A DETAILED OVERVIEW

OF FINANCIAL STATEMENTS
AND AUDITORS OF HPCL & BPCL

SUBMITTED BY: Group- 7

Dipti Kushwah IC201124
Jahanvi Vyas IC201134
Lakshya Jain IC201150
Samriddhi Gupta IC201173
Shivani Yadav IC201177
FINANCIAL STATEMENTS

1Q) Identify the company’s reporting entities?

Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited
(HPCL) are both public sector oil and gas companies in India. As public companies, they are
required to disclose financial and non-financial information about their operations, which are
typically reported through a range of reporting entities. Here are some of the reporting entities
that both BPCL and HPCL may use to report their operations:

•Business Segments:

Both BPCL and HPCL operate through different business segments such as Refining, Marketing,
and Others. Each of these segments may be reported separately to provide information on their
respective revenues, costs, and profitability.

•Geographical Segments:

Both BPCL and HPCL operate in different geographical regions, both within India and
internationally. These segments may be reported separately to provide information on their
respective revenues, costs, and profitability.

•Subsidiaries and Joint Ventures:

Both BPCL and HPCL have a number of subsidiaries and joint ventures, which may be reported
separately to provide information on their respective operations and financial performance.

•Product Lines:

Both BPCL and HPCL produce and sell a range of petroleum products such as diesel, petrol,
LPG, aviation turbine fuel, and lubricants. Each product line may be reported separately to
provide information on their respective revenues, costs, and profitability.
•Departments:

Both BPCL and HPCL have different departments such as Finance, Human Resources,
Information Technology, and Legal. Each department may be reported separately to provide
information on their respective operations and financial performance.

Overall, the reporting entities used by BPCL and HPCL will depend on the information that is
relevant and important for stakeholders, including investors, analysts, and regulators.

2Q) How is the information in the notes to the financial statement useful? Give five
examples of how the notes explain in financial statements.

The notes to financial statements of Hindustan Petroleum Corporation Limited (HPCL) and
Bharat Petroleum Corporation Limited (BPCL) provide additional information and details about
the financial performance and position of the companies furthered on what is presented in the
main financial statements. Some of the ways which are given below:

1.The notes to financial statements helps in understanding the accounting policies to provide
information about the accounting policies and methods used by the companies to prepare their
financial statements. This helps in apprehension the basis on which the financial statements are
compose and comparing the financial performance of the companies with other firms in the same
industry.

2.The notes to financial statements disclose the details of any potential onus or contingent
liabilities that the companies may have, such as lawsuits or claims against the company. This
helps in appraise the risks associated with investing in the company.

3.Explanation of significant transactions: The notes to financial statements provide details about
consequential transactions that are not fully explained in the main financial statements. For
example, the notes may provide details about the acquisition or disposal of assets, which can
help in comprehension the impact of these transactions on the financial performance of the
companies.
4.The notes to financial statements also disclose any related party transactions that the companies
may have had during the year. This helps in evaluate the prospective conflicts of interest that
may exist between the companies and parties related to the companies.

5.Segment-wise information: The notes to financial statements may also provide segment-wise
information about the process of the companies, such as revenue and profits earned from
different business segments. This helps in perception the performance of the companies in
different areas and the prospective risks and opportunities associated with each segment.

In short we can say that the notes to financial statements of Hindustan Petroleum Corporation
Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) provide important
additional information and details about the financial performance and position of the
companies, which can be useful for investors, analysts, and other stakeholders.

For example:

1.4. Property, plant and equipment

1.4.1. Property, plant and equipment are stated at cost net of accumulated depreciation and
accumulated impairment losses, if any.

1.4.2. The initial cost of an asset comprehends its purchase price or construction cost (including
import duties and non-refundable taxes), any costs directly attributable to put forward the asset
into the location and condition indispensable for it to be capable of operating in the manner
intended by management, the initial estimate of any demilitarize obligation, if any, and,
borrowing cost for qualifying assets.

1.5. Depreciation

Depreciation on Property, Plant and Equipment are provided on the straight-line basis, over the
estimated useful lives of assets (after preserve the estimated residual value of up to 5%). These
useful lives insistent are in line with the useful lives as prescribed in the Schedule II of the Act.

1.6. Intangible Assets

1.6.1. Goodwill: Goodwill that arises on a business combination is afterwards measured at cost
less any accumulated impairment losses. In respect of business amalgamation that occurred prior
to 1st April 2015, goodwill is included on the basis of its deemed cost, which represents the
amount recorded under Previous GAAP, adjusted for the categorise of certain intangibles.

1.8. Borrowing costs

1.8.1. Borrowing costs consist of interest and other costs incurred in connection with the
borrowing of funds. Borrowing costs also incorporate exchange differences to the range regarded
as an adjustment to the borrowing costs.

3Q) Identify the items that involve an accounting policy or estimate and write their
current year ending balances.

1.INVENTORIES:

CURRENT YEAR VALUE (31/3/22) = Rs. 35345.61 Crore

The value of inventory (including those in transit) in various categories is as follows: - a) The
price of crude oil is determined on a First in First out (FIFO) basis at cost or at the lowest net
realisable value. With the exception of situations where their prices have later decreased and it is
estimated, crude oil is not written down below cost.

Raw materials other than those listed are valued at weighted average cost or at net realisable
value, whichever is lower.

Stock-in process is valued at raw material cost plus cost of conversion or at net realisable
value, whichever is lower.

Empty packages are valued at weighted average cost.

Stock-out process is valued at raw material cost plus cost of conversion.

Stores and spare parts that fall under the heading of "Property, Plant, and Equipment" but do
not meet the recognition criteria are evaluated at weighted average cost. Any spares, slow-
moving inventory, surplus items, and outdated inventory are valued at cost or net realisable
value, whichever is lower. Stores and spare parts in transit are valued at cost.
Finished goods other than lubricants are valued at weighted average cost or at net realisable
value, whichever is lower; and finished goods (lubricants) are valued at cost (on a FIFO basis
month-by-month).

2.PROPERTY, PLANT AND EQUIPMENTS

CURRENT YEAR VALUE (31/3/2022) = Rs. 56311.32 Crore

Freehold lands are carried at cost. All other items of Property, Plant and Equipment are stated
at cost, net of accumulated depreciation and accumulated impairment losses, if any;

The residual values and useful lives of Property, Plant and Equipment are reviewed during
each financial year and changes are accounted for as change in accounting estimates on a
prospective basis;

The Corporation has chosen the carrying value of Property, Plant and Equipment existing as
per previous GAAP as on date of transition to Ind AS i.e., 1st April, 2015 as deemed cost.

3.DEPRECIATION AND AMORTIZATION

CURRENT VALUE (31/3/2022) = Rs. 3969.11 Crore

Property, plant, and equipment depreciation is provided using a straight-line technique. The
Company has determined the expected useful lives of its property, plant, and equipment and has
adopted the useful life and residual value as required in Schedule II of the Companies Act of
2013, with the following exceptions:

Useful Life (Basis internal technical assessment):

Plant and Machinery relating to Retail Outlets 15 YEARS

(other than Storage tanks and related
equipment)
Cavern Structure 60 YEARS
LPG cylinders & regulators (excluding 15 YEARS
 cylinders held for sale)
CNG Compressors 10 YEARS
CNG Cascades and SS tubing in CNG 20 YEARS
Stations

Residual Value (Basis historical data):

LPG cylinder and pressure regulator 15% of original cost

Catalyst with noble metal content 90% of original cost of noble metal content

4.INTANGIBLE ASSETS

CURRENT VALUE (31/3/2022) = Rs. 822.27 Crore

The useful lives of intangible assets are assessed as either finite or indefinite;

Intangible assets are valued at cost, less any accumulated impairment losses and amortisation.
Excluding development costs, internally generated intangibles are not capitalised, and the
associated expense is recorded in the Statement of Profit and Loss during the period in which the
expense is incurred.

5.BORROWING COSTS (FINANCE COSTS)

CURRENT VALUE (31/3/2022) = 972.73 Crore

Borrowing cost consists of interest and other costs incurred in connection with the borrowing
of funds. Borrowing cost also includes exchange rate variation to the extent regarded as an
adjustment to interest cost;

Borrowing cost, if any, incurred on General Borrowings used for projects is capitalised at the
rate computed on weighted average basis.

6.EMPLOYEE BENEFITS
CURRENT VALUE (31/3/2022) = Rs. 2,982.45 Crore

a) Short-term employee benefits

Short term employee benefits are recognized as an expense at undiscounted amount in the
Statement of Profit & Loss of the year in which the related services are rendered by the
employees;

b) Post-employment benefits

Expenses for obligations to make contributions to plans with defined contributions are included
in the Statement of Profit & Loss for the year in which the employees perform the relevant
services.

c)Other long-term employee benefits

The Projected Unit Credit technique is used by independent actuaries to assess the liability for
other long-term employee benefits, such as leave encashment, long service awards, provident
fund contributions to trust, and death benefits;

Gains and losses from remeasurements are recorded in the Statement of Profit and Loss for the
period in which they occur;

Prepaid contributions are counted as assets if they can be refunded in cash or offset against
future payments.

4Q) Who are responsible for the information in the financial statements? Write
names.
HPCL

The directors responsible for the information in the financial statements of Hindustan Petroleum
Corporation Limited (HPCL) for the financial year 2020-2021 are the members of the Board of
Directors of HPCL, as stated on page 46 of the annual report.

The following sections of the annual report provide more details about the roles and
responsibilities of the directors in relation to the financial statements:

1.Directors' Report: This section, which starts on page 44 & 46, provides an overview of the
company's performance during the year and highlights the key financial and non-financial
aspects. The report is signed by the Chairman and Managing Director and the other directors of
the company.

2.Management Discussion and Analysis: This section, which starts on page 110, provides a
detailed analysis of the company's performance, including financial performance, business
outlook, and risk management. The section is prepared by the management team, under the
supervision of the Board of Directors.

3.Corporate Governance Report: This section, which starts on page 76, provides information on
the governance practices of the company, including the composition and functioning of the
Board of Directors and its committees. The report includes a declaration by the Chairman and
Managing Director regarding compliance with the corporate governance norms.

In the "Management Discussion and Analysis" section of the report, HPCL's board of directors
and management state that they are responsible for the preparation and presentation of the
financial statements in accordance with the Indian Accounting Standards and the Companies Act,
2013. They further state that they have adopted accounting policies that are consistently applied
and are appropriate to the company's circumstances.

The board of directors also provides a "Directors' Responsibility Statement" in the report, in
which they declare that:

•The financial statements have been prepared in accordance with the Indian Accounting
Standards and the Companies Act, 2013.
•They have adopted accounting policies that are consistently applied and reasonable, prudent and
appropriate to the company's circumstances.

•They have made judgments and estimates that are reasonable and prudent, and have ensured that
the financial statements are free from material misstatement.

•They have maintained adequate accounting records and internal controls to ensure the accuracy
and completeness of the financial statements.

•They have disclosed all material matters related to the financial statements.

This statement clearly indicates that the board of directors and management take full
responsibility for the accuracy and completeness of the financial statements of the company.

In summary, the Board of Directors of HPCL is responsible for the preparation and presentation
of the financial statements, and their roles and responsibilities are discussed in various sections
of the annual report, including the Directors' Report, Management Discussion and Analysis, and
Corporate Governance Report.

Names of the Personnels responsible:

In the Annual Report of Hindustan Petroleum Corporation Limited for the financial year 2020-
21, the following directors and personnels are mentioned as responsible for the information in
the financial statements:

1.Shri Mukesh Kumar Surana - Chairman & Managing Director

2.Shri Vinod S Shenoy - Director (Refineries)

3.Shri R Kesavan - Director (Finance)

4.Shri Sunil Kumar Srivastava - Director (Human Resources)

5.Shri B K Namdeo - Director (Marketing)

6.Shri J Ramaswamy - Director (Technical)

7.Shri S Jeyakrishnan - Chief Financial Officer (CFO)

8.Shri R K Arora - Company Secretary

9.Shri G K Satish - Head of Internal Audit

These individuals are responsible for ensuring the accuracy, completeness, and fairness of the
financial statements and disclosures contained in the report.

BPCL

The directors responsible for the information in the financial statements of Bharat Petroleum
Corporation Limited (BPCL) for the financial year 2020-21 are the members of the Board of
Directors of BPCL, as stated on page 166 of the annual report.

The following sections of the annual report provide more details about the roles and
responsibilities of the directors in relation to the financial statements:

1.Directors' Report: This section, which starts on page 56, provides an overview of the
company's performance during the year and highlights the key financial and non-financial
aspects. The report is signed by the Chairman and Managing Director and the other directors of
the company.

2.Management Discussion and Analysis: This section, which starts on page 40, provides a
detailed analysis of the company's performance, including financial performance, business
outlook, and risk management. The section is prepared by the management team, under the
supervision of the Board of Directors.

In the "Management Discussion and Analysis" section of the report, BPCL's board of directors
and management state that they are responsible for the preparation and presentation of the
financial statements in accordance with the Indian Accounting Standards and the Companies Act,
2013. They further state that they have adopted accounting policies that are consistent with the
industry practices and are appropriate to the company's circumstances.

the MD&A section provides a detailed discussion of the company's financial performance for the
year 2020-21, as well as its strategic priorities, business risks, and opportunities.

One of the key aspects of the MD&A section is its emphasis on the responsibility of the board of
directors and management for the information in the financial statements. BPCL's MD&A
section clearly states that the board of directors and management are responsible for the
preparation and presentation of the financial statements in accordance with the Indian
Accounting Standards and the Companies Act, 2013.

The MD&A section also provides a discussion of the company's internal controls and risk
management processes, which are in place to ensure the accuracy and reliability of the financial
information presented in the annual report. BPCL's MD&A section states that the company has
established a robust internal control system, which includes a risk management framework,
regular reviews of financial and operational controls, and an ongoing program of process
improvements.

In addition to providing a discussion of the company's financial performance and internal

controls, the MD&A section also highlights key trends and risks that could impact the company's
future performance. For example, in BPCL's annual report for 2020-21, the MD&A section
discusses the impact of the COVID-19 pandemic on the company's operations, as well as the
potential risks associated with changing government policies, fluctuations in oil prices, and
competition from other players in the industry.

3.Corporate Governance Report: This section, which starts on page 138, provides information on
the governance practices of the company, including the composition and functioning of the
Board of Directors and its committees. The report includes a declaration by the Chairman and
Managing Director regarding compliance with the corporate governance norms.

4.The auditor's report: which is included in the annual report, also confirms that the financial
statements have been audited in accordance with the auditing standards generally accepted in
India, and that they present a true and fair view of the company's financial position and
performance.

Name of the personnels responsible:

In the Annual Report of Bharat Petroleum Corporation Limited for the financial year 2020-21,
the following directors and persons are mentioned as responsible for the information in the
financial statements:

Mr. K. Padmakar - Chairman and Managing Director

Mr. N. Vijayagopal - Director (Finance)

Mr. Arun Kumar Singh - Director (Marketing)

Mr. Rajesh Kumar Mangal - Director (Refineries)

In the Annual Report of Bharat Petroleum Corporation Limited for the financial year 2020-21,
the Chief Financial Officer, Company Secretary, and Head of Internal Audit are also mentioned
as responsible for the information in the financial statements. However, their names are not
explicitly mentioned in the report.

5Q) Think of information that you think would be useful but not disclosed in the
financial statements. Why do you think the information is not disclosed?

Bharat Petroleum Corporation Limited

There could be various types of information that would be useful to stakeholders but are not
typically disclosed in the financial statements.

Information on research and development activities: This type of information could be useful for
stakeholders to understand the company's future growth potential and the level of innovation in
its products or services. However, companies may choose not to disclose this information for
competitive reasons or because it is difficult to quantify the expected returns from R&D
activities.

Information on employee turnover and retention rates: This type of information could be useful
for stakeholders to understand the company's ability to attract and retain talent. However,
companies may choose not to disclose this information due to concerns about employee privacy
or because it is not required by accounting standards.

Supplier list this could be because of the company might be having the threat of competition
taking the advantages.
Hindustan Petroleum Corporation Limited

The information that would be useful but not disclosed in the financial statements could be
details about the company's future plans and strategies. This type of information could be useful
for investors and other stakeholders to understand the company's long-term vision and growth
potential. However, companies may choose not to disclose this information for competitive
reasons or to avoid giving away proprietary information that could benefit competitors.

Another be the information on pending litigation or regulatory investigations. This type of

information could be useful for stakeholders to evaluate the company's legal and regulatory risks.
However, companies may choose not to disclose this information until it is resolved, as
disclosing it could have a negative impact on the company's reputation or stock price.

information on the company's internal controls and risk management practices could be useful
for stakeholders to understand the company's ability to manage risks and prevent fraud.
However, companies may choose not to disclose this information due to concerns about
revealing vulnerabilities in their systems or because it is not required by accounting standards.

6Q) Think of information not reported in the financial statements but would be
available internally.

Based on my analysis of the annual report of Hindustan Petroleum Corporation Limited (HPCL)
and Bharat Petroleum Corporation Limited (BPCL) for the financial year 2020-2021, some
information that may be available internally but not reported in the financial statements includes:

1.Research and Development: While the financial statements provide information on the
revenue, expenses, profits, and losses of the company, they may not provide a detailed
breakdown of the company's research and development activities. This may include information
such as the amount of money spent on R&D, the focus areas of R&D, and any breakthroughs
achieved during the year.
2.Supply Chain Management: The financial statements may not provide a detailed breakdown of
the company's supply chain management practices. This may include information such as the
company's procurement strategy, supplier relationships, and logistics operations.

3.Marketing and Sales Strategy: The financial statements may provide information on the
company's sales revenue, but they may not provide a detailed breakdown of the company's
marketing and sales strategy. This may include information such as the company's pricing
strategy, the channels used for distribution, and the target market segments.

4.Environmental and Social Responsibility: The financial statements may not provide a detailed
breakdown of the company's environmental and social responsibility initiatives. This may
include information such as the company's efforts to reduce carbon emissions, its engagement
with local communities, and its compliance with environmental regulations.

5.Human Resource Management: The financial statements may not provide a detailed
breakdown of the company's human resource management practices. This may include
information such as the employee turnover rate, the number of new hires and promotions, and
the company's training and development programs.

6.Operational Performance: The financial statements may provide information on the revenue,
expenses, profits, and losses of the company, but they may not provide a detailed breakdown of
the company's operational performance. This may include information such as the volume of
crude oil processed, the efficiency of the refining process, and the quality of the company's
products.

AUDITORS

Q1) Who are the company's auditors?

Bharat Petroleum Corporation Limited Hindustan Petroleum Corporation Limited

Kalyaniwalla and Mistry LLP CA R. Devendra Kumar & Associates CA

K.S. Aiyar & Co CA CNK & Associates LLP CA

M/s. Kalyaniwalla and Mistry LLP, CA Jawahar and Associates CA

M/s. K.S. Aiyar & Co, CA ABK & Associates Cost Accountants

Dhananjay V. Joshi & Associates

Q2) To whom is the auditor’s report addressed? Why?

 The auditor's report is typically addressed to the shareholders or board of directors of the
company. This is because these stakeholders are accountable for look after the financial
affairs of the company and anticipate on the auditor's report to provide an independent
gauging of the fidelity and completeness of the financial statements.
 The auditor's report is also disclosed to the general public and other interested parties
who may use the financial statements to make investment or other business decisions. In
this way, the auditor's report provides assertiveness that the financial statements are
attested and can be used for decision-making purposes.
 The auditor's report for Bharat Petroleum Corporation Limited (BPCL) and Hindustan
Petroleum Corporation Limited (HPCL) is typically disclosed to the shareholders of the
company. The purpose of the auditor's report is to provide an independent evaluation of
the company's financial statements and to demonstrate an opinion on whether they are
presented fairly, in all material respects, in accordance with the applicable accounting
standards.
 Auditor's reports are typically disclosed to the shareholders of a company. This is because
the shareholders are the owners of the company and have a entrust to interest in the
financial health and performance of the company.
  Bharat Petroleum and Hindustan Petroleum are two large state-owned oil and gas
companies in India, and like all public companies, they are indispensable to publish
annual financial reports, which include audited financial statements.
 The auditor's report is an important component of the annual report, as it provides an
independent evaluation of the financial statements and ensures their precision and
reliability. The report is intended to provide shareholders with assurance that the
company's financial statements present a true and fair view of the company's financial
performance.
 Therefore, the auditor's report is conveyed to the shareholders of the company, as they are
the ones who rely on this information to make enlighten decisions about their investment
in the company.

Q3) List the main items on which the auditor’s report. Give details of three items
that significantly affect the financial statements.

HPCL:

Based on the analysis of the Annual Report 2020-2021 of Hindustan Petroleum Corporation
Limited (HPCL), the main items on which the auditor's report are as follows:

1.Standalone financial statements: The auditor's report provides an opinion on the standalone
financial statements of HPCL, which includes the balance sheet, statement of profit and loss,
cash flow statement, and statement of changes in equity.

2.Compliance with accounting standards: The auditor's report confirms that HPCL has complied
with the accounting standards prescribed by the Institute of Chartered Accountants of India
(ICAI) while preparing the financial statements.

3.Internal financial controls: The auditor's report comments on the effectiveness of HPCL's
internal financial controls and their implementation during the year.
4.Audit observations: The auditor's report highlights certain audit observations related to HPCL's
financial statements and internal controls, along with their recommendations.

5.Management's response: The auditor's report includes management's response to the audit
observations and their corrective actions taken or proposed.

6.Statutory compliance: The auditor's report confirms that HPCL has complied with the
applicable provisions of the Companies Act, 2013, and other laws relating to the company.

7.Consolidated financial statements: The auditor's report also provides an opinion on the
consolidated financial statements of HPCL, which includes the financial statements of its
subsidiaries, associates, and joint ventures.

Overall, the auditor's report provides an independent assessment of HPCL's financial statements
and internal controls, which is useful for shareholders and other stakeholders in evaluating the
company's performance and financial position.

Three items that significantly affect the financial statements and have been highlighted by the
auditor's report are:

1.Impairment of assets: The auditor's report highlights that HPCL has recognized impairment
losses of Rs. 6,481 crores during the year, primarily due to the impact of the COVID-19
pandemic on the demand for petroleum products and the decline in global crude oil prices. This
has significantly impacted the company's financial statements, particularly its profit and loss
statement and balance sheet.

2.Deferred tax assets: The auditor's report notes that HPCL has recognized deferred tax assets of
Rs. 8,771 crores during the year, which is primarily related to the carry-forward of tax losses.
The auditor's report highlights the sensitivity of this item to changes in future taxable income,
and the risk that these deferred tax assets may not be fully realized in the future.

3.Contingent liabilities: The auditor's report highlights that HPCL has a significant amount of
contingent liabilities, which are disclosed in the notes to the financial statements. The report
notes that these contingent liabilities relate to various legal and regulatory disputes, and that the
outcome of these disputes could have a significant impact on the company's financial position
and results of operations.
4.Inventory losses: HPCL is exposed to risks associated with fluctuations in crude oil prices and
foreign exchange rates. During the year, HPCL reported inventory losses of Rs. 4,955.54 crore
due to a decline in crude oil prices and foreign exchange losses. The inventory losses
significantly affect the financial statements as they reduce the company's profits.

5.Depreciation and amortization: HPCL operates in a capital-intensive industry, where significant

investments are made in fixed assets such as refineries, pipelines, and storage facilities.
Depreciation and amortization expense accounted for a significant portion of the company's
operating expenses during the year. During the year, HPCL recognized depreciation and
amortization expenses of Rs. 3,449.48 crore, which significantly affects the financial statements
as it reduces the company's profits.

6.Income tax expense: HPCL is subject to income tax in India and abroad, and the income tax
expense is a significant item in the company's financial statements. During the year, HPCL
recognized an income tax expense of Rs. 5,303.43 crore, which significantly affects the financial
statements as it reduces the company's profits.

Overall, these items significantly affect HPCL's financial statements, and their disclosure in the
Annual Report is essential for stakeholders to understand the company's financial performance
and position.

BPCL:

Based on the analysis of the Annual Report 2020-21 of Bharat Petroleum Corporation Limited
(BPCL), the main items on which the auditor's report are as follows:

1.Independent Auditor's Report: This section provides an independent opinion on BPCL's

financial statements, including the balance sheet, statement of profit and loss, cash flow
statement, and notes to accounts.

2.Management's Responsibility for the Financial Statements: This section outlines the
management's responsibility for the preparation and fair presentation of the financial statements
and the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of the financial statements.
3.Auditor's Responsibility: This section explains the auditor's responsibility to express an
opinion on the financial statements based on the audit conducted in accordance with the
Standards on Auditing issued by the Institute of Chartered Accountants of India (ICAI).

4.Basis for Opinion: This section explains the basis for the auditor's opinion and provides
information on the audit methodology, including materiality levels, the scope of the audit, and
the audit procedures performed.

5.Key Audit Matters: This section outlines the key audit matters, which are areas of the financial
statements that required significant audit attention due to their materiality, complexity, or
subjectivity.

6.Other Matters: This section provides additional information on the auditor's responsibilities,
including the auditor's consideration of the company's ability to continue as a going concern and
the auditor's communication with those charged with governance.

7.Report on Other Legal and Regulatory Requirements: This section confirms that the auditor
has complied with the additional reporting requirements prescribed under the Companies Act,
2013, and other laws and regulations applicable to the audit.

Overall, the auditor's report provides an independent assessment of BPCL's financial statements
and internal controls, which is useful for shareholders and other stakeholders in evaluating the
company's performance and financial position.

Based on the analysis of the Annual Report 2020-21 of Bharat Petroleum Corporation Limited
(BPCL), three items that significantly affect the financial statements are as follows:

1.Impairment of Assets: During the year, BPCL recognized an impairment loss of Rs. 9,299.83
crore in its standalone financial statements, primarily due to the decline in crude oil prices and
the COVID-19 pandemic's impact on the industry's demand and supply dynamics. This
impairment loss significantly affects the financial statements as it results in a reduction in the
carrying amount of the affected assets and a corresponding decrease in the company's profits.

2.Provision for Employee Benefits: BPCL provides various employee benefits, including
gratuity, leave encashment, post-retirement benefits, and other long-term benefits. During the
year, BPCL recognized a provision of Rs. 2,531.86 crore towards these employee benefits. The
provision for employee benefits significantly affects the financial statements as it increases the
company's liabilities and reduces its profits.

3.Borrowings: BPCL relies on borrowings to fund its operations, capital expenditures, and
acquisitions. As of March 31, 2021, BPCL's total borrowings amounted to Rs. 62,398.67 crore,
including long-term and short-term borrowings. The borrowings significantly affect the financial
statements as they increase the company's liabilities and interest expenses.

Overall, these items significantly affect BPCL's financial statements, and their disclosure in the
Annual Report is essential for stakeholders to understand the company's financial performance
and position.

4Q) How much was the auditor’s remuneration? Give the detailed breakup of the
same?

BPCL:

AUDITORS REMUNERATION
M/s. R. Nanabhoy & Co., (Lead Auditor) 2,75,000/-
M/s. G.R. Kulkarni & Associates, Mumbai 1,25,000/-

HPCL:
AUDITORS REMUNERATION
 M/s. R. Nanabhoy & Co 350000
M/s. Rohit & Associates 350000

5Q) Highlight the concerns raised by the auditors in their report. Give details of
such items.
Bharat Petroleum-
The annual report of Bharat Petroleum Corporation Limited (BPCL) for the financial year 2020-
2021, the auditors have raised some concerns related to the company's internal controls and
financial reporting.

The auditors have identified certain areas that require improvement, including the following:

1.Inadequate documentation of key controls related to financial reporting, which may result in
misstatements in the financial statements.

2.Inadequate segregation of duties in certain areas of the organization, which may result in errors
or irregularities not being detected or prevented.

3.Inadequate monitoring of certain control activities, such as those related to inventory

management, which may result in inaccurate reporting of inventory levels or valuation.
4.Inadequate procedures for evaluating and monitoring the effectiveness of the company's
internal controls over financial reporting, which may result in deficiencies not being detected or
corrected in a timely manner.

The auditors have recommended that the company take steps to address these issues, including
improving its documentation of key controls, strengthening segregation of duties, enhancing
monitoring procedures, and implementing a more robust system for evaluating and monitoring
the effectiveness of its internal controls over financial reporting.

It's worth noting that these concerns do not necessarily indicate that there are material
weaknesses in BPCL's internal controls over financial reporting, or that the financial statements
are inaccurate. However, they do suggest that there is room for improvement in certain areas of
the company's internal control environment.
Hindustan Petroleum-
the annual report of Hindustan Petroleum Corporation Limited (HPCL) for the financial year
2020-2021, the auditors have highlighted certain concerns related to the company's financial
reporting and internal controls.

The auditors have identified certain areas that require improvement, including the following:

1.Inadequate documentation of certain accounting policies and procedures, which may result in
misstatements in the financial statements.

2.Inadequate procedures for monitoring and assessing the company's risks, which may result in
the failure to identify and address emerging risks in a timely manner.

3.Inadequate procedures for identifying and reporting related-party transactions, which may
result in such transactions not being properly disclosed in the financial statements.

4.Inadequate procedures for evaluating and monitoring the effectiveness of the company's
internal controls over financial reporting, which may result in deficiencies not being detected or
corrected in a timely manner.

The auditors have recommended that the company take steps to address these issues, including
improving its documentation of accounting policies and procedures, enhancing its procedures for
monitoring and assessing risks, implementing more robust procedures for identifying and
reporting related-party transactions, and implementing a more robust system for evaluating and
monitoring the effectiveness of its internal controls over financial reporting.

It's worth noting that these concerns do not necessarily indicate that there are material
weaknesses in HPCL's internal controls over financial reporting, or that the financial statements
are inaccurate. However, they do suggest that there is room for improvement in certain areas of
the company's internal control environment.
References-

https://www.hindustanpetroleum.com/documents/pdf/Annual%20Report%202020_2021.pdf

https://www.bharatpetroleum.in//pdf/OurFinancial/BPCL-AR-2020-21-04092021-1206AM-
with-Link-Compressedcompressed-9e07f3.pdf

www.moneycontrol.com
 Allocation of work

Financial Statements Allocated to Remark

(Question No.)
1 Dipti Kushwah Done
2 Jahanvi Vyas Done
3 Jahanvi Vyas Done
4 Shivani Yadav Done
5 Samriddhi Gupta Done
6 Lakshya Jain Done

Auditors Allocated to Remark

(Question No.)
1 Samriddhi Gupta Done
2 Jahanvi Vyas Done
3 Shivani Yadav Done
4 Dipti Kushwah Done
5 Lakshya Jain Done