Amukha has analyzed auditor’s comments stated in annual reports for 190 companies from the BSE 200 index for the financial year 2020. Our analysis revealed that 11 companies had received a qualified opinion from the Auditors for FY20.
A qualified opinion is a statement issued when an auditor cannot obtain sufficient and appropriate audit evidence on which to base the opinion. Moreover, this statement is also issued when an auditor obtains sufficient and appropriate audit evidence to conclude that misstatements are material, but not pervasive, to the financial statements.
In our view, adverse auditor comments are red-flags. However, a qualified opinion may or may not be a red-flag. Hence, a closer look is warranted to determine whether a qualified opinion is a red-flag or not.
Amukha’s innovative early warning application, Risk Analytics System (RAS) can help banks to uncover Red-flags from Auditor’s comments – Adverse Remarks, Qualified Opinion, and Disclaimer of Opinion.
Here, we highlight five companies that have received a qualified opinion from the professional auditors for FY20.
#1. Adani Power Ltd
#2. GMR Infrastructure Ltd
#3. Hindustan Zinc Ltd
#4. Indiabulls Housing Finance Ltd
#5. Zee Entertainment Enterprises Ltd
Example: Adani Power Ltd
The auditors of Adani Power have raised concerns over realizing the investment of INR 5,270 crores from the subsidiary Adani Power Mundra Ltd (APMuL). The auditors have also flagged significant operating losses in earlier years and complete erosion in the net worth of APMuL. Further, they have added that the future of APMuL is dependent on the outcome of the resolution of various matters with the Discoms / regulators and improvement in operational performance.
Our early warning system RAS captures such Red-flags from Auditor comments by deep-diving into Annual Reports to help the banks get actionable intelligence on portfolio companies.
To know more about Amukha’s RAS, email us at info@amukha.com.
AMUKHA 