The auditor summarizes the key findings from their examination of the financial statements of Bharat Sanchar Nigam Limited for the year ended 31 March 2014. Several issues were noted regarding the maintenance and verification of fixed assets and inventory records across different circles. Statutory dues were regularly deposited by some circles but there were delays or non-payment by others. Accumulated losses were not found but cash losses were incurred in the current year.

1. Annexure to the Independent Auditors’ Report of even date to the members of
Bharat Sanchar Nigam Limited on the financial statements for the year ended
31 March 2014
Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us, the books of account and other records examined by us in the normal course of audit and based on the audit reports of auditors of all the circles, we report that:
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except in case of 27 circles, where such records have not been appropriately maintained.
Further, one of the circles of the Company does not have any fixed assets. Accordingly, the provisions of clause 4(i) of the order, in respect of this circle, are not applicable.
(b) In case of 12 circles, the fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification of the fixed assets is reasonable having regard to the size of the Company and the nature of its assets in respect of these circles.
However in case of 2 circles, the physical verification has not been completed and in case of 14 circles, the fixed assets have not been physically verified by the management during the year. Further, in the case of 18 circles, the management has furnished the certificate of physical verification of fixed assets but no documentary evidence was provided. Hence in respect of all these circles, we are unable to comment on the discrepancies, if any, which could have arisen on such verification. In our opinion, the frequency of verification of the fixed assets is also not reasonable having regard to the size of the Company and nature of its assets in respect of these circles.
(c) In our opinion, a substantial part of fixed assets has not been disposed off during the year.
(ii) (a) In case of 22 circles, the management has conducted physical verification of inventory at reasonable intervals during the year. Further, 7 circles do not carry any inventory and accordingly the provisions of clause 4 (ii) of the order are not applicable in respect of these circles.
.In case of 7 circles, the inventory has not been verified by the management during the year and owing to lack of adequate information at 12 circles, we are unable to comment on the provisions of clause 4 (ii) of the order in respect of these circles.
(b) In case of 8 circles, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.
However, the inventory of 7 circles, have not been verified by the management during the year and owing to no documentation/inadequate documentation provided in case of 26 circles, we are unable to comment on the procedures of physical verification and reasonableness thereof.
(c) In case of 13 circles, proper records of inventory are being maintained and no material discrepancy between physical inventory and book records were noticed on physical verification.
Further, 28 circles are not maintaining proper records of inventory. We are, therefore, unable to comment on the discrepancies which could have arisen between physical inventory and book records.
(iii)(a) The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clauses 4(iii)(b) to 4(iii) (d) of the Order are not applicable.

2. Annexure to the Independent Auditors’ Report of even date to the members of
Bharat Sanchar Nigam Limited on the financial statements for the year ended
31 March 2014 (contd.)
(e) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clauses 4(iii)(f) and 4(iii)(g) of the Order are not applicable.
(iv) In our opinion, in case of 15 circles, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these activities.
However, in case of 33 circles, the internal control system is not commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Out of these circles, 7 noticed continuing failures to correct major weaknesses in the internal control system.
(v) The Company has not entered into any contracts or arrangements referred to in Section 301 of the Act. Accordingly, the provisions of clause 4(v) of the Order are not applicable.
(vi) The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the Companies (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of clause 4(vi) of the Order are not applicable.
(vii) The Company has an internal audit system, the scope and coverage of which, in our opinion, requires to be further enhanced to be commensurate with its size and the nature of its business.
(viii) The auditors of the 3 manufacturing circles have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act in respect of Company’s products and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, no detailed examination of the cost records with a view to determine whether they are accurate or complete has been done for the Company as a whole.
Further, in case of the remaining circles, the cost records are in the process of being prepared at the corporate level and hence, we are unable to comment on the completeness and accuracy of the same.
(ix) (a) Subject to our comments in para 30 in the basis of qualified opinion paragraph of the audit report, 40 circles are regular in depositing the undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues, as applicable, with the appropriate authorities. Further 7 circles have generally been regular in depositing such dues, though there has been a slight delay in few cases. One circle has not been regular in depositing such dues and there have been significant delays in a large number of cases.
Further, in case of 41 circles, no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable. Undisputed amounts payable in respect in respect of 2 circles, which were outstanding at the year-end for a period of more than six months from the date they became payable are set out in appendix I to our report and in respect of 5 circles, such undisputed amounts payable has not been ascertained.

3. Annexure to the Independent Auditors’ Report of even date to the members of
Bharat Sanchar Nigam Limited on the financial statements for the year ended
31 March 2014 (contd.)
(b) Subject to our comments in para 30 in the Basis of Qualified Opinion paragraph of the audit report, in respect of 12 circles, there are no dues in respect of income-tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess that have not been deposited with the appropriate authorities on account of any dispute and incase of 36 circles, there are dues outstanding in respect of income-tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess on account of any dispute, the said information has been detailed in appendix II to our report.
(x) In our opinion, the company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the immediately preceding financial year; however, in the current financial year, the Company has incurred cash losses.
(xi) The Company has no dues payable to a financial institution or debenture-holders during the year. Accordingly, the provisions of clause 4(xi) of the Order are not applicable in respect of financial institution and debenture holders. In our opinion, the Company has not defaulted in repayment of dues to banks during the year.
(xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4(xii) of the Order are not applicable.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society. Accordingly, provisions of clause 4(xiii) of the Order are not applicable.
(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable.
(xv) The Company has not given any guarantees for loans taken by others from banks or financial institutions. Accordingly, the provisions of clause 4(xv) of the Order are not applicable.
(xvi) The Company did not have any term loans outstanding during the year. Accordingly, the provisions of clause 4(xvi) of the Order are not applicable.
(xvii) In our opinion and based upon examination of the books of account and utilization of funds of the Company on an overall basis, funds raised on short-term basis, prima facie, have been used for long-term purposes.
(xviii) During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clause 4(xviii) of the Order are not applicable.
(xix) The Company has neither issued nor had any outstanding debentures during the year. Accordingly, the provisions of clause 4(xix) of the Order are not applicable.
(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable.

4. Annexure to the Independent Auditors’ Report of even date to the members of
Bharat Sanchar Nigam Limited on the financial statements for the year ended
31 March 2014 (contd.)
(xxi) No fraud on or by the Company has been noticed or reported during the period covered by our audit except in the case of 8 circles. Out of which 4 circle auditors have reported inventory and cash embezzlements aggregating to Rs. 242.05 lacs, further 4 circles have reported on frauds being done by the employees of the company aggregating to Rs. 314.83 lacs.
For Walker Chandiok & Co LLP
(formerly Walker, Chandiok & Co)
Chartered Accountants
Firm Registration No.: 001076N/N500013
per Atul Seksaria
Partner
Membership No.: 86370
Place: New Delhi
Date: 29 August 2014