |
preparation and presentation of the financial statements. |
that are relevant to our audit. |
The Company''s accounting and financial reporting processes |
⢠Tested the design and operating effectiveness of the Company''s |
are dependent on automated controls enabled by IT systems which impacts key financial accounting and reporting items |
IT controls over the IT applications as identified above; |
such as loans, interest income, EIR computation, impairment on |
⢠On such in-scope IT systems, we have tested key IT general |
loans, computation of daily DPD amongst others. The controls |
controls with respect to the following domains: |
implemented by the Company in its IT environment determine |
a. Program change management which includes controls |
the integrity, accuracy, completeness and validity of data that is |
on moving program changes to production environment |
processed by the applications and is ultimately used for financial |
as per defined procedures and relevant segregation of |
reporting. |
environments |
Our areas of audit focus included user access management, |
b. User access management which includes user access |
changes to the IT environment and segregation of duties Further, we focused on key automated controls relevant for financial |
provisioning, de-provisioning, access review, password management, sensitive access rights and segregation of |
accounting and reporting systems. |
duties |
Accordingly, since our audit strategy included focus on key IT |
c. Other areas that were assessed under the IT control |
systems and controls due to pervasive impact on the financial statements, we have determined the ''IT Systems and Controls for |
environment included batch processing and interfaces. |
the financial reporting process'' as a key audit matter for current |
⢠Evaluated the design and tested the operating effectiveness of |
year audit. |
key automated controls within various business processes. This included testing of configuration and other application layer controls identified during our audit and report logic for system generated reports relevant to the audit mainly for loans, interest income and impairment of loan assets for evaluating completeness and accuracy. ⢠Where deficiencies were identified, tested compensating controls or performed alternative procedures. |
Information other than the Financial Statements and Auditor''s Report thereon
6. The Company''s Board of Directors are responsible for the other information. The other information comprises the information included in the Director''s Report, but does not include the standalone financial statements and our auditor''s report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The accompanying standalone financial statements have been approved by the Company''s Board of Directors. The Company''s Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the financial statements, the Board of Directors are responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company''s financial reporting process.
Auditor''s Responsibilities for the Audit of the Standalone Financial Statements
10. 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 Standards on Auditing 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.
11. As part of an audit in accordance with Standards on Auditing, specified under section 1 43(1 0) of the Act 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;
⢠Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system with reference to financial statements in place and the operating effectiveness of such controls;
⢠Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
⢠Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern;
⢠Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and
⢠Obtain sufficient appropriate audit evidence regarding the financial statements of the Company to express an opinion on the financial statements.
12. 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.
1 3. 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.
14. 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.
15. The standalone financial statements of the Company for the year ended 31 March 2021 were audited by the predecessor auditor, S. R. Batliboi & Associates LLP, Chartered Accountants, who have expressed an unmodified opinion on those standalone financial statements vide their audit report dated 29 April 2021.
Our opinion on the standalone financial statements is not modified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
16. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
17. As required by the Companies (Auditor''s Report) Order, 2020 (''the Order'') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
1 8. Further to our comments in Annexure A, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, that:
a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;
b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) the standalone financial statements dealt with by this report are in agreement with the books of account;
d) in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2022 from being appointed as a director in terms of section 164(2) of the Act;
f) with respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2022 and the operating effectiveness of such controls, refer to our separate Report in Annexure B wherein we have expressed an unmodified opinion; and
g) with respect to the other matters to be included in the Auditor''s Report in accordance with rule 1 1 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanations given to us:
i. the Company, as detailed in note 36 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2022;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2022;
iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2022;
iv. a. The management has represented that, to the
best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities (''the intermediaries''), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (''the Ultimate Beneficiaries'') or
provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (''the Funding Parties''), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (''Ultimate Beneficiaries'') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to
our attention that causes us to believe that the management representations under subclauses (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended 31 March 2022.
Chartered Accountants
Firm''s Registration No:001076N/N500013
Partner
Membership No:105117
Place: Mumbai
Date: 05 May 2022
Mar 31, 2021
Key audit matters |
How our audit addressed the key audit matter |
Impairment of Financial assets (as described in Note 4 of the standalone financial statements) |
|
Ind AS 109 requires the Company to provide for impairment |
⢠Our audit procedures included considering the Companyâs |
of its financial assets using the expected credit loss (âECLâ) |
accounting policies for impairment of financial instruments |
approach involving an estimation of probability of loss on |
and assessing compliance with the policies in terms of Ind |
the financial assets over their life, considering reasonable and |
AS 109 and pursuant to Reserve Bank of India guidelines |
supportable information about past events, current conditions |
issued on February 17, 2021. |
and forecasts of future economic conditions which could |
|
impact the credit quality of the Companyâs financial assets. In |
|
the process, a significant degree of judgement has been applied |
|
by the management in respect of following matters: |
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Aavas Financiers Limited (âthe Companyâ), which comprise the Balance sheet as at March 31 2021, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013, as amended (âthe Actâ) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2021, its profit including other comprehensive income its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the âAuditorâs Responsibilities for the Audit of the Standalone Financial Statementsâ section of our report. We are independent of the Company in accordance with the âCode of Ethicsâ issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Emphasis of Matter - Impact of COVID-19
We draw attention to Note 45 to the standalone financial statement, which describes the extent to which the COVID-19 pandemic will impact the Companyâs operations and its financial metrics including the expected credit loss on financial assets which are dependent on uncertain future developments. Our opinion is not modified in respect of this matter.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the financial year ended March 31, 2021. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditorâs responsibilities for the audit of the standalone financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.
Key audit matters |
How our audit addressed the key audit matter |
|
a) Grouping of the loan portfolio under risk-based categories |
⢠|
Assessed the assumptions used by the Company for grouping |
determined using Companyâs risk-management framework. |
and staging of loan portfolio into various categories and |
|
Loans grouped under a particular category are assumed |
default buckets and their appropriateness for determining |
|
to represent a homogenous pool thereby expected to |
the probability-weighted default (PD) and loss-given default |
|
demonstrate similar credit characteristics; |
(LGD) rates. |
|
b) Staging of loans (i.e. classification in âsignificant increase in |
⢠|
Tested controls for staging of loans based on their past-due |
credit riskâ (âSICRâ) and âdefaultâ categories); |
status. Also tested samples of stage 1 and Stage 2 loans to assess whether any loss indicators were present requiring |
|
c) Estimation of expected loss from historical observations. |
them to be classified under higher stage. |
|
d) Estimation of losses in respect of those groups of loans |
⢠|
Tested samples of the input data used for determining the |
which had no/ minimal defaults in the past. |
PD and LGD rates and agreed the data with the underlying |
|
e) Management overlay for macro-economic factors and |
books of accounts and records. |
|
estimation of their impact on the credit quality. |
⢠|
Assessed the management overlays applied by the Company to factor the impact of COVID-19 on the ECL as approved by |
The Company has developed models that derive key assumptions used within the provision calculation such as probability of |
their Board of Directors. |
|
default (PD) and loss given default (LGD). The output of these |
⢠|
Tested the arithmetical accuracy of computation of ECL |
models is then applied to the provision calculation with other |
provision performed by the Company. |
|
information including and the exposure at default (EAD). The impact of COVID-19 on the ECL is highly uncertain, however the Company has factored the higher risk in its computation of the ECL provision and has applied management overlays which |
⢠|
Assessed that the assumptions, used by the management for estimation of allowance for expected credit losses as at March 31, 2021, are presented and disclosed in the financial statements. |
are approved by the Board of Directors. |
⢠|
Assessed the Companyâs policy with respect to moratorium pursuant to the RBI circular and tested the implementation |
Considering the significance of such provision to the overall financial statements and the degree of managementâs judgment, |
of such policy on a sample basis. |
|
any error or misstatement in such estimate may give rise to a material misstatement of the financial statements or omission of any disclosure required by the standards. Therefore, it is |
⢠|
Assessed the additional considerations applied by the management for staging of loans as SICR/ default in view of Companyâs policy on moratorium. |
considered as a key audit matter. |
⢠|
Read and assessed the specific disclosures made in the financial statements with regards to managements evaluation of the uncertainties arising from COVID-19, its impact on ECL and other disclosures as prescribed by RBI relating to moratorium granted. |
Information Technology (IT) systems and controls |
|
Our audit procedures have a focus on IT systems and controls due to the pervasive nature and complexity of the IT environment, the large volume of transactions processed in numerous locations daily and the reliance on automated and IT dependent manual controls. Due to the pervasive nature and complexity of the IT environment, we have ascertained IT systems and controls as a key audit matter. |
⢠In assessing the reliability of electronic data processing, we included specialized IT auditors as part of the audit team. ⢠Tested the design and operating effectiveness of the IT general controls (logical access, changes management and aspects of IT operational controls). This included testing that requests for access to systems were reviewed and authorised. ⢠Tested the Companyâs periodic review of access rights. We inspected requests of changes to systems for appropriate approval and authorisation. ⢠Considered the control environment relating to various interfaces, configuration and other application layer controls identified as key to our audit. |
The Companyâs Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone financial statements and our auditorâs report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Standalone Financial Statements
The Companyâs Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management is responsible for assessing the Companyâs ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Companyâs financial reporting process.
Auditorâs Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditorâs report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
⢠Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
⢠Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section l43(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
⢠Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
⢠Conclude on the appropriateness of managementâs 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 Companyâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditorâs 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 auditorâs report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
⢠Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements for the financial year ended March 31, 2021 and are therefore the key audit matters. We describe these matters in our auditorâs report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure 1â a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on March 31, 2021 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2021 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls over the financial reporting of the Company with reference to standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in âAnnexure 2â to this report;
(g) In our opinion, the managerial remuneration for the year ended March 31, 2021 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditorâs Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company does not have any pending litigations which would impact its financial position;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
For S.R. Batliboi & Associates LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Sarvesh Warty
Partner
Membership Number: 121411
UDIN: 21121411AAAADF4046
Place of Signature: Mumbai
Date: April 29, 2021
Mar 31, 2019
Report on the Audit of the Standalone Ind AS Financial Statements
Opinion
We have audited the accompanying standalone Ind AS financial statements of Aavas Financiers Limited (âthe Companyâ), which comprise the Balance sheet as at March 31 2019, the Statement of Profit and Loss, including the Statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013 (âthe Actâ) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, its profit including other comprehensive income its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the âAuditorâs Responsibilities for the Audit of the Standalone Ind AS Financial Statementsâ section of our report. We are independent of the Company in accordance with the âCode of Ethicsâ issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements for the financial year ended March 31, 2019. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditorâs responsibilities for the audit of the standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.
Key audit matters |
How our audit addressed the key audit matter |
Impairment of financial assets (expected credit loss) (as described in note 4 of the standalone Ind AS financial statements) |
|
Ind AS 109 requires the Company to provide for |
- Our audit procedures included considering the Companyâs |
impairment of its financial assets using the expected |
accounting policies for impairment of financial instruments |
credit loss (âECLâ) approach involving an estimation of |
and assessing compliance with the policies in terms of Ind AS |
probability of loss on the financial assets over their life, |
109. |
considering reasonable and supportable information about past events, current conditions and forecasts of future economic conditions which could impact the credit quality of the Companyâs financial assets. In the process, a significant degree of judgement has been |
- We have assessed the assumptions used by the Company for grouping and staging of loan portfolio into various categories and default buckets and their appropriateness for determining the probability-weighted default (PD) and loss-given default (LGD) rates. |
applied by the management in respect of following |
|
matters: |
- We have tested the operating effectiveness of the controls |
a) The Company has grouped its loan portfolio under risk-based categories determined using Companyâs risk-management framework. Loans grouped under a particular category are assumed |
for staging of loans based on their past-due status. We also tested a sample of stage 1 and Stage 2 loans to assess whether any loss indicators were present requiring them to be classified under stage 2 or 3. |
to represent a homogenous pool thereby expected |
- We have performed sample testing of the input data used for |
to demonstrate similar credit characteristics. |
determining the PD and LGD rates and agreed the data with |
b) Staging of loans and estimation of behavioral life. |
the underlying books of accounts and records. |
c) Estimation of expected loss from historical observations. |
- We have tested the arithmetical accuracy of computation of ECL provision performed by the Company. |
d) Estimation of losses in respect of those groups of loans which had no/ minimal defaults in the past. |
- We have assessed that the assumptions used by the management for estimation of allowance for expected credit losses as at March 31, 2019 are presented and disclosed in |
The Company has developed models that derive key |
the Ind AS financial statements. |
assumptions used within the provision calculation such |
|
as probability of default (PD) and loss given default |
|
(LGD). The output of these models is then applied |
|
to the provision calculation with other information |
|
including and the exposure at default (EAD). |
|
Considering the significance of such provision to |
|
the overall financial statements and the degree of |
|
managementâs judgment, any error or misstatement in |
|
such estimate may give rise to a material misstatement |
|
of the Ind AS financial statements or omission of any |
|
disclosure required by the standards. Therefore, it is |
|
considered as a key audit matter. |
Information Technology (âITâ) systems and controls |
||
Our audit procedures have a focus on IT systems and |
- |
In assessing the reliability of electronic data processing, we |
controls due to the pervasive nature and complexity of |
included specialized IT auditors as part of the audit team. |
|
the IT environment, the large volume of transactions processed in numerous locations daily and the reliance on automated and IT dependent manual controls. |
- |
We tested the design and operating effectiveness of the IT general controls (logical access, changes management and aspects of IT operational controls). This included testing |
Due to the pervasive nature and complexity of the IT |
that requests for access to systems were reviewed and |
|
environment, we have ascertained IT systems and |
authorised. |
|
controls as a key audit matter. |
- |
We tested the Companyâs periodic review of access rights. We inspected requests of changes to systems for appropriate approval and authorisation. |
We considered the control environment relating to various interfaces, configuration and other application layer controls identified as key to our audit. |
||
- |
Where deficiencies were identified, we tested compensating controls or performed alternate procedures. |
|
Transition to Ind AS (as described in note 32 of the standalone Ind AS financial statements) |
||
Ind AS is applicable to the Company with effect from |
- |
We read the Ind AS impact assessment performed by the |
April 1, 2018. Accordingly, the Company has prepared |
management to identify areas which were impacted on |
|
financial statements which comply with Ind AS for |
account of Ind AS transition; |
|
the year ended March 31, 2019. In preparing these financial statements, the Companyâs opening balance sheet under Ind AS was prepared as at 1 April 2017, |
- |
We understood the financial statement closure process and the controls established by the Company for transition to Ind AS; |
the Companyâs date of transition to Ind AS. |
||
For the years till year ended March 31, 2018, the Company had prepared its financial statements in accordance with Indian GAAP or previous GAAP. |
Read and assessed the changes made to the accounting policies due to the requirements of the new financial reporting framework; |
|
Given complexity of implementation of Ind AS framework, transition from Indian GAAP to Ind AS |
We have assessed the judgement applied by the Company in determining its business model for classification of financial assets. |
|
has material impact over the financial statements of |
||
the Company and requires application of significant |
- |
We have assessed the exemption availed by the management |
judgment and estimates with regards to the |
in applying the first-time adoption principles of Ind AS 101. |
|
measurement of loan and advances, measurement of expected credit losses, accounting for ESOP cost, accounting for assignment and securitisation of loans and application of effective interest rate. |
We have assessed the judgements applied by the Company in respect of areas such as where the accounting treatment adopted or the disclosures made under the new accounting framework were different from the extant NHB directions. |
|
Further, the management has exercised significant judgement for giving an appropriate effect of principles of First-time Adoption of Indian Accounting Standards |
- |
We have performed test of details by inspection of contracts, documents and policies to assess the Ind AS adjustments. |
(Ind AS 101), as at transition date and to determine the |
- |
We have tested arithmetical accuracy of the Ind AS |
impact of the new accounting framework on certain |
adjustments. |
|
accounting and disclosure requirements prescribed under extant National Housing Bank (âNHBâ) directions. |
- |
We have assessed the disclosures with respect to the transition in accordance with the requirement of Ind AS 101, |
Given that judgements of the management on first |
with respect to the previous year presented. |
|
time adoptions could have material implications on |
||
the financial statements, the transition to Ind AS was |
||
considered as a key audit matter. |
De-recognition of financial assets (as described in note 42 of the standalone Ind AS financial statements) |
|
During the year, the Company has assigned loans |
- We have examined the terms of assignment agreements on |
amounting to RS.762.68 crore for managing its funding |
a sample basis to evaluate whether the de-recognition criteria |
requirements and recorded a net income of RS.78.28 |
have been applied by the Company. |
crores and corresponding un-winding of excess interest spread receivable of RS.35.96 crores. |
- We have assessed the significant estimates and judgments, including the discount rate and expected remaining life of the |
As per Ind AS 109, de-recognition of loans transferred |
portfolio transferred used by the Company for computation |
by the Company through assignment is based on |
of excess interest spread receivable servicing asset and |
the ârisk and rewardâ model and a âcontrolâ model. If |
servicing liability. |
de-recognition criteria are met, the financial assets transferred are de-recognized and difference between carrying value and consideration including the present value of interest payments that it would not give up |
- We have tested the arithmetical accuracy of computation of the excess interest spread receivable, servicing asset and servicing liability. |
(excess interest spread receivable) is recorded as |
- We have assessed the disclosures included in the Ind |
income in the statement of profit and loss. |
AS financial statements with respect to de-recognition in |
The Company also records a servicing asset and |
accordance with the requirements of Ind AS 109 and Ind AS 107. |
servicing liability at their fair value for the right retained |
|
for servicing the financial asset for the service contract |
|
and the related costs to be incurred. |
|
There are assumptions made with respect to the |
|
remaining tenor of the financial assets assigned |
|
and other factors which could materially impact the |
|
fair valuation as well the excess interest spread. |
|
Accordingly, de-recognition of financial assets was |
|
considered as a key audit matter. |
Other Information
The Companyâs Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone Ind AS financial statements and our auditorâs report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS 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 obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Companyâs Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone Ind AS financial statements, management is responsible for assessing the Companyâs ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Companyâs financial reporting process.
Auditorâs Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditorâs report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of managementâs 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 Companyâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditorâs 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 auditorâs report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements for the financial year ended March 31, 2019 and are therefore the key audit matters. We describe these matters in our auditorâs report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure 1â a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on March 31, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in âAnnexure 2â to this report;
(g) In our opinion, the managerial remuneration for the year ended March 31, 2019 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditorâs Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company does not have any pending litigations which would impact its financial position. Refer Note 36 in the financial statements;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses. Refer Note 31 in the financial statements;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
Re: Aavas Financiers Limited
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) All fixed assets were physically verified by the management in the previous year in accordance with a planned programme of verifying them once in two years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management, the title deeds of immovable properties included in property, plant and equipment are held in the name of the Company.
(ii) The Companyâs business does not involve inventories and, accordingly, the requirements under clause 3 (ii) of the Order are not applicable to the Company and hence not commented upon.
(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii) (a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees, and securities given in respect of which provisions of section 185 and 186 of the Act are applicable and hence not commented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under section 148(1) of the Act, for the services of the Company.
(vii) (a) Undisputed statutory dues including provident fund, employeesâ state insurance, income-tax, value added tax, goods and service tax, cess and other statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases. The provisions relating to duty of excise and sales-tax are not applicable to the Company.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employeesâ state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, goods and service tax, cess and other statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
(c) According to the information and explanations given to us, there are no dues of income tax, sales-tax, service tax, customs duty, excise duty, value added tax and cess which have not been deposited on account of any dispute.
(viii) I n our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of loans or borrowing to a financial institution, bank or government or dues to debenture holders.
(ix) In our opinion and according to the information and explanations given by the management, the Company has utilized the monies raised by way of initial public offer and debt instruments in the nature of Nonconvertible debentures for the purposes for which they were raised.
Further, monies raised by the Company by way of term loans were applied for the purpose for which those were raised, though idle/surplus funds which were not required for immediate utilization were gainfully invested in liquid investments payable on demand. The maximum amount of idle/surplus funds invested during the year was RS.409 crores, of which H Nil was outstanding at the end of the year.
(x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, we report that no fraud by the Company or no material fraud on the Company by the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management, the managerial remuneration has been paid and provided in accordance with the requisite approvals mandated by the provisions of section 197, read with Schedule V to the Act.
(xii) In our opinion, the Company is not a nidhi company. Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the details have been disclosed in the notes to the financial statements, as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence, reporting requirements under clause 3(xiv) are not applicable to the Company and, not commented upon.
(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with the directors as referred to in section 192 of the Act.
(xvi) According to the information and explanations given to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.
We have audited the internal financial controls over financial reporting of Aavas Financiers Limited (âthe Companyâ) as of March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Managementâs Responsibility for Internal Financial Controls
The Companyâs Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Companyâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditorâs Responsibility
Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting with reference to these standalone financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing as specified under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting with reference to these standalone financial statements was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls over financial reporting with reference to these standalone financial statements and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting with reference to these standalone financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditorâs judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls over financial reporting with reference to these standalone financial statements.
Meaning of Internal Financial Controls Over Financial Reporting With Reference to these Financial Statements
A companyâs internal financial control over financial reporting with reference to these standalone financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs internal financial control over financial reporting with reference to these standalone financial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Companyâs assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting With Reference to these Standalone Financial Statements
Because of the inherent limitations of internal financial controls over financial reporting with reference to these standalone financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting with reference to these standalone financial statements to future periods are subject to the risk that the internal financial control over financial reporting with reference to these standalone financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, adequate internal financial controls over financial reporting with reference to these standalone financial statements and such internal financial controls over financial reporting with reference to these standalone financial statements were operating effectively as at March 31, 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For S.R. Batliboi & Associates LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Sarvesh Warty
Place of Signature: Jaipur Partner
Date: May 03, 2019 Membership Number: 121411
Mar 31, 2018
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Aavas Financiers Limited (formerly known as Au Housing Finance Limited) (the âCompanyâ), which comprise the standalone Balance Sheet as at March 31, 2018, the standalone Statement of Profit and Loss and standalone Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Managementâs Responsibility for the Financial Statements
The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (the âActâ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Companies (Accounting Standards) Rules, 2006 (as amended) specified under section 133 of the Act, read with the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial control 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.
Auditorâs Responsibility
Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, as specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companyâs preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Companyâs Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at March 31, 2018, its profit, and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs Report) Order, 2016 (the âOrderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure 1, a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143 (3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
(b) In our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Companies (Accounting Standards) Rules, 2006 (as amended) specified under section 133 of the Act, read with the Companies (Accounts) Rules, 2014;
(e) On the basis of written representations received from the directors as on March 31, 2018, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018, from being appointed as a director in terms of section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure 2 to this report;
(g) With respect to the other matters to be included in the Auditorâs Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 2.29 to the financial statements.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
Annexure 1 referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date
Re: Aavas Financiers Limited
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) All fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.
(c) According to the information and explanations given by the management, the title deeds of immovable properties included in property, plant and equipment are held in the name of the Company.
(ii) The Companyâs business does not involve inventories and, accordingly, the requirements under clause 3(ii) of the Order are not applicable to the Company and hence not commented upon.
(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Accordingly, the provisions of clause 3(iii) (a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees, and securities granted in respect of which provisions of section 185 and 186 of the Act are applicable and hence not commented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under section 148(1) of the Act, for the services of the Company.
(vii) (a) Undisputed statutory dues including provident fund, employeesâ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues have generally been regularly deposited with the appropriate authorities though there have been slight delays in a few cases.
According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employeesâ state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, cess and other statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us, there are no dues of income tax, sales-tax, service tax, customs duty, excise duty, value added tax and cess which have not been deposited on account of any dispute.
(viii) In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of loans or borrowings to a financial institution or bank or dues to debenture holders.
(ix) According to the information and explanations given by the management, the Company has not raised any money by way of initial public offer or further public offer.
Further, monies raised by the Company by way of term loans were applied for the purpose for which those were raised, though idle/surplus funds which were not required for immediate utilization were gainfully invested in liquid assets payable on demand.
(x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, we report that no fraud by the Company or no fraud on the Company by the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management, the managerial remuneration has been paid and provided in accordance with the requisite approvals mandated by the provisions of section 197, read with Schedule V to the Act.
(xii) In our opinion, the Company is not a nidhi company. Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the details have been disclosed in the notes to the financial statements, as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has complied with provisions of section 42 of the Act in respect of the preferential allotment or private placement of shares during the year. According to the information and explanations given by the management, we report that the amounts raised, have been used for the purposes for which the funds were raised. According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of fully or partly convertible debentures during the year.
(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in section 192 of the Act.
(xvi) According to the information and explanations given to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.
For S. R. BATLIBOI & ASSOCIATES LLP
ICAI Firm registration number: 101049W/E300004
Chartered Accountants
per Amit Kabra
Partner
Membership No. 094533
Mumbai
April 27, 2018
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