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Auditor Report of Karnataka Bank Ltd.

Mar 31, 2016

1. We have audited the accompanying financial statements of The Karnataka Bank Limited (''the Bank''), which comprise the Balance Sheet as at 31st March 2016, the Profit and Loss Account, the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information. Incorporated in these Financial Statements are the returns of 29 branches audited by us, 722 branches/offices audited by Branch Auditors.

Management''s Responsibility for the Financial Statements

2. The Bank''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act,2013 (''the Act'') with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit.

4. 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 there under.

5. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing (''the Standards'') 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 of material misstatements.

6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s 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 Bank''s 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 Bank''s Directors, as well as evaluating the overall presentation of the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013, in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India:

a. In case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2016;

b. In case of the Profit and Loss Account, of the profit for the year ended on that date; and

c. In case of the Cash Flow Statement, of cash flows for the year ended on that date.

Emphasis of Matter

9. We draw attention to Note of the Financial Statements, regarding deferment of loss of Rs.58.72 crore on sale of advances to Asset Reconstruction Companies.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949, read with Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

11. As required by sub section (3) of section 30 of the Banking Regulation Act, 1949, we report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory;

(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and

(c) the returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

12. Further, as required by section 143(3) of the Act, we further report that:

i. 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;

ii. in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

iii. the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 143(8) of the Companies Act, 2013, have been sent to us and have been properly dealt with by us in preparing this report;

iv. The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us;

v. in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with the accounting policies prescribed by RBI;

vi. on the basis of written representations received from the directors as on 31st March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2016 from being appointed as a director in terms of Section 164 (2) of the Act; and

vii. with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our separate Report in "Annexure A";

viii. with respect to the other matters to be included in the Auditor''s 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:

a. the Bank has disclosed the impact of pending litigations on its financial position in its financial statements

b. the Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts and

c. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank.

For Kamath & Rau For Abarna & Ananthan

Chartered Accountants Chartered Accountants

Firm Regn. No. 001689S Firm Regn. No. 000003S

Sd/- Sd/-

Srinivas S Kamath C.S. Gopalakrishna

Partner Partner

M.No. 201716 M.No. 014706

Place : Mangaluru

Date : 20-05-2016


Mar 31, 2015

Report on the Financial Statements

1. We have audited the accompanying financial statements of The Karnataka Bank Limited, which comprise the Balance Sheet as at 31st March 2015 and the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information. Incorporated in these financial statements are the returns of 20 branches/ offices audited by us and 679 branches/offices audited by branch auditors.

Management''s Responsibility for the Financial

Statements

2. Management is responsible for the preparation of these financial statements in accordance with the Banking Regulation Act, 1949 and Accounting Standards notified under the Companies Act, 1956 ("this Act") read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, 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 control relevant to the bank''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the accounting policies and notes thereon give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013, in the manner so required for the banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2015;

(ii) in the case of the Profit and Loss Account of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Emphasis of Matter

7. Without qualifying our opinion, we draw attention to:

(a) Note no. 2.1 of the financial statements, which describes the change in accounting policy of charging depreciation on fixed asset having regard to change in the estimated useful life of the assets from written down value method to straight line method as per the requirement of Schedule II of the Companies Act 2013; and

(b) Note no. 3.13 of the financial statements, regarding absorption of unamortized pension and gratuity liabilities of the bank to the extent of Rs. 31.41 crore pursuant to the exemption granted by the Reserve Bank of India from the application of the provisions of Accounting Standard (AS) 1 5, Employee Benefits vide Circular No.DBOD.BO.BC/80/21.04.01 8/ 2010-11 dated February 9th, 2011.

Report on Other Legal and Regulatory Matters

8. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013.

9. Subject to the limitations of the audit indicated in paragraph 1 to 5 above, We report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory.

(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

(c) the returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

10. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

11. We further report that:

(i) the Balance Sheet and Profit and Loss Account dealt with by this report, are in agreement with the books of account and the returns;

(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books;

(iii) the reports on the accounts of the branches audited by branch auditors have been dealt with in preparing our report in the manner considered necessary by us.

(iv) on the basis of the written representation received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of sub-section (2) of section 164 of the Companies Act, 2013.

For Kamath & Rau For Abarna & Ananthan Chartered Accountants Chartered Accountants Firm Regn. No. 001689S Firm Regn. No. 000003S

Sd/- Sd/- Parineeth Rau C.S. Gopalakrishna Partner Partner M.No. 222039 M.No. 014706

Place: Mangaluru Date : May 22nd, 2015


Mar 31, 2014

1. We have audited the accompanying financial statements of The Karnataka Bank Limited, which comprise the Balance Sheet as at 31st March, 2014 and the Statement of Profit and Loss and the cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information. Incorporated in these financial statements are the returns of 18 branches / offices audited by us and 606 branches/offices audited by branch auditors.

Management''s Responsibility for the Financial Statements

2. Management is responsible for the preparation of these financial statements in accordance with the Banking Regulation Act, 1949 and Accounting Standards notified under the Companies Act, 1956 ("this Act") read with General Circular 15/2013 dated 131 st September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, 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 control relevant to the bank''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the accounting policies and notes thereon give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for the banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2014;

(ii) in the case of the Profit and Loss Account of the profit for the year ended on that date; and

(ifl) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Emphasis of Matter

7. Without qualifying our opinion, we draw attention to:

(a) Note No, 3.13 of the financial statements, regarding deferment of pension and gratuity liability of the bank to the extent of Rs.31.41 crore to be amortized in the next year pursuant to the exemption granted by the Reserve Bank of India from the application of the provisions of Accounting Standard (AS) 15, Employee Benefits vide circular No. DBOD. BP. BC/807 21.04.018/2010-11 dated Feb.9Tl:2011;and

|b) Note 8 of the financial statements, which describes the accounting treatment of the expenditure on creation of Deferred Tax Liability of Rs. 27,01 crore on Special Reserve under section 36(1 )(viii) of the Income Tax Act, 1961 as at 31 st March 2013, pursuant to RBI''s Circular No. DBOD No.BP.BC.77/ 21.04.018 / 2013-14 dated 20th December 2013.

Report on Other Legal and Regulatory Matters

8. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956.

9. Subject to the limitations of the audit indicated in paragraph 1 to 5 above, We reportthat:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory.

(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

(c) the returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

10. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with General Circular 15/2013 dated 13''" September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

11. We further report that:

(i) the Balance Sheet and Profit and Loss Account dealt with by this report, are in agreement with the books of account and the returns;

(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books;

(iii) the reports on the accounts of the branches audited by branch auditors have been dealt with in preparing our report in the manner considered necessary by us.

(iv) as per information and explanation given to us the Central Government has, till date, not prescribed any cess payable under section 441A of the Companies Act, 1956,

(v) on the basis of the written representation received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 st March, 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

For R, K. Kumar & Co. For Kamath & Rau

Chartered Accountants Chartered Accountants

Firm Regn No. 0D1595S Firm Regn No. 00TB89S

Sd/- Sd/-

C R SUNDARARAJAN SRINIVAS S KAMATH

Partner Partner

M. No. 025400 M. No.201716

Place: Mangalore

Date: May 15, 2014


Mar 31, 2013

1 We have audited the accompanying financial statements of The Karnataka Bank Limited as 31st March 2013. which comprises the Balance Sheet as at 2013; the Profit and Loss Account and the Cash Flow Statement for the year then ended; arid a summary of significant Accounting Policies and other explanatory information, Incorporated in these financial statements are the returns opt SB branches audited by us and balance 522 branches / 25 offices audited by & Auditors. The Marches audited by us and I hose audited by ether auditor have been selected by the Bank in accordance with the guidelines issued by the Reserve Barn of India,

Management''s responsibility ior the Financial Statements:

2 Management is responsible for the preparation of these financial statements in accordance with the Banking Regulation Act, 1949 This responsibility includes lye design, implementation and maintenance of internal control relevant to the preparation of the financial statements that a re free from material misstatements, whether due to fraud or error.

Auditor''s Responsibility:

3. Our responsibility is express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the institute of Chartered Accountants of India r txjse Standards require that we comply with the ethical requirement and plan and perform the audit to obtain reason able assurance about whether the financial statements are free of material misstatement,

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors Judgment, including the assessment of the asks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control

6. In our pin fen and to the best of our information and according to he explanations given to us, the said accounts read together with the accounting policies and notes thereon, give the information required by the Banking Regulation Act. 1949 as well as the Companies Act. 1966, In the so required for the banking companies and give a true and fair view in conformity with the accounting p/inquiries generally ace opted In Indy:

(i) I n the ease of the Bane Sheet, of He state of affaire opt the bankas at31st March, 2013;

ii) fn the case of the Profile and Loss Account, of the profits for the year ended on that date, and

[iii) fn the case of the cosh Flow Statement, of cash f tows forties year ended o n that date.

Report on other legal and Regulatory requirements:

7. The Balance Sheet and the Profile and Loss Account have been drawn up In accordance with the provisions of section 29 of the Banking Refutation Act, 1nead with section 21 of the Companies Act, 1050:

B Subject (tone [imitations of the audit indicated in paragraph 1 to5 above, we rapport dhal.

a We have obtained all the information and explanations, which to the best of Our knowledge and belief were necessary lor the purposes of our audit and have found them to be satisfactory.

b. The transactions of the Bank, which have come to our notice have been within the powers of I he Bank. and

e. The resumes received from the Offices and Branches of the Bank have been found adequate for the purposes of our audit. relevant ( He bank''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances An audit also includes evaluating the appropriateness accounting policies used and the reasonableness of the accounting tail mates made by the management, as well as evaluating the overall presentation of the financial statements.

5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a bastes for our 9 edit opinion:

6. In our opinion, (he Balance Sheel, Profit and Loss Account and Cash Flow Statement com ply with the Accounting Slander us referred to in sub-section (3C) of Section2l 1 of (he Companies Act. 1956.

10. We further re port (hat

(i) The Balance Sheet anal Profit and Loss account dealt with by this report are in agreement with the books of accounts and returns;

(li) In our opinion, props hooks of accounts as required by law have been kept by the bank so far as appears from our examination of those book;

(ill) The repos on the accounts of the branches audited by branch auditors have been dealt with in preps ring our report in the manner considered necessary by us;

(M) As per information and explain nation glen to us the Central Government has, till date, not proscribed any cuss payable under section 441A of the Co manias Act., 1056.

(v) On the basis of the written representation received from the directors arid taken on record by the Board of Directors, none of the directors disqualified as on March 312013 from being appointed age s director in terms of clause (g) of sub-section (1) of section 2/4 of the Companies Act. 1956.

far Vishnu Daya & Co. for R,K. Kumar & Co.

Charlsred Accountants Chartered Accountants

M.R.No.008456S M.R.No.001595S

Sd/- Sd/-

Guruprasad B.R. Ashok

Partner Partner

M. No.29250 M, No, 023313

Place Mangalore

Dale : May 15th 2013


Mar 31, 2012

1. We have audited the accompanying financial statements of The Karnataka Bank Limited as at 31st March 2012, which comprises the Balance Sheet as at 31st March 2012; the statement of Profit and Loss Account and the Cash Flow Statement for the year then ended; and a summary of significant Accounting Policies and other explanatory information. Incorporated in these financial statements are the returns of 23 branches / 5 offices audited by us and 480 branches / 20 offices audited by Branch Auditors. The Branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued by the Reserve Bank of India.

Management's responsibility for the Financial Statements:

2. Management is responsible for the preparation of these financial statements in accordance with the Banking Regulation Act, 1949. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatements, whether due to fraud or error.

Auditor's Responsibility:

3. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's 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 control relevant to the bank's preparation and fair presentation of the financial statements 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 management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion:

6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the accounting policies and notes thereon, give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for the banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance Sheet, of the state of affairs of the bank as at 31st March, 2012; (ii) in the case of the Profit and Loss Account, of the profits for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Report on other legal and Regulatory requirements:

7. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of section 29 of the Banking Regulation Act, 1949 read with section 211 of the Companies Act, 1956;

8. Subject to the limitations of the audit indicated in paragraph 1 to 5 above, we report that: a. we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory, b. the transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and c. the returns received from the Offices and Branches of the Bank have been found adequate for the purposes of our audit.

9. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) ofSection211 of the Companies Act, 1956.

10. We further report that: (i) the Balance Sheet and Profit and Loss account dealt with by this report are in agreement with the books of accounts and returns; (ii) in our opinion, proper books of accounts as required by law have been kept by the bank so far as appears from our examination of those books; and (iii) the reports on the accounts of the branches audited by branch auditors have been dealt with in preparing our report in the manner considered necessary by us; (iv) on the basis of the written representation received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

for Vishnu Daya & Co. for R.K. Kumar & Co.

Chartered Accountants Chartered Accountants

Firm Reg. No.: 008456S Firm Reg. No.: 001595S

Sd/- Sd/-

Guruprasad B.R. Ashok

Partner Partner

M. No. 219250 M. No. 023313

Place: Mangalore

Date: May 18, 2012


Mar 31, 2011

1. We have audited the accompanying financial statements of The Karnataka Bank Limited as at 31st March 2011, which comprises the Balance sheet as at 31st March 2011; the statement of Profit and Loss Account and the Cash Flow Statement for the year then ended; and a summary of significant Accounting Policies and other explanatory information. Incorporated in these financial statements are the returns of 13 branches and 3 offices audited by us and 465 branches and 21 offices audited by Branch Auditors. The Branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued by the Reserve Bank of India.

Managements responsibility for the Financial Statements:

2. Management is responsible for the preparation of these financial statements in accordance with the Banking Regulation Act, 1949. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatements, whether due to fraud or error.

Auditors Responsibility:

3. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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 control relevant to the banks preparation and fair presentation of the financial statements 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 management, as well as evaluating the overall presentation of the financial statements

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter:

6. Without qualifying our opinion, we draw attention to Note 2.3.2 of Schedule 18 to the financial statements, which describes deferment of peinsion and gratuity liability of the Bank to the extent of Rs. 125.63 crore pursuant to the exemption granted by the Reserve Bank of India to the Bank from the application of the provisions of Accounting Standard (AS) 15, Employee Benefits, vide its circular No. DBOD. B P. BC/15896/21.04.018/2010-11 dated 8th April, 2011 on prudential regulatory treatment relating to re-opening of pension option to employees of the Bank and enhancement in gratuity limits.

Opinion:

7. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereon, give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for the Banking Companies and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2011; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Report on other legal and Regulatory requirements:

8. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of section 29 of the Banking Regulation Act, 1949 read with section 211 of the Companies Act, 1956;

9. Subject to the limitations of the audit indicated in paragraph 1 to 5 above, we report that: a. we

have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory; b. the transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and c. the returns received from the Offices and Branches of the Bank have been found adequate for the purposes of our audit.

10. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

11. We further report that: (i) the Balance Sheet and Profit and Loss account dealt with by this report are in agreement with the books of accounts and returns; (ii) in our opinion, proper books of account as required by law have been kept by the bank so far as appears from our examination of those books; (iii) the reports on the accounts of the branches audited by branch auditors have been dealt with in preparing our report in the manner considered necessary by us; (iv) as per the information and explanations given to us the Central Government has, till date, not prescribed any cess payable under section 441A of the Companies Act, 1956; and (v) on the basis of the written representation received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.



For Vishnu Daya & Co For R.K. Kumar & Co Chartered Accountants Chartered Accountants Firm Reg. No. 008456S Firm Reg. No. 001595S

Sd/- Sd/-

Venkatesh Kamath S.V. B.R. Ashok Partner Partner M.No. 202626 M.No. 023313

Place : Mangalore Date : 23rd May, 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of The Karnataka Bank Ltd.,(The Bank) as on 31st March, 2010 and also the Profit & Loss Account of the Bank and the Cash Flow Statement annexed thereto for the year ended on that date in which are incorporated the returns of 9 branches and 1 Regional Office audited by us, 455 branches, 7 Regional Offices, 1 International Division, 5 Service Branches, 2 Currency chests, 3 Asset Recovery Branches, 1 Data centre,2 Central Processing Centers and 1 Customer Care Centre audited by branch auditors. These financial statements are the responsibility of the Banks management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.

3. The Balance Sheet and the Profit and Loss Account have been drawn-up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949, read with section 211 of the Companies Act, 1956.

4. We report that- a. We have obtained all the information and

explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory.

b. The transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

c. The returns received from the offices and branches of the Bank have been found adequate for the purpose of our audit.

5. In our Opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement comply with the Accounting Standards referred to in sub sec (3C) of section 211 of the Companies Act, 1956.

6. We further report that:

(i) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by the report, are in agreement with the books of account and the branch returns.

(ii) in Our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books.

(iii) the reports on the accounts of the Branches audited by Branch Auditors have been dealt with in preparing our report in the manner considered necessary by us.

(iv) as per information and explanation given to us the Central Government has till date, not prescribed any cess payable under section 441A of the Companies Act1956,

(v) on the basis of the written representations received from the Directors, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2010 from being appointed as a director in terms of clause(g) of Sub-section(1) of Section 274 of the Companies Act,1956.

7. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with Significant Accounting

Policies and the Notes thereon and in particular note no 2 of schedule 18, give the information required by the Banking Regulation Act,1949 as well as the Companies Act,1956, in the manner so required for banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India :

(i) In the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March 2010;

(ii) In the case of the Profit & Loss Account, of the Profit of the Bank for the year ended on that date and

iii) In the case of the Cash Flow Statement, of the cash flows for the year then ended on that date.



For KAMATH &RAU For ViSHNU DAyA & Co.

Chartered Accountants Chartered Accountants

Firm Reg. No. 001689S Firm Reg.No. 008456S



Sd/- Sd/-

(CA. SRiNiVAS S.KAMATH) (CA. VeNKATeSH KAMATH S.V.)

(M No.201716 ) (M No.202626)

Partner Partner



Place : Mangalore

Date : 17th May 2010

 
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