A PROJECT report ON COMPAMY

AUDIT OF TATA STEEL LTD.

A project report submitted in partial fulfillment of the degree of
BACHELOR OF COMMERCE
By
Name of the student:- Under the guidance of:-
RAJESH NATH Mr. Pradeep Kumar Behera
(ROLL NO-8106B17001)
ARBAZ QUADRI
(ROLL NO-8106B17003)
SUSHANTA KUMAR JENA
(ROLL NO-8106B17004)
JOGESH KUMAR JENA
(ROLL NO-8106B17006)
JYOTI SINGH
(ROLL NO-8106B17009)
PRADEEP KUMAR SAHU
(ROLL NO-8106B17010)

DINA KRUSHNA COLLEGE

DHANASIMULIA , JALESWER , BALASORE

1
 DECLARATION

This is certify that the undersigned have assessed and evaluated the “Project report
on Company Audit of TATA STEEL LIMITED ’’Submitted by us for semester-VI during the
academic year 2019-2020, is based on actual work carried out by us under guidance and
supervision of Mr. Pradeep Kumar Behera.

We further state that this work is original and not submitted any where else for any
examination.

This project is original to the best of our knowledge and has been accepted for internal
assessment.

Name Roll Number Registration Signature of student

Number

RAJESH NATH 8106B17001 04365/17

ARBAZ QUADRI 8106B17003 04367/17

2
SUSHANTA KUMAR JENA 8106B17004 04368/17

JOGESH KUMAR JENA 8106B17006 04371/17

JYOTI SINGH 8106B17009 04376/17

PRADEEP KUMAR SAHU 8106B17010 04377/17

CERTIFICATE

3
This is to certify that the thesis/project report entitled “ A PROJECT REPORT ON COMPANY
AUDIT of TATA STEEL LIMITED”, submitted by Rajesh Nath, Arbaz Quadri, Sushanta Ku. Jena,
Jogesh Ku.Jena,Jyoti singh,Pradeep Ku.Sahu, for the award of the degree of Bachelor of
Commerce from Dinakrushna Degree College,Jaleswer, Balasore, Odisha, India, is a bonafide
record of work carried out by him under my guidance. Neither this project report nor any part
of it has been submitted for any degree or academic award else where.

NAME ROLL NO. VIVA- TOTAL

VOICE MARK
PROJECT
MARK MARK

RAJESH NATH

8106B17001

ARBAZ QUADRI

8106B17003

SUSHANTA KUMAR JENA

8106B17004

JOGESH KUMAR JENA

8106B17006

JYOTI SINGH

8106B17009

4
PRADEEP KUMAR SAHU

8106B17010

INTERNAL EXAMINER SIGNATURE EXTERNAL EXAMINER SIGNATURE

ACKNOWLEDGMENT

Our debts are many and we acknowledge them with much pride and delight. This
project Report was undertaken for the fulfillment bachelor of commerce program pursuing at
Dina Krushana Degree college, Dhanasimulia, Jaleswar, Balasore would like to thank my project
on audit of Tata Steel Limited which has provided me the opportunity for doing this project
work

We are extremely great full to Mr. Pradeep Kumar Behera in Dhanasimulia, Jaleswar,
Balasore for his invaluable help and guidance throughout our work. He kindly evinced keen
interest in our work and furnished some useful comments, which could enrich the work
substantially. In fact it is very difficult to acknowledge all the names and nature of help and
encouragement provided by them. I would never forget the help and support extended directly
or indirectly tome by all.

RAJESH NATH
(ROLL NO-8106B17001)

5
 ARBAZ QUADRI
(ROLL NO-8106B17003)
SUSHANTA KUMAR JENA
(ROLL NO-8106B17004)
JOGESH KUMAR JENA
(ROLL NO-8106B17006)
JYOTI SINGH
(ROLL NO-8106B17009)
PRADEEP KUMAR SAHU
(ROLL NO-8106B17010)

CONTENTS

CHAPTER NO. TOPIC PAGE NO.

1. AUDITING : AN INTRODUCTION 6

2. OBJECTIVE OF AUDITING 6-9

3. CLASSIFICATION OF AUDIT 10-13

4. ADVANTAGES AND DISADVANTAGES OF AUDITING 13-16

5. AUDITOR’S REPORT AND ITS TYPE 17-20

6. ABOUT THE COMPANY AND ANNUAL REPORT 22-25

7. 26-30
PROFIT & LOSS A/C AND BALANCE SHEET

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 8. GENERALLY ACCEPTED AUDITING STANDARDS 31

9. ACCOUNTING STANDARDS(CURRENTLY APPLICABLE AND USE IN 32-34

COMPANY OR NOT)
10. DRAFT OF AN AUDIT REPORT 34-40

11. CONCLUSION 41

AUDITING ; AN OINTRODUCTION
The subject of auditing is as old as Accounting. Its traces can be found in ancient
civilization such as Mesopotamia, Greece, Egypt, Rome, U.K. and India. Even the Vedas contain
reference to accounts and auditing. Arthasastra by Koutilya detailed rules for accounting and
auditing of public finances. Study of Auditing practices is very important for students as it
entails the basics of vouching/scrutinizing the records, books of accounts of an entity. The
objective of this chapter is to develop the basics of auditing.

MEANING AND DEFINATION

Audit deals with checking, verification and examination of accounts. The audit can be
started only when the accounting ends. There exists an interrelationship between accounting
and auditing principles. Therefore it is a fact that without the proper development of
accounting principle, the development of auditing procedure principles is not possible. The
term auditing is defined in various ways by different persons.

According to A.W. Hanson, ‘‘ An audit is an examination of such records to establish

their reliability and the reliability of the statement drawn from them.’’

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 According to Taylor and Perry, ‘‘audit is defined as an investigation of some statement
of figures involving examination of certain evidence, so as to enable an auditor to make a
report on the statement.’’

OBJECTIVES OF AUDITING
Auditors are basically concerned with verifying whether the account exhibit true and fair view
of the business. The objectives of auditing depend upon the purpose of his appointment.
However, the objectives may be classified as

(A)Primary objective

(B) Subsidiary objective

(C) Specific objective

(A) Primary/ main objectives

The primary objectives of an auditors is to report to the owners expressing his
opinion whether the audited account exhibits true and fair view of the state of
affairs of the business. It should be remembered that in case of a company, the
auditor reports to the shareholders who are the owners of the company and not to
the director.
(a) Examine the internal control and internal check.
(b) Verify whether all the books of accounts as required by law are kept.
(c) Verify whether proper accounting principles and producers are followed.
(d) Check the arithmetical accuracy of the books of accounts.
(e) Verify the authenticity and validity of the transactions.

(B) Secondary or ancillary objectives:-

The following objectives are incidental to the main objectives of auditing.

1. Detection and prevention of errors:-

Errors are mistakes committed unintentionally because of ignorance, careless, errors
are many types:

(i) Errors of omissions:

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 These are the errors which arise on account of transaction into being recorded in
the books of accounts either wholly or partially. If a transaction has been totally omitted it will
not affect trial balance and hence it more difficult to detect. On the other hand if a transaction
is partially recorded, the trial balance will not agree and hence it can be easily detected.

Example

 Omission of purchases from purchases day book.

 Ignoring depreciation on fixed assets completely.

(ii) Errors of commission:

When incorrect entries are made in the books of accounts either wholly or partially, such errors
are known as errors of commission.

Example:

 Wrong amount recorded in the books of original entry sale of goods of Rs. 15,000 recorded as
Rs. 1,500 in sale day book.
 Posting to the wrong side of an account. In place of debiting an amount of Rs. 150 is credited.
This error will affect the trial balance.

(iii) Compensating errors:-

It happens when two or more mistakes are committed which counter balance each other. Such
an error is known as compensating error. E.g., if the amount is wrongly debited by Rs. 100 less and
wrongly credited by Rs.100 such a mistake is known as compensating error.

Example:-

 A debit balance is under cast by Rs.100 and credit balance is under cast by the same amount
Rs.100.
 Sales returns of Rs.500 is posted to the return inward A/c as Rs.5,000 and similarly purchase
return of Rs.500 Is posted to the return outwards A/c as Rs. 5,000.

(iv ) Errors of principles:-

These are the errors committed by not properly following the accounting principles. These
arise mainly due to the lack of knowledge of accounting. E.g., revenue expenditure may be treated as
capital expenditure.

Example:-

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  Treatment of capital expenditure as revenue expenditure, e.g. purchase of machinery treated
as purchase of goods.
 Valuation of stock on the basis of wrong principle.

(v) Clerical errors:-

A clerical error is one which arises on account of ignorance, carelessness, negligence etc.

Location of errors:-

It is not the duty of the auditor to identify the errors but in the process of verifying accounts,
he may discover the errors in the accounts. The auditor should follow the following procedure in this
regard.

(a) Check the trial balance.

(b) Compare list of debtors and creditors with the trial balance.
(c) Compare the names of account appearing in the ledger with the names of account in the trial
balance.
(d) Check the totals and balances of all accounts and see that they have been properly shown in
the trial balance.
(e) Check the posting of entries from various books into ledger.

2. Deduction and prevention of fraud:-

A fraud Is an error committed intentionally to deceive/ to mislead/ to conceal the truth/ the
material fact. Frauds may be of 3 types:

(i) Misappropriation of cash:-

This is one of the majored frauds in any organization it normally occurs in the cash
department. This kind of fraud is either by showing more payments or less receipts. The cashier may
show more expenses than what is actually incurred and misuse the extra cash. For example, showing
wages to dummy workers. Cash can also be misappropriated by showing less receipts .E.g., not
recording cash sales. Not allowing discounts to customers. The cashier may also misappropriate the
cash when it is received. Cash receive for 1 st customers ids misused when the 2 nd customer pay it is
transferred to the 1st customers account. When the 3rd customer pays it goes forever. Such a fraud is
known as ‘’ teaming and landing ‘’. To prevent such frauds the auditors must check in detail all books
and document, vouchers, invoice etc.

(ii) Misappropriation of goods:-

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 Here records may be made for the goods not purchase not issued to production
departments; goods may be used for personal purpose. Such a frauds can be deducted by check in
stock records and physical verification of goods.

(iii) Manipulation of accounts:-

This is finalizing accounts with the intention of misleading others. This is also known as
‘’windows dressing’’. It is very difficult to located because its usually committed by higher level
management such as directors. The objectives of windows dressing may be to evade tax, to borrow
money from bank, to increase the share price etc.

To conclude it can be said that, it is not the main objectives of the auditors to discover frauds
and irregularities. He is not an insurance against frauds and errors. But if he finds anything of a
suspicious nature, he should prove it to the full.

(c) Specific objectives:-

There will be specific objectives in respect of is type of specific audits. For example, in
operational of audit, the aim of audit is to evaluate the existing operations of the entity in order to give
expert advice to improve their efficiency. And the cost audit is to check the cost records of the entity in
order to make a report on the proper ascertainment of cost of production of goods or services.
Depending upon the nature of specific audit, there may be different objective in respect of each specific
audit.

CLASSIFICATION OF AUDIT
Introduction:-

In the previous chapter, the meaning, definition, characteristics, benefits and limitations of
audit is discussed. Here, we will see the different types of audit. The requirement of getting the books
of accounts audited became mandatory due to legislation. The nature and scope of audit vary due to
various factors such as the size of organization, the strength of internal control system, legal
requirement etc.

Classification on the basis of organization or organization structure:-

On the basis of organization structure, audit may be classified into three types. There are:

1. Statutory audit

2. Government audit

3. Private audit

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1. Statutory audit:-

Statutory audit is compulsory audit prescribed under statute i.e. law. Appointment of auditors,
removal, remuneration, rights, duties, liabilities are governed as per the provisions of the respective law
applicable to the organization. Scope of the audit work and all others terms are as laid down by the law.
It can be conducted only by a qualified chartered accountant.

2. Government audit:-

Government audit refers to the audit of accounts of government departments and offices,
Government companies and statutory or public corporations.

3. Private audit:-

Where and audit is not compulsory under any statute, but is undertaken by the owners voluntarily
to get the benefits of audit, the audit is called private audit. In the other words private audit refers to
the audit of accounts of private enterprises such as a sole trending concerns partnership firm and
others individual and institutions.

Classification of audit on the basis of degree of independence:-

Audit is a process of independent checking of financial records of an organization, So as to give an

opinion on the financial statement. It can be grouped into two categories,

1. Internal audit

2. External audit

1. Internal audit:-

Internal audit is a review of operations and records undertaken within a business by specially
assigned staff. It is a post-transaction review to evaluate the correctness of records and the
effectiveness of operations on a continuous basis in an organization by the paying staffs. The term
‘internal audit’ has been defined as the independent appraisal of activity within an organization for the
review of accounting, financial and other business practices as a protective and contrastive arm of
management.

2. External audit:-

The external audit is done with the help of independent and external organizations to the audited
company. This audit is oriented towards the financial analyze or the associated risks to the commercial
activity and it is addressed mostly to the stakeholders of the company. The main responsibility of the
external audit is to realize the annual statutory audit of financial position. As part of it, external auditors

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examine and evaluate the internal audit activity, analyzing risks that could affect the financial
statements.

Classification of the audit on the basis of time

1. Continuous audit:-

Continuous audit is one where the auditor’s staff is occupied continuously on the accounts whole
the year round and performs interim audit. It is an audit under which detailed examination of the books
of accounts is conducted continuously throughout the year. It is continuous review of the accounts of
the organization. It is generally applicable to banking company and insurance company.

2. Final audit:-

It is an audit carried out after the preparation of financial statement. It is an audit where the
auditor takes up his work of checking the books of accounts only at the end of the accounting year. The
audit work is commenced and completed in a single uninterrupted session. There is very little impact on
prevention of errors and fraud by way of moral checks. It is best suited for small and medium sized
business. It saves in terms of times, energy and money.

3. Interim audit:-

Interim audit is an audit conducted in between the annual audits. It is conducted to find out the
interim profit and known the financial position at the end of a part of the accounting year. For example,
an audit of accounts prepared for the period of six months from 1 st April to 30th September, would be
interim audit.

4. Balance sheet audit:-

Balance sheet audit is an American terms which means verifications of the items appearing in the
balance sheet. It includes verification and valuation of assets and liabilities appearing in balance sheet.
Profit and loss account is not given much importance in this type of audit. In balance sheet audit, the
auditors assume that there is a reliable system of internal check and internal audit. Balance sheet audit
is also ‘limited audit’. Such a type of audit is used where the size of the type of audit is used where the
size of the company is very large.

Classification of the audit on the basis of scope

1. Complete audit:-

In this type of audit, the auditor is required to check each and every transaction recorded in the
books of accounts. He has to examine each and every voucher, document or correspondence relating to
the transaction. This type of audit is not possible for large sized organizations.

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2. Partial audit:-

In partial audit, the auditor is not required to examine all the books of accounts. Only a part of the
accounts or some transactions as desired by the clients may be scrutinized. Auditor has to state the
area covered by the audit.

3. Detailed audit:-

Under detailed audit, few business transactions are examined in detail by the auditor. Spicer and
Pegler have defined it as, ‘‘an audit which starts with books of prime entry and ends with the balance
sheet. The checking sequence is arranged in order of recording the transactions in the primary book”

Classification of audit on the basis of specific objectives

1. Special audit:-

Central government has power to order a special audit of the accounts of a company for a specific
period. This is under section 233A of the companies Act, 1956. Special audit is ordered without
providing an opportunity to the company, where the central government is of the opinion.

2. Cost audit-

It is type of audit which involves verification of cost records maintained by the organization. U/s
233(B) of the companies Act 1956 the central government may direct an audit of cost records by a
person who is qualified. Appointment of auditor is done by the board of directors subject to the
approval of the central government.

3. Management audit

Management audit involves examine of the plans, policies, procedure, method and strategies and
evaluates the performance of management with a view to improve organizational effectiveness. It does
not look into the past, present but also in the future.

4. Social audit

Social audit is a recent development in the field of auditing. It is based on the modern concept of
social responsibility of business. Social audit examines to what extent the business is discharging its
social responsibilities. It examines the contribution of the concern in the following areas of social
welfare and awareness.

ADVANTAGES OF AUDITING:-

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 There are numerous advantages of having accounting records audited, no matter whether there
is hardly any legal requirement of audit. Nowadays business people get their accounts audited buy a
professional auditor with a view to make the accounting information transparent and reliable. Audit is
useful for every business organization.

1. Deduction and prevention of errors and fraud become easier:-

Audit helps a business to detect and prevent the frauds and errors. Errors and frauds can be
located and rectified at an early and initial stage.

2. Audited accounting information:-

Management exercises a great deal of subjectivity in preparing financial statements and

allocating resources entrusted to it in operating the entity. An audit provides reasonable assurance that
management’s representations on these activities are authentic.

3. Acceptability by the authorities:-

Audited accounts are readily acceptable by the income tax, sales tax, and such other statutory
bodies.

4. Professional advice available:-

Independent auditors also render services other than auditing. They do tax work, act as
management consultants, advices on internal control system in operation, and prepare reports required
by government agencies and so on so forth.

5. Speedy processing of loan:-

Financial institutions consider audited accounts genuine and authentic and this helps them in
speedy processing of loan proposals.

6. Settlement of disputes:-

In case of partnership firm, disputes among the partners over such matters as profits sharing,
settlement of claims in case of retirement/death of a partner may be less likely to arise when accounts
are duly audited. All partners can easily trust audited accounts.

7. Facilities calculations of net worth and goodwill of business:-

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 In case of sale or takeover of business as a going concern by other party, audited accounts carry
greater reliability to deciding out the net worth of the business and goodwill. a perspective purchaser of
a business may place more confidence in audited accounts as evidence of past profitability. The
auditing function therefore plays an important role in everything whether an organization is profitable
or not or whether its financial position is sound or not.

8. Settlement of insurance claims:-

Audited accounts are likely to have more credibility and this helps in early and easy settlement
of insurance claims in case of losses by fire, misappropriation, embezzlement or any other reason.

9. Useful to compare the financial performance:-

Audited financial statements are considered more reliable to compare the financial performance
of a business concern over the years.

10. Keeps accounts department vigilant:-

A regular audit of accounts keeps the accounts department not only up-to-date but also careful
and vigilant.

11. Identifies the weak areas:-

Audit reviews the internal control system of the audit and identifies the weak areas, which helps
management to get over the weakness and achieve their goal within stipulated time and at reasonable
cost.

LIMITATIONS OF AUDITING:-

An audit should have no limitations of its own. It is designed to protect the interest of all parties
who are interested in the affairs of the business. If there be any shortcoming arising there from, it may
be due to its narrow scope of applicable in its related field of operation and un-extended definition of
the concept. The audit suffers from the following shortcomings

1. Deficiency of complete picture:-

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 The audit may not give complete picture. If the accounts are prepared with the intention to
defraud others, auditor may not be able to detect them.

2. Problems of dependence:-

Sometimes the auditor has to depend on explanations, clarification and information from staff
and the client. He may or may not get correct or complete information.

3. Non-detection of errors or frauds:-

Auditor may not be able to detect certain frauds which are committed by the clients.

4. Dependence on explanation by others:-

Auditor has to depend on the explanation and information given by the responsible officers of
the company. Audit report is affected adversely if the explanation and information prove to be false.

5. Dependence on opinions of others:-

Auditor has to reply on the views or opinions given by different experts’ Viz. Lawyers, Solicitors,
Engineers, Architects etc, he cannot be an expert in all the fields.

6. Conflict with others:-

Auditor may have difference of opinion with the accountants, management, engineers etc. in
such a case personal judgment plays an important role. It differs from person to person.

7. Quality of the auditor:-

Success of audit depends on the sincerity with which the auditor has performed his duties. The
same audit work can be done by two different auditors with difference in sincerity.

8. Effect of inflation:-

Financial statement may not disclose true picture even after audit due to inflationary trends.

9. Corrupt practices to influence the auditors:-

The management may use corrupt practices to influence the auditors and get a favorable report
about the state of affairs of the organization.

10. No assurance:-

An auditor can give any assurance about the future profitability and prospects of a company.

11. Inherent limitations of the financial statements:-

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 Financial statements do not reflect current values of the assets and liabilities. Many items are
based on personal judgment of the owners. Certain non-monetary facts cannot be measured. Audited
statements due to these limitations cannot exhibit true position.

12. Detailed checking not possible:-

Auditor cannot check each and every transaction. He may be required to do test checking.

13. Post-mortem examination:-

Auditing is post-mortem examination. There is no use of such examination when events have
been occurred.

14. Lack of expertise-

Auditor has to seek opinion of experts on certain matters on which he may not have experts’
knowledge. The auditor has to depend upon such reports which may not be always correct.

AUDITOR’S REPORT

CONCEPT AND DEFFINATION:-

An audit report is the product of the auditing. It is concluding part of the audit process as an
auditor has to go through following three phases while conducting an audit.

(a) Preliminary work for audit.

(b) Conduct of actual audit, and

(c) Conclusion of audit, which means submission of Audit Report.

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 Therefore, audit report is called as the ultimate and final product of every audit, the meaning
of audit report can be well understood from the following select definition:-

According to Lan Cester, ‘‘ a report is a statement of collected and considered facts, so drawn
of as to give clear and concise information to persons who are not already in position of the full facts of
the subject matter of report.”

BASIC ELEMENTS OF THE AUDITORS' REPORT:-

The audit report should contain the following basic elements in it:

1. Title of the Report: The title of the report should be appropriate i.e., Auditor's Report, Cost
Auditor's Report, etc. It enables the readers to identify the auditor' report and also distinguish it from
the reports of others such as director's report, accountant's report, etc.

2. Addressee: The auditor's report should be addressed to the person to whom it should be
forwarded generally, it is submitted to the perse who appoints the auditor. Hence, the addressee is a
person who appoints the auditor and to whom the report is forwarded In case of the statutory audit of
a company, it is the shareholders who are the addressee.

3. Opening/Introductory Paragraph: It consists of the identification of the following aspects:

(a) Financial Statements Audited: Financial statements are identified by name of the company
and the period covered by the financial statements.

(b) Clear Marking of Responsibility between the Management and the Auditor: It should state
clearly that the financial statements are the responsibility of the entity's management and that the
responsibility of the auditor is to express an opinion thereon

4. Scope Paragraph: The scope paragraph should specify the nature and scope of the work
performed by the auditor. It should state that the audit was conducted as per the auditing standards
generally accepted in India and that the audit was planned and performed to obtain assurance that the
financial statements are free of material misstatement. Then it should specifically describe the audit as
including examination, on a test basis, of evidence supporting the financial statements, assessment of
accounting principles followed and of significant estimates made by the management, and overall
evaluation of financial statement presentation. Besides, it should also state that the audit provides a
reasonable basis for the auditor's opinion.

5. Management's Responsibility for the Financial Statements: The auditor's report shall describe
management's responsibility for the preparation of the financial statements in the manner in which
that responsibility is described in the team of the audit engagement. The description shall include an
explanation that management is responsible for the preparation of the financial statements in
accordance with the applicable financial reporting framework, this responsibility includes the design,

19
implementation and maintenance of internal control relevant to the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.

6. Auditor's Responsibility: The auditor's report shall state that the responsibility of the auditor is
to express an opinion on the financial statements based on the audit The auditor's report shall state
that the audit was conducted in accordance with Standards on Auditing issued by the Institute of
Chartered Accountants of India. The auditor's report shall also explain that those Standards require that
the auditor comply with ethical requirements and that the auditor plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.

7. Opinion Paragraph: The opinion paragraph of the auditor's report should clearly specify the
financial reporting framework such as accounting principles generally accepted in India used to prepare
the financial statements and state the auditor's opinion as to whether the financial statements give a
true and fair view in accordance with that financial reporting framework and whether they comply with
the statutory requirements.

8. Signature: The auditor in his personal name should sign the auditor's report. The audit report
should be signed in the personal name of the auditor and also in the name of the audit firm if it was
appointed as the auditor. While signing the report, the membership number of the partner or
proprietor, assigned by ICAI should be mentioned.

9. Place of Signature: The report should specify the location, where the audit report is signed. That is
the town or city where the report is signed should be mentioned specifically here.

10. Date of the Report: The date of auditor's report on financial statements indicates the date when
the report is signed by the auditor with his views and opinions about the financial statements of the
company he audited. This gives a clear picture that the auditor has considered the effect, on the
financial statements and on the audit report, of the events and transactions that occurred, and of which
the auditor became aware, up to that date. Further, the auditor report should not pre-dated than the
date on which the financial statements are signed or approved by the management.

Audit Certificate:-

The general purpose of an audit certificate is to give to the Commission reasonable assurance
that eligible costs (and, if relevant, the receipts) charged under the project are calculated and claimed
by the contractors in accordance with the relevant legal and financial provisions of the FP6 legal texts,
including contractual provisions. When an auditor certifies a financial statement implies that the
contents of the statement are reliable as the auditor has vouched for the exactness of the data. The
term certificate is, therefore, used to mean confirmation of the truth and correctness of something
after a verification of certain exact facts. An auditor may therefore certify the circulating figures of a

20
newspaper or the value of imports and exports of a company the term 'certificate should not be
confused with the term report. While a certificate affirms the truth and correctness of a fact figure or a
statement, a report is generally a statement of facts or an expression of opinion regarding the truth and
fairness of the facts, figures and statement.

Type of Audit Report:-

An audit report is an appraisal of a small business complete financial status. Completed by an

independent accounting professional this document covers a company's assets and liabilities, and
presents the auditor's educated assessment of the firm's financial position and future. Audit reports are
required by law if a company is publicly traded or in an industry regulated by the Securities and
Exchange Commission (SEC). Companies seeking funding as well as those looking to improve internal
controls, also find this information valuable. There four types of audit reports.

1. Unqualified Opinion

Often called a clean opinion, an unqualified opinion is an audit report that is issued when an
auditor determines that each of the financial records provided by the small business is tree of any
misrepresentations. In addition, an unqualified opinion indicates that the financial records have been
maintained in accordance with the standards known as Generally Accepted Accounting Principles
(GAAP). This is the best type of report a business can receive. Typically, an unqualified report consists of
a title that includes the word "independent." This is done to illustrate that it was prepared by an
unbiased third party. The title is followed by the main body. Made up of three paragraphs, the main
body highlights the responsibilities of the auditor, the purpose of the audit and the auditor's findings.
The auditor signs and dates the document, including his address

2. Qualified Opinion

In situations when a company's financial records have not been maintained in accordance with
GAAP but no misrepresentations are identified, an auditor will issue a qualified opinion. The writing of a
qualified opinion is extremely similar to that of an unqualified opinion. A qualified opinion, however,
will include an additional paragraph that highlights the reason why the audit report is not unqualified.

3. Adverse Opinion

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 The worst type of financial report that can be issued to a business is an adverse opinion. This
indicates that the firm's financial records do not conform to GAAP. In addition, the financial records
provided by the business have been grossly misrepresented. Although this may occur by error, it is
often an indication of fraud. When this type of report is issued, a company must correct its financial
statement and have it re-audited, as investors, lenders and other requesting parties will generally not
accept it

4. Disclaimer of Opinion

On some occasions, an auditor is unable to complete an accurate audit report. This may occur
for a variety of reasons, such as an absence of appropriate financial records. When this happens, the
auditor issues a disclaimer of opinion, stating that an opinion of the firm's financial status could not be
determined.

Qualified audit reports

It is necessary firstly identify the circumstances which can give rise to a qualification

These are as follows:

Uncertainty arising from ether a limited upon the scope of the auditors work or an inability to
obtain any evidence regarding doubts which exist in relation to an unresolved matter.

Disagreements arising from factual discrepancies, unsuitable accounting policies, inadequate or

misleading disclosure given in the financial statements or failure to comply with an accounting standard
or legislation. Some of these types of disagreement should be resolved fairly easily with the client so
that a qualification can be avoided, for example a factual disagreement should lead to the financial
statements being amended to reflect the correct view. Other types of disagreement which are perhaps
more subjective will be much more difficult to resolve such as those relating to the suitability of an
accounting policy.

Secondly, it is necessary to decide upon the effect of the circumstances discussed above

These are classified as:

 Those having a material but not fundamental effect upon the financial statements

 Those having a fundamental effect of the circumstances discussed above.

Fundamental means that the matter is such as to seriously distort or undermine the view which is given
by the financial statements to the extent that they could mislead user groups.

22
 An except for qualification will be given when the matter is a material but not fundamental uncertainty
or disagreement. An example of an uncertainty could be the destruction of a part of the clients
accounting records leading to a limitation of scope being imposed upon the auditors work because
audit evidence is then unavailable. An example of a disagreement under this heading could be a failure
by a client to apply a reasonable depreciation policy to a particular class of fixed assets, however in
both of these examples the effect not pervasive to the view which the financial statements give as a
whole.

TATA STEEL LIMITED

ABOUT THE COMPANY :-

23
 Established in Jamshedpur, India in 1907, Tata Steel is a
flagship entity of the 150-year old Tata group. Embodying
the vision of the Tata group founder, Jamsetji Nusserwanji
Tata, Tata Steel group, today, is one of the world’s most
geographically diversified steel producers and is recognized
as the hallmark for corporate citizenship and business ethics.

Tata Steel has manufacturing units at Jamshedpur, Jharkhand

and Kalinganagar, Odisha with production capacities of 10
MnTPA and 3 MnTPA, respectively. In Financial Year 2018-19, Jamsetji N. Tata
the Company initiated a 5 MnTPA expansion project at Kalinganagar Founder of Tata Steel
to enhance its cumulative capacity to 8 MnTPA .

KEY MANAGEMENT PERSONNEL:-

Mr. Ratan Naval Tata is the Emeritus Chairman of Tata Sons, Tata Industries, Tata Motors, Tata Steel
and Tata Chemicals. He has been the Chairman of Tata Steel, Tata Motors, Tata Steel, Tata Consultancy
Services, Tata Power, Tata Global Beverages, Tata Chemicals, Taj Group and Tata Teleservices. During
his tenure, the Tata Group’s revenues grew manifold, totaling over $100 billion in 2011-12. Mr. Tata
joined the Tata Group in 1962. After serving in various companies, he was appointed Director-in-Charge
of the National Radio Electronics Company Limited in 1971. In 1981, he was named Chairman of Tata
Industries and was responsible for transforming it into a group strategy think-tank, and a promoter of
new ventures in high technology businesses. Mr. Tata currently serves on the board of directors of
Alcoa and is on the international advisory boards of Mitsubishi Corporation, JP Morgan Chase, Rolls
Royce and the Monetary Authority of Singapore. He is the Chairman of the Sir Ratan Tata Trust and the
Sir Dorabji Tata Trust, two of the largest private sector-promoted philanthropic Trusts in India. He is the
chairman of the Council of Management of the Tata Institute of Fundamental Research. He also serves
on the board of trustees of Cornell University and the University of Southern California. Mr. Tata has
received honorary doctorates from several universities in India and abroad. In 2008, the Government of
India honoured Mr. Tata with its second-highest civilian award, the Padma Vibhushan.

Mr. Natarajan Chandrasekaran is the Executive Chairman of Tata Sons Limited and the former CEO and
MD of Tata Consultancy Services (TCS). Under his leadership, TCS became the largest private sector
employer and was rated as the world's most powerful brand in IT services in 2015. TCS was also
recognized as a Global Top Employer by the Top Employers Institute across 24 countries. Mr.
Chandrasekaran has played an active role in Indo-US and India-UK CEO Forums and is part of
India’s business taskforces for Australia, Brazil, Canada, China, Japan and Malaysia. He served
as the Executive Chairman of NASSCOM, India’s apex trade body for IT services firms, in 2012-
13 and continues to be a member of its governing executive council. Mr. Chandrasekaran has received
several awards and was honoured with the ’Business Leader Award’ at the Economic Times Awards for
Corporate Excellence 2016. He was voted the ‘Best CEO’ at the 2015 All-Asia Executive Team rankings
for the fifth consecutive year in 2015. He was awarded the Frans Banninck Cocq Medal from the City of

24
Amsterdam for promoting trade and economic relations between The Netherlands and India. Mr.
Chandrasekaran has been conferred honorary degrees and doctorates by several universities in India
and abroad including KIIT University (2012), SRM University (2010) and Nyenrode Business University in
the Netherlands, among others.

VISION OF THE COMPANY:-

We aspire to be the global steel industry benchmark

for Value Creation and Corporate Citizenship.
We make a difference through;

Our
Innovative
Our Our Our Our Approach
People Offerings Conduct Policies

MISSON OF THE COMPANY:-

Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to
strengthen India’s industrial base through effective utilization of staff and materials. The means
envisaged to achieve this are cutting edge technology and high productivity, consistent with modern
management practices.
Tata Steel recognizes that while honesty and integrity are essential ingredients of a strong and
stable enterprise, profitability provides the main spark for economic activity. Overall, the Company
seeks to scale the heights of excellence in all it does in an atmosphere free from fear, and thereby
reaffirms its faith in democratic values.

Prepared for the future

Tata Steel operates with a completely integrated value chain that extends from mining to finished
steel products. With a relentless focus on innovation and cutting-edge technologies, we are building a
sustainable business enterprise.

Innovation Technology Sustainability

We focus on creating solutions We value the importance of We remain committed

that make a positive difference technology as a strategic to conserving natural
to the society with patents, new enabler and intend to leverage resources while ensuring
products, new materials and by both steel technology and digital sustainable growth and
developing in-house interface to achieve service fostering strong relation
technologies for sustainable excellence. with communities.
performance

25
PRODUCTS AND MARKETS
Diversified portfolio across markets

AUTOMOTIVE

Market Products
Sub-segment and Brands

Auto OEMs* Hot-rolled (HR), Cold-rolled (CR),

B2B Coated Sheets, Steel Coils and Sheets

Auto Ancillaries HR, CR, Coated Steel Coils and Sheets,

B2B, B2ECA Precision Tubes, Tyre Bead Wires, Spring
Wires, Bearings

CONSTRUCTION

Market Products
Sub-segment and Brands

Individual House Tata Tiscon (Rebars), Pravesh (Steel

Builders Doors and Windows), Tata Shaktee
B2C (Roofing Sheets), Tata Pipes (Plumbing
Pipes), Tata Structura (Tubes)
Corporate and Government Nest-In (Habinest – Prefabricated Houses,
Infrastructure
Bodies B2B TMT Rebars
AquaNest (Higher
Water DiaEzynest
Kiosks, Rebars and
Modular
Corrosion-resistant
Toilets, MobiNest –Steel)
Office Cabins,
B2B, B2G
Nestudio – Rooftop Houses)

Housing and Tiscon Readybuild (Cut and Bend Bars),

Commercial Tata Structura (Tubes), PC Strands
(LRPC)**, Tata Nirman, Tata Aggreto,
Ground Granulated Blast Furnace Slag
B2ECA (GGBS)

INDUSTRIAL AND GENERAL ENGINEERING

Market Products
Sub-segment and Brands

26
Panel and Appliances, Fabrication Tata Steelium (CR), Galvano (Coated),
and Capital Goods, Tata Astrum (HR),
Furnitures Tata Structura (Tubes)
B2ECA
LPG HR
B2B

I
Welding Wire Rods
B2B

Process Industries Tata Tiscrome (Ferro Chrome),

(e.g., Cement, Tata Ferromag (Ferro Manganese),
Power, Steel) Boiler Tubes, Tata Pipes, Tata Ferroshots,
B2B Blast Furnace (BF) Slag, Metallics

AGRICULTURE

Market Products
Sub-segment and Brands

Agri Equipment Bearings

B2B

Fencing, Farming Galvanised Iron (GI), Wires, Agri and

and Irrigation Garden Tools, Conveyance Tubes
B2C

B2B - Business to Business

B2C - Business to Consumer
B2G - Business to Government
B2ECA - Business to Emerging Corporate Account
*OEM - Original Equipment Manufacturer
**LRPC - Low-Relaxation Pre-stressed Concrete

TATA STEEL LIMITED

BALANCE SHEET
as at March 31, 2019

27
 (₹ crore)

PARTICULARS As at As at
March 31,2019 March 31,2018

Assets

(I) Non Current Assets

(a) Property, plant and equipment 70,416.82 70,942.90

5,686.02 5,641.50
(b) Capital work-in-progress

(c) Intangible assets 805.20 786.18

(d) Intangible assets under development 110.27 31.77

(e) Investments in subsidiaries, associates and joint ventures

4,437.76 3,666.24

(f) Financial assets

(i) Investments
34,491.49 5,970.32
(ii) Loans
231.16 213.50

(iii) Derivative assets 9.05 12.13

(iv) Other financial assets 310.65 21.21

(g) Non-current tax assets (net) 1428.38 1,043.84

2535.98 2,140.84
(h) Other assets

1,20,462.78 90,470.43

Total Non-current assets

(II) Current Assets

11,255.34 11,023.41
(a) Inventories

(b) Financial assets

477.47 14,640.37
(i) Investments
1,363.04 1,875.63
(ii) Trade receivables

544.85 4,588.89
(iii) Cash and cash equivalents
173.26 107.85

28
 (iv) Other balances with banks
74.13
(v) Loans 55.92

30.07
(vi) Derivative assets 14.96
491.51
(vii) Other financial assets 940.76
1812.05
(c) Other assets 2209.98

34,643.91
17,035.58
Total Current Assets

1,37,498.36 1,25,114.34
Total Assets

Equity & Liability

(III) Equity
1,146.12 1,146.12
(a) Equity share capital
2,275.00 2,275.00
(b) Hybrid perpetual securities
69,308.59 60,368.72
(c) Other equity

72,729.71 63,789.84

Total equity

(IV) Non Current Liability

(a) Financial liabilities

24,568.95
(i) Borrowings 26,651.19
70.08
(ii) Derivative liabilities 59.82
19.78
(iii) Other financial liabilities 125.07

1,961.21
(b) Provisions 1,918.18

(c) Retirement benefit obligations 1,247.73

1,430.35
1,365.61
(d) Deferred income 747.23

(e) Deferred tax liabilities (net) 6,259.09

7807.00
224.71
(f) Other liabilities 436.16

Total Non-Current Liability

39,175.00 35,717.16

(V) Current Liability

(a) Financial liabilities

(i) Borrowings

29
 (ii) Trade payables

 Total outstanding dues of micro and small enterprise's 8.09 669.88

 Total outstanding dues of creditors other than micro and small

149.49 25.48
enterprises
10,820.07 11,217.27
(iii) Derivative liabilities

(iv) Other financial liabilities

139.57 16.41
(b) Provisions 6,872.53 6541.40

(c) Retirement benefit obligations 778.23 735.28

(d) Current tax liabilities (net) 102.12 90.50

(e) Other liabilities 358.14 454.06

6365.59 5857.06

Total Current Liability

25593.65 25,607.34

Total equity & Liability

137498.36 1,25,114.34

30
 STATEMENT OF PROFIT AND LOSS
for the year ended March 31, 2019
(₹ crore)

PARTICULAR

Year ended Year ended

March 31,2019 March 31,2018

(I) Revenue from operations 70610.92 60519.37

(II) Other income 2405.08 763.66
(III) Total income 73016.00 61283.03
(IV) Expenses:
a) Cost of materials consumed 19840.29 16877.63

b) Purchases of stock-in-trade 1807.85 647.21

c) Changes in inventories of finished and semi-finished (554.33) 545.36

goods, stock-in-trade and work-in-progress

d) Employee benefits expense 5131.06 4828.85

e) Finance costs 2823.58 2810.62

f) Depreciation and amortisation expense 3802.96 3727.46
g) Other expenses
244622.81 22178.02

Less: Expenditure (other than interest) transferred to

799.70 51615.15
capital and other accounts
56674.22 336.66

31
Total expenses

(V) Profit before exceptional items and tax (III-IV) 16341.48 51278.49

(VI) Exceptional items:

262.28 -
a) Profit/(loss) on sale of non-current investments
b) Provision for impairment of investments/doubtful (12.53) (62.92)
advances
c) Provision for demands and claims (328.64) (3213.68)
d) Employee separation compensation (35.34) (89.69)
(114.23) (3366.29)
Total exceptional items

(VII) Profit before tax (V+VI) 16,227.25 6638.25

(VIII) Tax expense:

a) Current tax 6297.11 1586.78

b) Deferred tax (603.05) (881.92)
Total tax expense 5694.06 2468.70

(IX) Profit for the year (VII-VIII) 10533.19 4169.55

(X )Other comprehensive income/(loss)

A. (i) Items that will not be reclassified subsequently to

profit and loss

a) Remeasurement gain/(loss) on post-employment 5.95 237.63

defined benefit plans
(46.23) (233.00)
b) Fair value changes of investments in equity shares
(ii) Income tax on items that will not be reclassified
(2.63) (82.24)
subsequently to profit and loss

B. (i) Items that will be reclassified subsequently to profit

and loss
(10.62) 9.96
a) Fair value changes of cash flow hedges
(ii) Income tax on items that will be reclassified 3.71 (3.47)
subsequently to profit and loss

Total other comprehensive income/(loss) for the year

(50.22) (61.12)
(XI )Total comprehensive income/(loss) for the year (IX+X)
10482.97 4108.43

32
(XII) Earnings per share

Basic( rupees) 90.41 38.57

90.40 38.56
Diluted (Rupees)

Generally Accepted Auditing Standards (GAAS)

Generally accepted auditing standards (GAAS) are a set of systematic guidelines used by auditors
when conducting audits on companies' financial records. GAAS helps to ensure the accuracy,
consistency, and verifiability of auditors' actions and reports. The Auditing Standards Board (ASB) of the
American Institute of Certified Public Accountants (AICPA) created GAAS.

Understanding the Generally Accepted Auditing Standards GAAS are the auditing standards that help
measure the quality of audits. Auditors review and report on the financial records of companies
according to the generally accepted auditing standards.

General standards:-The first three GAAS are general standards that address your qualifications to be an
auditor and the minimum standards for your work product:

 As an auditor, you must have both adequate training and proficiency

 You are independent bath fact and appearance

 You exercise due professional care in performing your auditing tasks.

Standards of fieldwork:- The next three GAAS govern how you actually do your job:

 Your work is adequately planned, and all assistants are properly supervised.

 You gain an understanding of the client and its environment, including internal controls, to
assess the risk of material misstatement in the financial statements and to plan your audit.

 The evidence you gather during the audit is appropriate and sufficient to evaluate
management's assertions on the financial statements.

Standards of reporting :- The last four GAAS concern Information you must consider prior to issuing
your audit report:

 You have to state whether the financial statements are prepared using generally accepted
accounting principles (GAAP).

 Just as important is to report whether GAAP are consistently applied for all financial
accounting. Should this not be the case, you have to report any departures

33
  You also have to make sure that disclosures - any additional information needed explain the
numbers on the financial statements-are provided.

Lastly, you have to include your opinion as to whether the financial statements present fairly in all
material respects the financial position of the company under audit.

Accounting Standards (Currently applicable and used in company or not)

Accounting Standards Y/N

AS 1 Discloses of accounting policies Y

AS 2 Valuation of inventories Y

AS 4 Contingencies and Events occurring after the balance sheet date Y

AS 5 Net profit and Loss for the period, prior period items and changes in Y
Accounting policies

AS 6 Depreciation Accounting Y

AS 9 Revenue Recognition Y

AS 10 Accounting for fixed assets Y

AS 13 Accounting for Investments Y

AS 14 Accounting for Amalgamations Y

AS 15 Employee Benefits Y

AS 16 Borrowing Costs Y

AS 18 Related Party Disclosures Y

AS 20 Earning Per Share Y

34
AS 22 Accounting for Taxes on Income Y

AS 26 Intangible Assets Y

AS-1- DISCLOSURE OF ACCOUNTING POLICIES

 Any change and financial impact such change should be disclosed.

 If fundamental assumptions (going concern, consistency and accrual) are not followed, the
fact to be disclosed Going concern assumption is assessed for a foreseeable period of one
year

 Accounting Policies adopted by the enterprise should represent true and fair view of the state
of affairs of the financial statements

 Major considerations governing selection and application of accounting policies are: i)

Prudence, i) Substance over form and i) Materiality.

AS-2-VALUATION OF INVENTORIES

The cost of inventories should comprise all costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present location and condition.

Inventories are valued at lower of cost or net realizable value. Specific identification method is required
when goods are not ordinarily interchangeable.

AS-4 - CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

The amount of a contingent loss should be provided for by a charge in the statement of profit and
loss it is probable that future events will confirm that, after taking into account any related probable
recovery, an asset has been impaired or a liability has been incurred as at the balance sheet date, and a
reasonable estimate of the amount of the resulting loss can be made.

Assets and liabilities should be adjusted for events occurring after the balance sheet date that
provide additional evidence to assist the estimation of amounts relating to conditions existing at the
balance sheet date or that indicate that the fundamental accounting assumption of going concern (e.
the continuance of existence or substratum of the enterprise) is not appropriate.

35
AS-6 - DEPRECIATION ACCOUNTING

Allocate depreciable amount of a depreciable assets on systematic basis to each accounting year
over useful life of asset useful life may be reviewed periodically.

Basis must be consistently followed and disclosed. Any change to be quantified and disclosed.

Rates f depreciation should be disclosed.

A change in method followed be made only it required by the statute, compliance to Accounting
Standard, appropriate preparation or presentation of the financial statement.

In cases of extension, revaluation or exchange fluctuation, depreciation to be provided on adjusted

figure prospectively over the residual useful life of the asset.

AS-10 - ACCOUNTING FOR FIXED ASSETS

 The cost of a fixed asset should comprise its purchase price and any attributable cost of bringing
the asset to its working condition for its intended use.

 Self-constructed asset shall be accounted at cost

In case of exchange of asset fair value of asset acquired or the net book value of asset given up
whichever is more clearly evident shall be considered.

Revaluation is permitted provided it is done for the entire class of assets. The basis of revaluation
should be disclosed.

Increase in value on revaluation shall be credited to Revaluation Reserve while the decrease should
be charged to Profit and Loss Account.

36
 DRAFT OF AN AUDIT REPORT

INDEPENDENT AUDITOR’S REPORT

TO,
THE MEMBERS
TATA STEEL LIMITED

Report on the Audit of the Consolidated Financial Statements:

Opinion

1. We have audited the accompanying Consolidated Financial Statements of Tata Steel Limited
(hereinafter referred to as the “Holding Company”) and its subsidiaries (Holding Company and its
subsidiaries together referred to as “the Group”), its associates and jointly controlled entities (refer
Note 1 to the attached Consolidated Financial Statements), which comprise the Consolidated Balance
Sheet as at March 31, 2019, the Consolidated Statement of Profit and Loss (including Other
Comprehensive Income), the Consolidated Statement of Changes in Equity and the Consolidated
Statement of Cash Flows for the year then ended, and Notes to the Consolidated Financial Statements,
including a summary of significant accounting policies and other explanatory information prepared
based on the relevant records (hereinafter referred to as “the Consolidated Financial Statements”).

Basis for Opinion

2. We conducted our audit in accordance with the Standards on Auditing (SAs) 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 Consolidated Financial Statements section of our report. We are
independent of the Group, its associates and jointly controlled entities in accordance with the ethical
requirements that are relevant to our audit of the Consolidated Financial Statements in India in terms
of the Code of Ethics issued by the Institute of Chartered Accountants of India and the relevant
provisions of the Act, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained and the audit evidence obtained
by the other auditors in terms of their reports referred to in sub-paragraph 20 of the Other Matters
paragraph below, other than the unaudited financial statements/financial information as certified by

37
the management and referred to in sub-paragraph 21 of the Other Matters paragraph below, is
sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

3. We draw your attention to the following paragraph included in the audit report on the consolidated
special purpose financial information of Tata Steel BSL Limited (formerly Bhushan Steel Limited), a
subsidiary of the Holding Company, issued by an independent firm of chartered accountants vide its
report dated April 18, 2019: “We draw attention to Note 3 to the Consolidated Special Purpose
Financial Information which describes the implementation of Resolution Plan pursuant to its approval
by National Company Law Tribunal and the resultant impact of the same, as recorded in the
Consolidated Special Purpose Financial Information as at 17 May 2018. Our opinion is not modified in
respect of this matter.” Note 3 as described above corresponds to Note 41(A) to the Consolidated
Financial Statements. Our opinion is not modified in respect of this matter.

Key Audit Matters.

4.Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Consolidated Financial Statements of the current year. These matters were addressed
in the context of our audit of the Consolidated Financial Statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters .

Assessment of Holding Company’s litigations and related disclosure of contingent liabilities

[Refer to Note 2 (c) to the Consolidated Financial Statements – “Use of estimates and critical accounting
judgements – Provisions and contingent liabilities”, Note 39 (A) to the Consolidated Financial
Statements – “Contingencies” and Note 40 to the Consolidated Financial Statements – “Other
significant litigations”]
As at March 31, 2019, the Holding Company has exposures towards litigations relating to various
matters as included in the aforesaid Notes. Significant management judgement is required to assess
such matters to determine the probability of occurrence of material outflow of economic resources and
whether a provision should be recognised or a disclosure should be made. The management judgement
is also supported with legal advice in certain cases as considered appropriate. As the ultimate outcome
of the matters are uncertain and the positions taken by the management are based on the application
of their best judgement, related legal advice including those relating to interpretation of
laws/regulations, it is considered to be a Key Audit Matter.

Business combination- Purchase Price Allocation for acquisition of Tata Steel BSL Limited (formerly
Bhushan Steel Limited)

[Refer to Note 2(e) to the Consolidated Financial Statements – “Business Combinations” and Note 41(A)
to the Consolidated Financial Statements]

On May 18, 2018, the Group completed the acquisition of business of Tata Steel BSL Limited
(formerly Bhushan Steel Limited) (“TSBSL”), pursuant to the approved resolution plan under the
Insolvency and Bankruptcy Code, 2016. The Group determined the acquisition to be business
combination in accordance with Ind AS 103. Ind AS 103 requires the identified assets and liabilities be
recognised at fair value at the date of acquisition with the excess of identified fair value of recognized

38
assets and liabilities over the acquisition cost as capital reserve. The Group engaged with the auditors of
TSBSL (“other auditor”) to perform an audit of the financial information of TSBSL as at the acquisition
date who have provided an unmodified opinion vide their audit report dated April 18, 2019. The
Management determined that the fair values of the net identifiable assets acquired was `1,918.88
crore. The valuation was performed as part of the Purchase Price Allocation (PPA). The Group
appointed independent professional valuers to perform valuation of certain assets for the purpose of
PPA. The purchase price allocation exercise was completed resulting in the Group recognising capital
reserve of `1,236.34 crore directly in “Other Equity”. Significant assumptions and estimates were used
in the determination of the fair values of the identified assets acquired and liabilities assumed in the
transaction and thus we consider this area to be a Key Audit Matter.

Accounting treatment for the effects of the Resolution Plan

Refer Note 4 to the Consolidated Special Purpose Financial Information.

Prior to the approval of the Resolution Plan on 15 May 2018, the Holding Company was a party to
certain litigations. Pursuant to the approval of the Resolution Plan, it was determined that no amounts
are payable in respect of those litigations as they stand extinguished. The Holding Company had also
made certain payments to the relevant authorities in respect of those litigations which are presented as
recoverable under “Other non-financial assets-non-current” in the Consolidated Special Purpose
Financial Information. The estimates related to expected outcome of litigations and recoverability of
payments made in respect thereof have high degree of inherent uncertainty due to insufficient judicial
precedents in India in respect of disposal of litigations involving companies admitted to Corporate
Insolvency Resolution Process. The application of significant judgement in the aforementioned matter
required substantial involvement of senior personnel on the audit engagement including individuals
with expertise in accounting of financial instruments.

Other Information
The Holding Company’s Board of Directors is responsible for the other information. The other
information comprises the information in the Integrated Report, Board's Report alongwith its
Annexures and Financial Highlights included in the Holding Company’s Annual Report (titled as ‘Tata
Steel Integrated Report & Annual Accounts 2018-19'), but does not include the financial statements and
our auditor’s report thereon.

Our opinion on the Consolidated 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 Consolidated Financial Statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially
inconsistent with the Consolidated Financial Statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If, based on the work we have performed and the reports
of the other auditors as furnished to us (Refer paragraph 20 below), 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.

39
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements

The Holding Company’s Board of Directors is responsible for the preparation and presentation of
these Consolidated Financial Statements in terms of the requirements of the Act that give a true and
fair view of the consolidated financial position, consolidated financial performance, consolidated
changes in equity and consolidated cash flows of the Group including its associates and jointly
controlled entities in accordance with the accounting principles generally accepted in India, including
the Accounting Standards specified under Section 133 of the Act. The respective Board of Directors of
the companies included in the Group and of its associates and jointly controlled entities are responsible
for maintenance of adequate accounting records in accordance with the provisions of the Act for
safeguarding the assets of the Group and its associates and jointly controlled entities respectively and
for preventing and detecting frauds and other irregularities; selection and application of appropriate
accounting policies; making judgements 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 financial statements that give a true and fair view and are free
from material misstatement, whether due to fraud or error, which have been used for the purpose of
preparation of the Consolidated Financial Statements by the Directors of the Holding Company, as
aforesaid.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the Consolidated 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 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 Consolidated Financial Statements .

As part of an audit in accordance with SAs, we exercise professional judgement and maintain
professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Consolidated 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 Holding Company has adequate internal
financial controls with reference to Consolidated Financial Statements in place and the operating
effectiveness of such controls.

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 • 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 ability of the Group and its associates and jointly
controlled entities 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 Consolidated
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 Group and its associates and jointly controlled entities to cease to continue as
a going concern.
• Evaluate the overall presentation, structure and content of the Consolidated Financial Statements,
including the disclosures, and whether the Consolidated Financial Statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group and its associates and jointly controlled entities to express an
opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and
performance of the audit of the financial statements of such entities included in the Consolidated
Financial Statements of which we are the independent auditors. For the other entities included in the
Consolidated Financial Statements, which have been audited by other auditors, such other auditors
remain responsible for the direction, supervision and performance of the audits carried out by them.
We remain solely responsible for our audit opinion.

Report on Other Legal and Regulatory Requirements

(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 of the aforesaid Consolidated
Financial Statements.

(b) In our opinion, proper books of account as required by law relating to preparation of the
aforesaid Consolidated Financial Statements have been kept so far as it appears from our examination
of those books and the reports of the other auditors.

(c) The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss (including Other
Comprehensive Income), the Consolidated Statement of Changes in Equity and the Consolidated
Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account
and records maintained for the purpose of preparation of the Consolidated Financial Statements.

(d) In our opinion, the aforesaid Consolidated Financial Statements comply with the Accounting
Standards specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors of the Holding Company
taken on record by the Board of Directors of the Holding Company and the reports of the statutory
auditors of its subsidiary companies, associate companies and jointly controlled companies
incorporated in India, none of the directors of the Group companies, its associate companies and jointly
controlled companies incorporated in India is disqualified as on March 31, 2019 from being appointed
as a director in terms of Section 164(2) of the Act.

41
 (f) With respect to the adequacy of internal financial controls with reference to Consolidated
Financial Statements of the Group and the operating effectiveness of such controls, refer to our
separate report in Annexure A.

(g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule
11 of the Companies (Audit and Auditor’s) Rules, 2014, in our opinion and to the best of our
information and according to the explanations given to us:

i. The Consolidated Financial Statements disclose the impact of pending litigations as on March
31, 2019 on the consolidated financial position of the Group, its associates and jointly controlled
entities– Refer Notes 39 (A) and 40 to the Consolidated Financial Statements.

ii. The Group, its associates and jointly controlled entities had long-term contracts including
derivative contracts as on March 31, 2019 for which there were no material foreseeable losses.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor
Education and Protection Fund by the Holding Company and its subsidiary companies, associate
companies and jointly controlled companies incorporated in India during the year ended March 31,
2019 except for amounts aggregating to `5.25 crore, which according to the information and
explanations provided by the management is held in abeyance due to dispute/pending legal cases.

iv. The reporting on disclosures relating to Specified Bank Notes is not applicable to the Group for
the year ended March 31, 2019.

For XXX
CHARTERED ACCOUNTANTS
Firm Registration Number: xxx

Place: Balasore MR.A

Date : 31/032020 (Partner)

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 Membership no. 123xxx

CONCLUSION

The project concluded that given the complexity and development of Company, the overall level of
compliances with the standards and codes is of high order. This project gives the correct ideas about
how the major areas can be found by way of effective auditing system i.e. errors, frauds, manipulations
etc. form this auditor get the clear idea show to recommend on the position. Project also contain that
how to conduct of audit of the company, what are the various procedure through which audit of
company should be done. Form auditing point of view, there is proper follow up of work done in every
organization there no misconduct of transactions is taken places for that purpose the auditing is very
important aspect in today's scenario form company and point of view

BIBLIOGRAPHY:-

BOOKS REFERRED

1. Gupta, Kamal and Ashok Arora. Fundamentals of Auditing. Tata Mc-Graw Hill Publishing
Co. Ltd., New Delhi

2. Jha, Aruna . Auditing. Taxmann

3. Ghatalia, S.V. Practical Auditing. Allied Publishers Pvt. Ltd., New Delhi

4. Alvin Arens and James Loebbecke, Auditing: an Integrated Approach

5. Singh, A.K. and Virender Sharma , Auditing Principle and Practice, PHI Learning Christine
A Marlin , Corporate Governance ( INDIAN EDITION ), Oxford University Press , New Delhi.

6. The companies Act 2013 (Relevant Sections)

NEWS PAPERS & MAGAZINE

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1. India time

2 .Samaj news paper

3. The hindustan

4. The times of india

WEBSITE LINKS:-

1. www.google.com 4. www.tatasteel.com

2. www.wikipedia.com 5. www..com

3. www.investopedia.com

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