'Audit'

Definition: Audit is the examination or inspection of various books of accounts by an auditor followed by
physical checking of inventory to make sure that all departments are following documented system of
recording transactions. It is done to ascertain the accuracy of financial statements provided by the
organization.

Meaning: Audit can be done internally by employees or heads of a particular department and externally
by an outside firm or an independent auditor. The idea is to check and verify the accounts by an
independent authority to ensure that all books of accounts are done in a fair manner and there is no
misrepresentation or fraud that is being conducted.

Special audit

Types of Audits
1. External
External audit, also known as financial audit and statutory audit, involves the examination of the truth and
fairness of the financial statements of an entity by an external auditor who is independent of the
organization in accordance with a reporting framework such as the IFRS. Company law in most jurisdictions
requires external audit on annual basis for companies above a certain size. External auditors could be
individual or audit firms. These kind of firms are sometime call CPA firms as they required to hold CPA
qualification to run audit firm and sign audit reports.

This type of audit required to maintain professional code of ethic and strictly follow international audit
standard or local standards as required by local law.

#2: Internal Audit

Internal audit refer to people or department that working in the company to perform internal audit
activities as determine by audit committee or board of directors. Internal audit is employed by company
but it is independence from operation and not reporting to executive management. Scope of internal
audit is generally determine by audit committee or board of directors. And if there is no audit
committee and board of directors, internal audit normally report to owner of the company. Unlike
external audit, whose scope is primarily restricted to matters that concern the financial statements, the
scope of work of an internal audit is very broad and can encompass any matters which can affect the
achievement of organizational objectives.

#3: Forensic Audit

Forensic audit normally perform by forensic accountant who have the skill in both accounting and
investigation. Forensic Accounting is the type of engagement that undertaking the Financial
Investigation in response to a particular subject matter, where the findings of the investigation may be
used as evidence in court. The investigation is cover certain areas include fraud, crime, insurance claims
as well as dispute among shareholders. Forensic audit also need to have proper plan, procedure and
report like others audit engagement. Forensic audit also need to for follow ethical guideline like an audit
of financial statements. This kind of engagement is not popular as an audit of financial statements or
statutory audit.

#5: Financial Audit

Financial audit refer to audit of entity’s financial statements by an independence auditors where audit
opinion will be provided on those financial statements. Financial audit normal perform by external audit
firm who hold CPA. Financial audit normally perform annually and at the end of the year. But, sometime
as require management, bank, security exchange, regulation, or else, the financial audit is also perform
quaintly as well. Most of the entity prepare its financial statements based on IFRS, and some entity’s
financial statements are prepared based on local GAAP.

STATE BANK OF INDIA. (SBIN) - AUDITORS

REPORT
Company auditors report
Independent Auditors' Report
To
The President of India
Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of State Bank of India
("the Bank") as at March 31 2018 which comprise the Balance Sheet as onthat date and the
Profit and Loss Account and the Cash Flow Statement for the year thenended and a summary
of significant accounting policies and other explanatory information.Incorporated in these
standalone financial statements are the returns of -i) The CentralOffices 16 Local Head Offices
Global Market Group International Business GroupCorporate Accounts Group (Central) Mid-
Corporate Group (Central) Stressed AssetsResolution Group (Central) Central Accounts
Offices and 42 branches audited by us; ii)14566 Indian Branches audited by other auditors; iii)
51 Foreign Branches audited by thelocal auditors.
The branches audited by us and those audited by other auditors have been selected bythe Bank
in accordance with the guidelines issued to the Bank by the Reserve Bank ofIndia. Also
incorporated in the Balance Sheet and the Profit and Loss Account are thereturns from 9033
Indian Branches (including other accounting units) which have not beensubjected to audit.
These unaudited branches account for 3.49 % of advances 12.56 % ofdeposits and 4.62 % of
interest income and 12.85 % of interest expenses.
Management's Responsibility for the Standalone Financial Statements
2. The Bank's management is responsible for the preparation of these standalonefinancial
statements that give a true and fair view of the financial position financialperformance and cash
flows of the Bank in accordance with the requirements of the ReserveBank of India the
provisions of the Banking Regulation Act 1949 the State Bank of IndiaAct 1955 and
recognised accounting policies and practices including the AccountingStandards issued by the
Institute of Chartered Accountants of India (ICAI). Thisresponsibility of the management
includes the design implementation and maintenance ofinternal controls and risk management
systems relevant to the preparation of thestandalone financial statements that are free from
material misstatement whether due tofraud or error. In making those risk assessments the
management has implemented suchinternal controls that are relevant to the preparation of the
standalone financialstatements and designed procedures that are appropriate in the
circumstances so that theinternal control with regard to all the activities of the Bank is
effective.
Auditors' Responsibility
3. Our responsibility is to express an opinion on these standalone financial statementsbased on
our audit. We conducted our audit in accordance with the Standards on Auditingissued by the
Institute of Chartered Accountants of India. Those Standards require that wecomply with
ethical requirements and plan and perform the audit to obtain reasonableassurance about
whether the standalone financial statements are free from materialmisstatement.
4. An audit involves performing procedures to obtain audit evidence about the amountsand
disclosures in the standalone financial statements. The procedures selected depend onthe
auditor's judgment including the assessment of the risks of material misstatement ofthe
standalone financial statements whether due to fraud or error. In making those riskassessments
the auditor considers internal control relevant to the Bank's preparation andfair presentation of
the standalone financial statements in order to design auditprocedures that are appropriate in
the circumstances but not for the purpose ofexpressing an opinion on the effectiveness of the
entity's internal control. An audit alsoincludes evaluating the appropriateness of accounting
policies used and the reasonablenessof the accounting estimates made by management as well
as evaluating the overallpresentation of the standalone financial statements.
5. We believe that the audit evidence we have obtained is suficient and appropriate toprovide a
basis for our audit opinion.
Opinion
6. In our opinion as shown by books of the Bank and to the best of our informationand
according to the explanations given to us:
(i) the Balance Sheet read with the significant accounting policies and the notesthereon is a full
and fair Balance Sheet containing all the necessary particulars isproperly drawn up so as to
exhibit a true and fair view of state of affairs of the Bank asat March 31 2018 in conformity
with accounting principles generally accepted in India;
(ii) the Profit and Loss Account read with the significant accounting policies and thenotes
thereon shows a true balance of loss in conformity with accounting principlesgenerally
accepted in India for the year covered by the account; and
(iii) the Cash Flow Statement gives a true and fair view of the cash flows for the yearended on
that date.
Emphasis of Matter
7. We draw attention to:
a) Note no 18(9)(b) regarding unamortized balance of INR 2707.50 crore on account
ofadditional liabilities towards Gratuity; and
b) Note no 18(9)(g) regarding recognition of Deferred Tax Assets of INR2461.40 Crore on
provision for standard assets.
Our Opinion is not modified in respect of the above stated matters.
Report on Other Legal and Regulatory Requirements
8. The Balance Sheet and the Profit and Loss Account have been drawn up in Forms"A" and
"B" respectively of the Third Schedule to the BankingRegulation Act 1949 and these give
information as required to be given by virtue of theprovisions of the State Bank of India Act
1955 and regulations there under.
9. Subject to the limitations of the audit indicated in paragraphs 1 to 5 above and asrequired by
the State Bank of India Act 1955 and subject also to the limitations ofdisclosure required there
in we report that:
a) We have obtained all the information and explanations which to the best of ourknowledge
and belief were necessary for the purposes of our audit and have found them tobe satisfactory.
b) The transactions of the Bank which have come to our notice have been within thepowers of
the Bank.
c) The returns received from the ofices and branches of the Bank have been foundadequate for
the purposes of our audit.
10. We further report that:
a) The Balance Sheet the Profit and Loss Account and the Cash Flow Statement dealtwith by
this report are in agreement with the books of account and returns.
b) The reports on the accounts of the branch ofices audited by branch auditors of theBank as
per the provisions of the Banking Regulation Act 1949 and the State Bank ofIndia Act 1955
have been sent to us and have been properly dealt with by us in preparingthis report.
c) In our opinion the Balance Sheet the Profit and Loss Account and the Cash FlowStatement
comply with the applicable accounting standards.
Emphasis of Matter
9. We draw attention to: a) Note no 3.2.1.1 regarding unamortized balance of INR2707.50
crore on account of additional liabilities towards Gratuity; and b) Note no 3.7regarding
recognition of Deferred Tax Assets of INR 2461.40 crore on provision forstandard assets; Our
opinion is not modified in respect of the above stated matters.
FOR VARMA & VARMA

CHARTERED ACCOUNTANTS

FRN 004532S

P R PRASANNA VARMA
PLACE: MUMBAI PARTNER

DATE: 22ND MAY 2018 M. NO.025854