[Company’s Letterhead]
[Date]
To,
[Auditor’s Name]
[Audit Firm Name]
[Address]
Subject: Management Representation Letter for Audit of Restated
Financial Statements
Dear [Auditor’s Name],
This representation letter is provided in connection with your audit of the
restated financial statements of [Company Name] for the financial
years ended [Financial Years] and interim period [if applicable],
prepared for inclusion in the Draft Red Herring Prospectus (DRHP),
Red Herring Prospectus (RHP), and final prospectus to be filed with
the Securities and Exchange Board of India (SEBI), stock
exchanges, and the Registrar of Companies for the proposed Initial
Public Offering (IPO).
We confirm that we are responsible for the fair presentation and
preparation of the restated financial statements in accordance with:
The Companies Act, 2013,
The SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2018 (as amended),
Indian Accounting Standards (Ind AS) or Accounting Standards (AS),
as applicable,
Guidance Note on Reports in Company Prospectuses issued by ICAI,
Any other applicable legal and regulatory framework.
To the best of our knowledge and belief, after making appropriate inquiries
and based on representations received from divisional/functional heads,
we confirm the following:
1. Completeness and Accuracy of Financial Statements
The restated financial statements and related disclosures are
accurate, complete, and fairly presented.
We confirm that all restatement adjustments have been properly
recorded, disclosed, and reconciled.
The restatement adjustments were made to:
o Ensure consistency in accounting policies across periods,
o Correct any errors or misstatements,
o Comply with SEBI (ICDR) Regulations and other applicable
standards.
2. Adjustments and Transactions Affected by Restatement
We confirm that the following adjustments have been considered in the
restated financial statements:
a. Lease Accounting Adjustments (Ind AS 116 - Leases)
Example: The company transitioned from an operating lease
model to a finance lease model under Ind AS 116 from FY 2021-
22.
Previously, rent expenses of ₹X million were recognized in P&L.
Under Ind AS 116, these leases are now recognized as Right-of-Use
(ROU) Assets of ₹Y million and corresponding Lease Liabilities of
₹Z million.
The impact on EBITDA is ₹X million higher due to the
reclassification of rental expenses to depreciation and interest
expenses.
b. Expected Credit Loss (ECL) Model for Trade Receivables (Ind AS
109)
Example: We have adopted the Expected Credit Loss (ECL)
method retrospectively for provisioning against trade receivables.
Earlier, a fixed provision of 1% was applied to receivables. Now,
the ECL method considers:
o Historical loss rates,
o Credit ratings of customers,
o Macroeconomic factors affecting credit risk.
As a result, an additional provision of ₹X million was created in
FY 2022-23.
c. Gratuity and Leave Encashment Adjustments (Ind AS 19 -
Employee Benefits)
Example: Actuarial valuations for gratuity and leave encashment
were revised based on:
o Updated discount rates from 6.5% to 7.2%,
o Change in attrition rate assumptions from 8% to 10%.
As a result, the gratuity liability increased by ₹X million,
impacting OCI (Other Comprehensive Income).
d. Revenue Recognition Adjustments (Ind AS 115 - Revenue from
Contracts with Customers)
Example: The company earlier recognized revenue based on
dispatch. However, under Ind AS 115, revenue is now recognized
only when control is transferred to customers.
This resulted in a deferral of revenue of ₹X million in FY 2021-
22.
Additional contract liabilities of ₹Y million were recorded for
performance obligations.
e. Contingent Liabilities and Litigation Adjustments
Example: A pending litigation case related to tax demands of ₹50
million was earlier classified as a "remote liability."
After a detailed legal review, it is now classified as a "probable
liability", requiring a provision of ₹50 million under Ind AS 37.
f. Reclassification of Financial Instruments (Ind AS 109)
Example: The company had earlier classified a loan given to a
subsidiary as "Investment."
Under Ind AS 109, this is now recognized as a Financial Asset at
Amortized Cost, leading to an adjustment of ₹X million in
interest income.
g. Changes in Share Capital Due to Bonus Issue and ESOPs
Example: In FY 2022-23, the company issued 1:1 bonus shares,
leading to a restatement of per-share financial metrics (EPS,
NAV, etc.).
ESOP-related expenses of ₹Y million have been retrospectively
adjusted.
3. Completeness of Information Provided
We have provided access to all:
o Financial records, agreements, and supporting documents,
o Board and audit committee meeting minutes,
o Internal audit and compliance reports.
No information has been intentionally withheld.
4. Fraud and Internal Controls
We confirm that there have been no instances of fraud affecting
the financial statements.
No whistleblower complaints or regulatory investigations exist that
materially impact the company.
5. Going Concern Assumption
The company has sufficient liquidity and business continuity plans
to sustain operations for at least 12 months.
No material uncertainties exist regarding going concern status.
6. IPO-Specific Representations
The restated financial statements have been prepared in
accordance with SEBI (ICDR) Regulations and ICAI guidance.
The financial information disclosed in the DRHP, RHP, and final
prospectus is consistent with the restated financials.
Any known or expected material commitments that may impact the
IPO have been disclosed.
7. Uncorrected Misstatements and Adjustments
All audit adjustments identified during the audit have been
considered and incorporated.
Any uncorrected misstatements are immaterial to the financial
statements.
8. Other Matters
We confirm there are no undisclosed guarantees, off-balance
sheet transactions, or related party arrangements that could
impact financial reporting.
This letter is signed in recognition of our responsibility for the integrity
and accuracy of the restated financial statements and the
completeness of the information provided to you.
For and on behalf of [Company Name]
[Authorized Signatory]
[Designation]
[Date]