Drafting:

Key Audit Matter How the matter was addressed in our audit

1.Revenue:  Considered whether revenue recognition policy of

Refer note xxx to the financial statements. company is appropriate in accordance with
applicable accounting standards.
The company recognized revenue from sale of Rs.xxx.  Performed tests of controls over recording of
revenue.
We identified revenue as a Key Audit Matter because this a  For sales recorded during the year, we verified a
key performance indicator of company and there is an sample of revenue transactions with sales orders,
inherent risk that revenue may be misstated to meet sales invoices, GDN and other underlying
expectations or targets. documents.
 Checked sales recorded at year end and credit notes
issued after the year end, to assess whether these
have been recorded in appropriate periods.
 Assessed the adequacy of disclosures related to
Revenue in notes to the accounts.

2.Goodwill:  Used an expert to evaluate assumptions and

Refer note xxx to the financial statements. methodologies used by company.
 Evaluated appropriateness of assumptions (e.g.
Company has recorded Goodwill amounting Rs. xxx. sales, volume, prices, operating cost, growth rates)
by comparing with our own assessment based on
We identified Goodwill as a Key Audit Matter because its our knowledge of client and industry.
amount is material to the financial statements. In addition,  Assessed the adequacy of disclosures related to
annual testing of impairment of goodwill is a highly Goodwill in notes to the accounts.
complex and judgmental process which involves
assumptions and methods affected by future economic
and market conditions.

3.Revaluation of PPE: ( similar for revaluation of  Assessed competence, capability and objectivity
investment property and impairment) of expert.
Refer note xxx to the financial statements.  Obtained revaluation report from valuer and discuss
with management and expert appropriateness
Company has recorded its land, building and machinery at assumptions and methodologies used.
revalued amounts.  Checked relevance, completeness and Accuracy of
source data.
We identified Revaluation of PPE as a Key Audit Matter  Ensured that revaluation is properly accounted for
because its amount is material to the financial statements. and disclosed in financial statements.
In addition, process of valuation is a highly complex and
judgmental process which involves assumptions and
methods affected by future economic and market
conditions.
4.Additions to PPE:  Obtained understanding of controls of mangement
Refer note xxx to the financial statements. over authorisation and recording of capital
expenditures, and Performed tests of controls.
company has made significant capital expenditure on  On a sample basis, tested cost incurred with
PPE. supporting documents and contacts. Also analyzed
nature of expenditure to evaluate whether
We identified addition/capitalization to PPE as a key expenditure meets criteria for capitalization as per
Audit Matter because there may be misclassification applicable accounting standards.
between capital and revenue expenditure. Further, there  Inspected supporting documents to ensure it has
may also be implications on depreciation expense because been
of this misclassification.  capitalized from date when asset was ready for
intended use.
 Assessed reasonableness of useful life of fixed asset.
 Tested calculation of depreciation expense.

5.Non-current assets held for sale:  Discussed with management regarding their plan
Refer note xxx to the financial statements. to dispose-off the asset. Checked status of sales
process and reviewed correspondence with
Company has classified some of its non-current assets as prospective buyers.
held for sale.  Reviewed board-minutes to confirm approval of
disposal of assets.
We identified non-current assets held for sale as a Key  Assessed competence, capability and objectivity of
Audit Matter because this is a non-routine transaction, expert.
involving significant management judgments. Further,  Obtained revaluation report from valuer and
there are also requirments regarding determination of discussed with management and expert
fair value, presentation and disclosures relating to assets appropriateness of assumptions and methodologies
held for sale. used.
 Assessed the adequacy of disclosures related to
non-current assets held for sale in notes to the
accounts.

6.Tax contingencies:  We circularized confirmation to company's external

Refer note xxx to the financial statements. tax consultants for their views on tax assessment,
and discussed the rationale and justification of their
Company has a number of tax contingencies. views.
 We used our own tax specialist to consider the level
We identified tax contingencies as a Key Audit Matter of provision required considering nature of case,
because of significance of amounts involved, and legal precedents, and company's correspondence
judgments involved to assess the outcome (i.e. level of with the tax authorities.
provisions and disclosures) of tax litigations.  We analyzed significant changes from prior period.
 Assessed the adequacy of disclosures related to
tax contingencies in notes to the accounts.
7.Completeness and valuation of Litigations & Claims:  We assessed management's process to identify new
Refer note xxx to the financial statements. obligations, and changes in existing obligations.
 We used our own legal expert to consider the level
Company has a number of pending litigations. of provision required considering nature of case,
legal precedents, and company's correspondence
We identified pending litigations as a Key Audit Matter with opponents.
because of significance of amounts involved, and  We circularized confirmation to company's external
judgments involved to assess the outcome (i.e. level of legal consultants for their views on pending
provisions and disclosures) of pending litigations. litigations, and discussed the rationale and
justification of their views.
 We analyzed significant changes from prior period.
 Assessed the adequacy of disclosures related to
pending litigations in notes to the accounts.

8.Retirement Benefits:  Assessed competence, capability and objectivity of

Refer note xxx to the financial statements.  actuarial expert.
 Obtained actuarial report from expert and discussed
Company operates defined benefit plans for its with management and expert appropriateness of
employees. assuniiitions and methodologies used.
 Checked relevance, completeness and accuracy of
We identified retirement benefits as a Key Audit Matter sorce data.
because assessment of present value of defined benefit  Ensured that actuarial valuation report is
obligation involves use of assumptions which are properly accounted for and disclosed in financial
inherently complex and require specialist actuarial input statements.
(e.g. expected annual increment in salaries, mortality
rates, discount rates). Changes in these assumptions can
have material impact on calculation of liability.

9.Deferred Tax:  Performed substantive procedures on calculation of

Refer note xxx to the financial statements. deferred tax balances, based on tax regulations.
 Performed analysis of recoverability of deferred tax
Company has recognized deferred tax amounting Rs.xxx. assets, and evaluated company's assumptions and
estimates in generating sufficient future taxable
We identified Deffered Tax as a Key Audti Matter because profits.
its amount is material and assessment process is a highly  Used an internal tax specialist to support us in these
complex and judgmental which involves assumptions and procedures.
methods aggected by future economic and market  Assessed the adequacy of disclosures related to
conditions. deferred tax in notes to the accounts.
10.Related party transactions and disclosures:  Obtained understanding of controls over
Refer note xxx to the financial statements. identification recording and disclosure of related
Party transactions.
Company has many related party transactions mainly Also, tested such controls.
with subsidiaries and associated companies.  Inspected minutes of BOD meetings and
shareholders' meetings to understand nature and
We identified related party transactions as a Key Audit approval of transactions.
Matter because of nature of such transactions and its  On a sample basis, compared transactions with
significance to the financial statements as a whole. related parties with underlying supporting
documents and agreements.
 Obtained confirmation (on sample basis) from
related parties for transactions and balances.
 Assessed the adequacy of disclosures related to
related parties in notes to the accounts.

11.Long term loan:  We reviewed loan agreement and inquired

Refer note xxx to the financial statements. management about compliance with covenants.
Also performed tests of controls related to such
Company has long term loan amounting Rs.xxx. compliance.
 We circularized confirmations to lenders to
We identified long term as a Key Audit Matter confirm outstanding balance and other terms and
because amount involved is significance and there are conditions.
debt-covenants which company is required to comply.  We also reviewed maturity dates of loans to ensure
proper classification between current and non-
current liabilities.
 Assessed the adequacy of disclosures related to long
term loan in notes to the accounts.

12.Inventories:  We performed physical verification of inventory

Refer note xxx to the financial statements. counts.
 We compared, on sample basis, cost of purchased
Company has inventory amounting Rs.xxx. inventory with supporting documents.
 Tested appropriateness of valuation method and
We identified inventories as a Key Audit Matter because their calculation.
its amount is significant as compared to total assets, and  We also evaluated usability of inventory items based
determination of NRV and identification of obsolete on management's report for slow moving, expired
inventory involves significant management judgment and and obsolete items. Also performed tests of controls
estimation. over accuracy of aging report.
 Assessed the adequacy of disclosures related to
inventory in notes to the accounts.
13.Trade debts:  Send confirmation letters to selected debtors.
Refer note xxx to the financial statements.  Checked subsequent receipts of cash.
 Obtained understanding of internal controls over
Company has debtors amounting Rs.xxx. credit control process (e.g. approval, and review of
credit limit), debt collection process, and making
We identified inventories as a Key Audit Matter because provision for bad debts.
its amount is significant as compared to total assets, and  Tested accuracy of receivables' aging report.
determination of recoverable amount involves significant  Assessed appropriateness of assumptions and
management judgment and estimation. estimates made by management for provision for
bad debts by comparing with actual write-offs and
cash collection subsequent to year.
 Assessed historical accuracy of provision for bad
debts.

14.Change in Accounting Policy (or Framework)  Considered the management's process to identify
Refer note xxx to the financial statements. the necessary amendments required in the
Company's financial statements;
IFRS/Law has brought changes regarding measurement,  Ensured the presentation and disclosure
presentation and disclosure of__________. requirements of accounting and reporting
framework relating to change in accounting policy.
In view of the significant change in accounting and
disclosures, we consider it as a key audit matter.