AUDITING AND

CORPORATE GOVERNANCE

CIA-I
About The Company
Expedite Motors Limited was founded in 1975 and is among the leading manufacturers of
automobiles globally. Innovation, comfort for our customers, sturdy and stylish vehicles, and
enhanced fuel-efficiency form the core of our philosophy. We continue to support socio-
economic advancement and empowerment through our range of products and services, with
over 100 million satisfied customers worldwide. We offer a plethora of automotive options,
including a wide range of cars, motorcycles, trucks, buses, utility vehicles as well as engines
for industrial and marine use. Impact Design underpins our new passenger cars and utility
vehicles, which provide an excellent balance of performance, fuel economy, and accessibility.

The pandemic caused enormous global disruptions, and there was no readymade playbook in
place to deal with it. As a result, we evolved, remained adaptable, and adopted purposeful
decisions to make the most of what was available to us. We at Expedite Motors decided to be
dynamic in our planning, simultaneously focusing on ensuring our people's safety at all times.
Our breakthrough performance once again demonstrated our company's underlying strength.

We continuously focused on the future and long-term sustainability in these unprecedented

times and challenging environments. We are actively powering our future to accomplish our
aspirations, fulfil our vision, and succeed in our pursuits.

Board of Directors

Sirisha Suresh-2011263 Shreela Baroi-2011262 Priyanka Mahesh-2011256

Chairperson Chief Executive Officer Managing Director

Janaki Varadayini-2011254 Riya Mary Paul-2011259

Executive Director and Chief Technology Officer Non-Executive and Independent Director
Independent Auditors’ Report

To the Members of Expedite Motors Limited

Audit Report of the Standalone Financial Statements

Opinion provide an accurate and fair view based on

We have audited the standalone financial accounting principles
statements of Expedite Motors Limited
(‘the Company’), which comprise the Basis for Opinion
Balance Sheet as of March 31, We followed the Standards on Auditing
2020, Statement of Profit and Loss, (SAs) outlined in section 143(10) of the Act
Statement of Changes in Equity and when conducting our audit. Our
Statement of Cash Flow for the year ended responsibilities with regarding to this aspect
on March 31,2020 and a summary of are explained in another section labelled
significant accounting policies and other "Auditor's Responsibilities for the Audit of
explanatory information (from now on the Standalone Financial Statements
referred to as the "standalone financial
statements"). Key Audit Matters
This section of the report includes
Those standalone financial statements, as significant aspects of the current period’s
previously mentioned, present the financial statements. These are considered
particulars needed by the Companies Act, to be an integral part of the report and
2013 (‘Act’) in the manner required, and therefore no separate statement is issued.

Description of Key Audit Matters

Key Audit Matters How the Matter was Addressed in the Audit
1) Impact of Covid-19 Pandemic on Going Concern Assessment of the Company
The ongoing COVID 19 pandemic has forced Because of the unpredictable conditions
the company to shut down its manufacturing existing at present, the following audit
plants and offices for a considerable time that procedures were used to get appropriate audit
extends to after the year-end. reference:
Because of the above matter, the going A better understanding of the internal controls
concern of the company and the financial of the company has been acquired.
predictions for the future year concern the
The assumptions, actual financials, and the
prevailing conditions. They are subject to
future changes in the company were all well
high degrees of estimation.
compared and analysed.

Assessed the sensitivities and performed

stress testing on the forecasted figures.

The funding and the liabilities of the company

were analysed. Its ability to get additional
loans and funding were also checked

2) Impairment of Property, Plant and Equipment and Intangible Assets of Passenger

Vehicles Cash Generating Unit
The company is developing intangible assets The design, its implementation and operating
and testing its cash-generating units ('CGU') effectiveness of the critical controls have been
for impairment at least once a year. The tested with references to the assumptions used
passenger vehicle business unit has been in the forecast of the financials.
designated a separate cash-generating unit
An independent valuation specialist was
('CGU'). The company incurred an
recruited to evaluate the valuation models
impairment loss of $1,418.64 crores for this
used to satisfy the requirements.
CGU on March 31, 2020. The carrying value
of the net assets in this CGU after impairment The suitability of the assumptions used for the
is $9,120.31 crores. key inputs was evaluated. These inputs were
compared with the data collected from the
The management considers impairment
environment and the knowledge on the
testing an essential part of making the right
market.
decisions due to the history of losses in the
passenger vehicle CGU and the decrease in its A sensitivity analysis was done to evaluate the
manufacturing and sales due to the ongoing decrease in the growth rates and the
pandemic. impairment losses recognised.
Due to the complexity of the accounting
requirements and the significant judgement
required in deciding the key assumptions,
such as estimates of future sales volumes and
prices, operating costs, and terminal value
growth rates, this annual impairment test is
considered a fundamental audit matter, capital
expenditure and the weighted-average cost of
capital (discount rate), to be used to estimate
the recoverable amount.

3) Recognition of Product Development Cost as an Intangible Asset

For projects started during the year, we tested
The costs on product development with
the Company's design, implementation, and
respect to new vehicle platforms, engines,
operational effectiveness of controls to see if
transaxles and new vehicles are recognised as
they met the recognition requirements set out
intangible assets when:
in Ind AS 38 'Intangible Assets.'.

·Technical feasibility has been established,

All inputs used to calculate volumes, sales,

·The company has committed technical and margins, and capital expenditure have been
commercial resources to the intangible asset’s evaluated to understand the future

development and usage. estimations.

·It is likely the asset will generate future The historical figures and forecasts are
economic benefits. compared with the present and analysed and
evaluated.
Costs capitalised during the year include the
cost of materials, direct labour, technical A sensitivity analysis of changes in forecasts
know-how expenses, inspecting and testing was conducted, taking into account the impact
charges, designing costs, software expenses, of previous forecasting accuracy.
and directly attributable overhead
Approvals of the project oversight committee
expenditures incurred up to the date the
are examined to analyse the project's expected
 intangible asset is available for use, including future economic benefits and technical
interest. feasibility.

Given the examination of the recognition The inputs used to forecast the future results
requirements set out in Ind AS 38, the of the projects are also discussed.
recognition of product development costs as
an intangible asset is deemed a critical audit
topic. The determination of 'intangible assets'
occurs early in the product development
process, and there are inherent difficulties in
precisely projecting future economic value,
which must be deemed 'likely' before
capitalisation can begin. As a result, there's a
chance that development costs will be
capitalised on if the essential requirements
aren't met.

The prevalence of uncertain conditions at

present, the mandatory lockdowns and the
reduction in the manufacturing processes has
led to increased uncertainties in the
estimations.

Management's and Board of Directors’ Responsibilities for the Standalone Financial

Statements
The Company's Management and Board of Directors are accountable for the matters stated in
section 134(5) of the Act concerning the preparation of these standalone financial statements
that give an accurate and impartial view of the Company's state of affairs, profit/loss and other
income statements, owner's equity, and cash flows, including its joint operations, by generally
accepted accounting principles commonly acknowledged in India, including the Indian
Accounting Standards Board.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
We as auditors of Expedite Motors do our best to ensure that there is no misstatement of any
kind in the financial statements provided to the respective stakeholders of the company.
We use professional appraisal and preserve professional scepticism throughout an audit
conducted in compliance. As a part of our responsibility we,
• Evaluate the risks associated with financial statement manipulation.
• Direct audit procedures in response to the risks came upon.
• Carefully scrutinize the financial statements in all the aspects and check the accuracy.
We are in charge of the audit of the Company's financial information and joint operations,
including their direction, monitoring, and execution.

Other Matter
Report on Other Legal and Regulatory Requirements
• In our opinion, based on these accounting reviews and reports the company has
maintained appropriated accounting records required by law
• The relevant accounting records are the balance sheet, income statement and cash
flow statement described in this report.
• In our view, the financial statements are in accordance with the stipulated standards.
Annexure "A" to the Independent Auditors’ Report - 31 March 2020

Concerning the information mentioned previously in the Report on other legal and regulatory
requirements, we report the following in our view:

• The Company has all the necessary books of accounts showing full details of fixed
assets and has the required protocol to verify the accounts of fixed assets. Given the
Company's scale and the nature of its fixed assets, we believe that this frequency of
physical verification is fair. No substantial discrepancies were discovered during
the fixed asset verification, according to the information provided.
• According to the information and description available, as of 31, 2020, for at least
six months from the due date. See Note 40 of the Financial Statements for a more
detailed explanation of matters relating to the non-payment of fund contributions
under the Supreme Court's decision of February 28, 2019, with the following
exceptions:
• According to the information provided, the Corporation did not bring up funds through
a subsequent public offering throughout the year. The credit facilities it took were used
for the objective they were obtained. This amount does not include Performance and
Long-Term Rewards, which will be accumulated when the Nomination and
Remuneration Committee has determined and approved them. Such sums will also
surpass the required limitations. The excess remuneration is subject to shareholders'
approval under the Companies Act of 2013, that the Company intends to seek at the
upcoming Annual General Meeting.
• This amount does not include Performance and Long-Term Rewards, which will be
accumulated when the Nomination and Remuneration Committee has determined and
approved them. Such sums will also surpass the required limitations. The excess
remuneration is subject to shareholders' approval under the Companies Act of 2013,
that the Company intends to seek at the upcoming Annual General Meeting.
Annexure "B" to the Independent Auditors’ Report - 31 March 2020

Report on the internal financial controls concerning those above standalone financial
statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013

Qualified Opinion
We believe that Expedite Motors Limited and its joint operations, which are Indian companies,
have kept up sufficient financial operational controls regarding financial statements in every
important way, and that such financial operational controls regarding financial statements were
operating effectively as of March 31, 2020, excluding the possible implications of the
misrepresentation mentioned below on the fulfilment of the control criteria's objectives. The
material weakness described below was taken into account when ascertaining the
characteristics, schedule, and scope of independent review tests done in the audit of the
Company's standalone financial statements by us, as of March 31, 2020, and the material
deficiency has no impact on our opinion on the Company's standalone financial statements.

Basis for Qualified Opinion

After scrutinizing the provided information and the audit performed, a significant deficit has
indeed been recognized in the system of internet operational controls concerning the annual
reports dated March 31, 2020, dedicated to the protection of documentary evidence of the
input/output parameters used in extracting system generated reports, to validate the controls
over the completeness and accuracy of information used in various process level and
management reports.
A significant deficiency in the operational control system may result from a single or a
combination of defects concerning the financial statements, thereby indicating the risk of
manipulation in accounts and misrepresentation of annual reports that are not being prevented
or discovered promptly.

Management's Responsibility for Internal Financial Controls

The board is answerable for the honesty and objectivity of the data in these fiscal reports. A
portion of the data in the budget summaries depends on the administration's best gauges and
judgment and gives due thought to materiality. To satisfy its bookkeeping and announcing
liabilities, the board keeps many records that provide a unified description of the Department's
monetary exchanges. The executives look to guarantee the objectivity and respectability of
information in its fiscal summaries through cautious determination, preparation, and
improvement of qualified staff; through authoritative plans that give fitting divisions of
obligation; through correspondence programs pointed toward guaranteeing that guidelines,
approaches, principles, and administrative.

Auditors’ Responsibility
Our job is to provide a judgement on the Company's internal financial controls centred on our
audited financial statements. To the level appropriate to an audit of internal control over
financial reporting concerning financial information, we followed the Guidance Note and the
Standards on Auditing provided under section 143(10) of the Act. We comply with the ethical
code of ICAI and the ethical requirements that apply to auditing financial statements in
accordance with the law and its regulations, and comply with other ethical obligation through
these requirements.

Meaning of Internal Financial controls concerning Financial Statements

Internal financial controls refer to a few processes that are meant to provide guarantee about
the precision of financial reporting and the drafting of financial statements for extrinsic use.
Internal financial controls involving financial statements encompasses the rules and processes
that apply to the paperwork that correctly and fairly represent the transactions of the Company's
assets. It also gives assurance that the recording of transactions are mandatory for the financial
statements to be prepared as per the GAAP and that the receipts and expenditures of the
company are carried on only when allowed by the directors and management. Moreover, it
assures that any unauthorised use or disposal of the assets of the company would be detected
and prevented on time.

Inherent Limitations of Internal Financial controls concerning Financial Statements

Owing to the innate limitations of internal controls over financial reporting over financial
statements, such as the possibility of unlawful collaboration or management overrule of
controls, significant misstatements due to an error or fraud may occur and go unnoticed.
Furthermore, any projections of any assessment of internal financial controls over financial
accounts to future periods risk the internal financial controls over financial statements
becoming insufficient in response to changes in circumstances or the extent of compliance with
policies or processes deteriorating.
Other Matter
Our file described above below Section 143(3)(i) of the Act at the adequacy and working
effectiveness of the internal economic controls on the subject of standalone financial statements
thus far because it relates to at least one joint operation, that is a business enterprise included
in India, is primarily based totally at the corresponding file of the alternative auditor.
Appendix

Balance Sheet (₹ in crores)

Statement of Profit and Loss (₹ in crores)
Cash Flow Statement (₹ in crores)
Cash Flow Statement (₹ in crores)
Statement of Changes in Equity

Statement of Changes in Equity

Notes Related to Financial Statements

Note 1: Background and Operations

The Company designs, produces and distributes various kinds of automobiles, and engines for
industrial and marine use. Along with its subsidiaries, the company owned 42.32% of the
Ordinary shares and 5.35% of the Company’s 'A' Ordinary shares as of March 31, 2020. They
can significantly influence the Company's activities. The Board approved the release of these
standalone financial statements of Directors on June 15, 2020.

Note 2: Significant Accounting Policies

The following is a summary of the essential principles used in preparing the financial
statements -
a. Statement of Compliance
The financial statements have been put together according to the Indian Accounting Standards
as specified under the Companies Rules, 2015, conjointly with Section 133 of the Companies
Act, 2013.

b. Recognition of Revenue
The Company produces income primarily from-
i) Sale of products such as commercial and passenger automobiles and vehicle parts. When
items are delivered to dealers or a carrier for export sales, the risks and rewards and title of
ownership pass to the customer. The Company records revenues on the sale of products, net
discounts, sales incentives, customer bonuses, and rebates provided. The consideration
received for transportation arrangements for delivering vehicles to customers is recorded in the
income statement as net costs in the revenues. When the collectability of the resulting
receivable is fairly ensured, revenues are recognised.
ii) Revenue from the sale of services such as maintenance and extended warranties for
commercial and passenger cars, which is recognised as revenue over the relevant duration of
service. When the Company offers items bundled with these services, they are only recognised
as a distinct performance obligation if the service or warranty is an option or includes an extra
service component. In such circumstances, the transaction price allocated to such maintenance
service or extended warranty duration is mentioned as a contract liability until the service
obligation is satisfied. The Company runs various customer loyalty programmes in which
customers may earn reward points for spending money on the Company's products. Customers'
accumulated reward points can be used to discount future purchases of certain items or services.
The transaction amount allocated to customer reward points is recorded as a deferred income
obligation and is transferred to income when the consumer redeems their reward points. Any
advance payment received regarding performance commitments that are completed over time
is recorded as a contract liability and revenue when service is supplied to consumers.
Customers' obligations to pay for discounts and sales incentives are included in refund
liabilities.

c. Property, Plant, and Equipment

Freehold land is valued at its purchase price and is not depreciated. The purchase price, taxes
and tariffs, labour cost and direct overheads for self-constructed assets, and other direct
expenditures incurred until the investment is ready for its intended use are all included in the
cost. Depreciation is calculated using the Straight-Line Method (SLM) across the assets'
expected useful life, considering the type, estimated usage, operating circumstances,
replacement history, anticipated technical advancements, manufacturer's warranties, and
maintenance assistance. Taking these considerations into account, the Company has chosen to
keep the valuable life adopted for certain kinds of property, plant, and equipment that differ
from those stated in Schedule II of the Act. After each year, useful lives are reassessed. Changes
in estimated useful lives are recognised as changes in accounting estimates. Depreciation on
capital work-in-progress is not recorded until construction and installation are completed and
the asset fits the intended use.

d. Impairment
At every balance sheet date, the Company assesses whether any property, plant, and equipment,
as well as intangible assets with limited lives, may be impaired. If an asset has an impairment,
the recoverable amount is calculated to determine the magnitude of the impairment, if any.
Intangible assets which are not yet in use are assessed for impairment yearly at each balance
sheet date or sooner if there is reason to believe the investment may be impaired.

Note 3: Dividends
The company declares dividends based on earnings available for distribution as stated in the
statutory financial statements prepared in compliance with Indian GAAP or Ind AS. Indian law
allows for the declaration and payment of dividends from earnings for the current or previous
fiscal year(s) as specified in the company's statutory financial statements (standalone) after
depreciation in compliance with the norms of Schedule II to the Companies Act.

However, when the earnings are less, it may declare dividends out of free reserves, in
compliance with the restrictions set out in the Companies. As a result, the net income recorded
in these financial statements may not be utterly distributable in some years. As of March 31,
2020, the amount available for distribution was Nil.
References
i. (Tata Motors 75th Integrated Annual Report, 2020, pp.174-198)

https://www.tatamotors.com/wp-content/uploads/2020/08/03045333/annual-report-
2019-2020.pdf

ii. (Hero MotoCorp Annual Report, 2021, pp. 138-145)

https://www.heromotocorp.com/en-in/uploads/Annual_Reports/pdf/Annual-Report-
FY-2020-21.pdf

iii. https://investors.tatamotors.com/financials/74-ar-html/ind-auditors-report.html
iv. https://www.business-standard.com/company/tata-motors-560/annual-report/auditors-
report
v. https://pcaobus.org/oversight/standards/auditing-standards/details/AS2201