REPORT OF THE AUDITOR GENERAL
The Chairman
Bank of Ceylon
Report of the Auditor General on the
Financial Statements and Other Legal
and Regulatory Requirements of the Bank
of Ceylon and its subsidiaries for the year
ended 31 December 2023 in terms of
Section 12 of the National Audit Act, No.
19 of 2018.
1. Financial Statements
1.1 Opinion
The audit of the Financial Statements of
the Bank of Ceylon (the "Bank") and the
Consolidated Financial Statements of the
Bank and its subsidiaries (the "Group")
for the year ended 31 December 2023
comprising the statement of financial
position as at 31 December 2023 and
the statement of profit or loss, statement
of comprehensive income, statement of
changes in equity and statement of cash
flow for the year then ended, and notes
to the Financial Statements, including
material accounting policy information,
was carried out under my direction in
pursuance of provisions in Article 154(1)
of the Constitution of the Democratic
Socialist Republic of Sri Lanka read
in conjunction with provisions of the
National Audit Act No. 19 of 2018.
The Bank has been exempted from the
provisions of Part II of the Finance Act,
No. 38 of 1971 by an Order of then
Minister of Finance published in the
Government Gazette No. 715 of 14 May
1992 by virtue of powers vested in him
by Sections 5(1) of the said Finance Act.
My report to Parliament in pursuance
of provisions in Article 154 (6) of the
Constitution will be tabled in due course.
To carry out this audit I was assisted by
a firm of chartered accountant in public
practise.
In my opinion, the accompanying
financial statements of the Bank and the
Group give a true and fair view of the
financial position of the Bank and the
Group as at 31 December 2023, and
of their financial performance and their
cash flows for the year then ended in
accordance with Sri Lanka Accounting
Standards.
1.2 Basis for Opinion
I conducted my audit in accordance
with Sri Lanka Auditing Standards
(SLAuSs). My responsibilities, under
those standards are further described
in the Auditor's Responsibilities for the
Audit of the Financial Statements section
of my report. I believe that the audit
evidence I have obtained is sufficent and
appropriate to provide a basis for my
opinion.
1.3 Key Audit Matters
Key Audit Matters are those matters that,
in my professional judgment, are of most
significance in my audit of the Financial
Statements of the current period. These
matters were addressed in the context of
my audit of the Financial Statements as a
whole, and in forming my audit opinion
thereon, and I do not provide a separate
opinion on these matters. For each
matter below, my description of how my
audit addressed the matter is provided in
that context.
I have fulfilled the responsibilities
described in the Auditor's responsibilities
for the audit of the financial statements
section of my report, including in relation
to these matters. Accordingly, my audit
included the performance of procedures
designed to respond to my assessment
of the risks of material misstatement
of the financial statements. The results
of my audit procedures, including the
procedures performed to address the
matters below, provide the basis for
my audit opinion on the accompanying
financial statements.
Key audit matter
How my audit addressed the key audit matter
Impairment for Expected Credit Losses of
Financial Assets measured at amortised cost
Impairment for expected credit losses of financial
assets measured at amortised cost comprising
of both loans and advances and debt and
other instruments as stated in Note 28 and 29,
respectively, is determined by management based
on the accounting policies described in Note
4.4.11
This was a key audit matter due to
• The involvement of significant management
judgements, assumptions and level of
estimation uncertainty associated in estimating
management expectation of future cash flows
to recover such financial assets; and
• The materiality of the reported amount of
Impairment of expected credit losses and use of
complex calculations in its determination.
Key areas of significant judgments, assumptions
and estimates used by management in the
assessment of the impairment for expected credit
losses for financial assets measured at amortised
cost included: assumed future occurrence of
events and conditions relating to the ongoing
foreign currency debt restructuring exercise,
forward- looking macroeconomic scenarios and
their associated weightages, which are subject
to inherently heightened levels of estimation
uncertainty.
In addressing the adequacy of the Impairment for expected credit losses of
Financial Assets measured at amortised cost, my audit procedures included
the following key procedures.
• Assessed the alignment of the Bank's Impairment for expected credit
losses computations and underlying methodology including responses to
the debt restructuring exercise and current economic conditions with its
accounting policies, based on the best available information up to the date
of my report.
• Evaluated the design, implementation and operating effectiveness
of controls over estimation of expected credit losses, which included
assessing the level of oversight, review and approval of allowances
for expected credit losses, policies and procedures by the Board and
management.
• Checked the completeness, accuracy and reasonableness of the underlying
data used in the expected credit loss computations by agreeing details to
relevant source documents and accounting records of the Bank.
• Evaluated the reasonableness of credit quality assessments and related
stage classifications.
In addition to the above, the following procedures were performed:
• For loans and advances assessed on an individual basis for impairment:
• Checked the arithmetical accuracy of the underlying individual
impairment calculations.
• Evaluated the reasonableness of key inputs used in the allowance for
expected credit losses made with particular focus on current economic
volatility. Such evaluations were carried out considering the value
and timing of cash flow forecasts particularly relating to elevated risk
industries and the status of recovery actions of the collaterals.
• For financial assets assessed on a collective basis for impairment:
• Tested the key inputs and the calculations used in the allowance for
expected credit losses.
Key audit matter
How my audit addressed the key audit matter
• Assessed the reasonableness of judgements, assumptions and
estimates used by the Management in the underlying methodology
and the management overlays. My testing included evaluating the
reasonableness of forward-looking information used, economic
scenarios considered, and probability weighting assigned to each of
those scenarios
• I assessed the adequacy of the related financial statement disclosures set
out in notes 28, 29 & 4.4.11.
Information Technology (IT) systems related
internal controls over financial reporting
Bank's financial reporting process is significantly
reliant on multiple IT systems with automated
processes and internal controls. Further, key
financial statement disclosures are prepared using
data and reports generated by IT systems, that
are compiled and formulated with the use of
spreadsheets.
Accordingly, IT systems related internal controls
over financial reporting were considered a key
audit matter.
My audit procedures included the following key procedures:
• I obtained an understanding of the internal control environment of the
processes and test checked relevant controls relating to financial reporting
and related disclosures.
• I involved my internal specialised resources and;
• Identified, evaluated and tested the design and operating effectiveness
of IT systems related internal controls, including those related to user
access and change management, and
• Obtained a high-level understanding of the cybersecurity risks affecting
the bank and the actions taken to address these risks primarily through
inquiry.
• I tested source data of the reports used to generate disclosures for
accuracy and completeness, including review of the general ledger
reconciliations.
1.4 Other information included in the
Group's 2023 Annual Report
The other information comprises the
information included in the Group's 2023
Annual Report, but does not include the
financial statements and my auditor's
report thereon, which is expected to
be made available to me after the date
of this auditor's report. Management is
responsible for the other information.
My opinion on the financial statements
does not cover the other information and
I do not express any form of assurance
conclusion thereon.
In connection with my audit of the
financial statements, my responsibility is
to read the other information identified
above when it becomes available and,
in doing so, consider whether the other
information is materially inconsistent with
the financial statements or my knowledge
obtained in the audit or otherwise
appears to be materially misstated.
When I read the Bank's 2023 Annual
Report, if I conclude that there are
material misstatements therein, I am
required to communicate that matter
to those charged with governance for
correction. If further material uncorrected
misstatements are existed those will be
included in my report to Parliament in
pursuance of provisions in Article 154 (6)
of the Constitution that will be tabled in
due course.
1.5 Responsibilities of Management
and Those Charged with Governance
for the Financial Statements
Management is responsible for the
preparation of Financial Statements that
give a true and fair view in accordance
with Sri Lanka Accounting Standards, and
for such internal control as management
determine is necessary to enable the
preparation of Financial Statements that
are free from material misstatement,
whether due to fraud or error.
In preparing the Financial Statements,
management is responsible for assessing
the Group's ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern
and using the going concern basis of
accounting unless management either
intends to liquidate the Group or to
cease operations, or has no realistic
alternative but to do so.
Those charged with governance are
responsible for overseeing the Bank's
and the Group's financial reporting
process.
As per Section 16(1) of the National
Audit Act No. 19 of 2018, the Group is
required to maintain proper books and
records of all its income, expenditure,
assets and Iiabilities, to enable annual
and periodic Financial Statements to be
prepared of the Group.
1.6 Auditor’s Responsibilities for the
Audit of the Financial Statements
My objective is to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor's
report that includes my opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with Sri Lanka Auditing Standards will
always detect a material misstatement
when it exists. Misstatements can arise
from fraud or error and are considered
material if, individually or in the
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of
these financial statements.
As part of an audit in accordance with
Sri Lanka Auditing Standards, I exercise
professional judgment and maintain
professional scepticism throughout the
audit, I also:
• Identify and assess the risks of
material misstatement of the financial
statements, whether due to fraud
or error, design and perform audit
procedures responsive to those risks,
and obtain audit evidence that is
sufficient and appropriate to provide
a basis for my opinion. The risk of not
detecting a material misstatement
resulting from fraud is higher than for
one resulting from error, as fraud may
involve collusion, forgery, intentional
omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal
control relevant to the audit in order
to design audit procedures that are
appropriate in the circumstances, but
not for the purpose of expressing an
opinion on the effectiveness of the
Bank's internal control.
• Evaluate the appropriateness of
accounting policies used and the
reasonableness of accounting
estimates and related disclosures
made by the management.
• Conclude on the appropriateness
of the management's use of the
going concern basis of accounting
and based on the audit evidence
obtained, whether a material
uncertainty exists related to
events or conditions that may cast
significant doubt on the Group's
ability to continue as a going
concern. If I conclude that a material
uncertainty exists, I am required
to draw attention in my auditor's
report to the related disclosures
in the Financial Statements or, if
such disclosures are inadequate, to
modify my opinion. My conclusions
are based on the audit evidence
obtained up to the date of my
auditor's report. However, future
events or conditions may cause the
Group to cease to continue as a
going concern.
• Evaluate the overall presentation,
structure and content of the financial
statements, including the disclosures,
and whether the financial statements
represent the underlying transactions
and events in a manner that achieves
fair presentation.
I communicate with those charged with
governance regarding, among other
matters, significant audit findings,
including any significant deficiencies in
internal control that I identify during my
audit.
2. Report on Other Legal and
Regulatory Requirements
2.1 National Audit Act, No. 19 of 2018
includes specific provisions for following
requirements;
2.1.1 I have obtained all the information
and explanation that required for the
audit and as far as appears from my
examination, proper accounting records
have been kept by the Bank as per the
requirement of section 12 (a) of the
National Audit Act, No. 19 of 2018.
2.1.2 The Financial Statements presented
is consistent with the preceding year as
per the requirement of section 6 (1) (d)
(iii) of the National Audit Act, No. 19 of
2018.
2.1.3 The Financial Statements presented
includes all the recommendations made
by me in the previous year as per the
requirement of section 6 (1) (d) (iv) of the
National Audit Act, No. 19 of 2018.
2.2 Based on the procedures performed
and evidence obtained were limited to
matters that are material, nothing has
come to my attention;
2.2.1 to state that any member of the
governing body of the Bank has any
direct or indirect interest in any contract
entered into by the Bank which are out
of the normal course of business as per
the requirement of section 12 (d) of the
National Audit Act, No. 19 of 2018.
2.2.2 to state that the Bank has not
complied with any applicable written law,
general and special directions issued by
the governing body of the Bank as per
the requirement of section 12 (f) of the
National Audit Act, No. 19 of 2018.
2.2.3 to state that the Bank has not
performed according to its powers,
functions and duties as per the
requirement of section 12 (g) of the
National Audit Act, No. 19 of 2018,
2.2.4 to state that the resources of the
Bank had not been procured and utilised
economically, efficiently and effectively
within the time frames and in compliance
with the applicable laws as per the
requirement of section 12 (h) of the
National Audit Act, No. 19 of 2018.
W P C Wickramaratne
Auditor General