| We have audited the accompanying Financial Statements of KABSONS
INDUSTRIES LIMITED, HYDERABAD (A.P)("The Company") which comprise the
Balance Sheet as at 31st March, 2014 and the Statement of Profit and
Loss and cash flow statement for the year then ended, and Summary of
Significant Accounting Policies and other explanatory information.
Management's responsibility for the Financial Statements
Management is responsible for the preparation of these Financial
Statements that give a true and fair view of the Financial position ,
Financial performance and Cash flows of the Company in accordance with
the Accounting Standards referred in the sub-section(3C)of section 211
of the Companies Act 1956("the Act"). This responsibility includes the
design, implementation and maintenance of internal control relevant
tothe preparation and presentation of the financial statements that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our Audit. We conducted our Audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain the
reasonable assurance about whether the financial statements are free
from material misstatement.
An Audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgement, including the assessment of
the risks of material misstatements of the financial statements,
whether due to fraud or error. In making those risk assessments, the
Auditor considers internal control relevant to the company's
preparation and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of the accounting estimates made
by the management, as well as evaluating the overall presentation of
the Financial statements
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for qualified opinion:
The Company has not adopted and complied with the requirements of AS-15
Employee Benefits' in respect of the Gratuity liability which
constitute a departure from the Accounting standards referred in
section 211(3C) of the Act. In view of this the liability of the
company in this regard could not be ascertained Consequently, we are
unable to comment about the impact of the same on the profit for the
year, income tax and shareholder's finds.
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis for Qualified Opinion Paragraph, the financial
statements give the information required by the Act in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) In the case of the Balance Sheet, of the state of affairs of the
company as at March 31, 2014;
(b) In the case of the Statement of Profit and Loss, of the profit for
the year ended on the date; and
(c) In the case of the Cash flow statement, of the cash flows for the
year ended on that date.
Emphasis of matter
(a) We draw attention to Note 24.1 in the financialstatements which
states that the Company's currentliabilities exceeded its current
assets by Rs. 3.36 crones. Further,as indicated by the Company's
Balance Sheet as at March 31, 2014, the net worth of the Company has
eroded completely. These conditionsalong with other matters as set
forth in Note 24.1, indicate the existence of a material
uncertaintythat may cast significant doubt about the Company's ability
to continue as agoing concern
(b) We draw attention to Note 24.3in the financialstatements which
states that the Company has not provided for the interest expense
amounting to Rs. 6,34, 899for the year and Rs. 78,05,598 for earlier
years against the Trade Deposits received from the Dealers/
Distributors.Consequently, the same has resulted in overstatement of
profit for the year by Rs. 6,34,889, understatement of the balance in
the statement of profit and loss by Rs. Rs. 84,40,497 and
understatement of Current Liabilities by Rs. 84,40,497.
Other matters
The Company could not get confirmation of balances in respect of
(a) Trade Receivables amounting to Rs.42,05,216 and (b) Trade Payables
amounting to Rs. 17,43,136. Consequently, we are unable to determine,
if any adjustments are required to the amounts reflecting in the
Balance Sheet as at March 31, 2014 and the impact of the same on the
profit for the year, income tax and shareholder's funds. Our opinion is
not qualified in this regard.
Report on other Legal and Regulatory requirements
1. As required by the Companies (Auditor's Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
(a)we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
(b) in our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
(c) the Balance Sheet, the Statement of Profit and Loss and Cash Flow
statement dealt with by this report are in agreement with the books of
account;
(d) except for the matter described under the basis for qualified
opinion paragraph in our opinion, the Balance sheet, Statement of
Profit and Loss, and Cash flow Statement comply with the Accounting
Standards referred to in sub-section (3C) of section 211 of the Act;
(e) on the basis of Written representations received from the Directors
as on March 31,2014 and taken on record by the Board of Directors, none
of the directors is disqualified as on March 31, 2014, from being
appointed as a Director in terms of clause(g) of sub-section (1) of
section 274 of the Act;
(f) Since the Central Government has not issued any notification as to
the rate at which cess is to be paid under section 441A of the
Companies Act 1956 nor has it issued any rules under the said section
prescribing the manner in which such cess is to be paid, no cess is due
and payable by the company.
ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE
Statement on the Companies (Auditor's Report) Order 2003
Re: KABSONS INDUSTRIES LIMITED
i) (a) The Company has maintained proper records showing
fullparticulars including quantitative details and situationof fixed
assets.
(b) All the assets have not been physically verified by the management
during the year but there is a regular program of verification which,
in our opinion, is reasonable having regard to the size of the company
and the nature of its assets.No material discrepancies were noticed on
such verification.
(c) During the year, the company has disposed off fixed assets which
are not substantial part of the fixed assets.
ii) (a) The inventory has been physically verified during theyear by
themanagement. In our opinion, thefrequency of verification is
reasonable.
(b) The procedures of physical verification of inventories followed by
the management are reasonable and adequate in relation to the size of
the company and the nature of its business.
(c) The company is maintaining proper records of inventory. The
discrepancies noticed on verification between the physical stocks and
the book records have been properly dealt with in thebooks of account.
iii)(a) The company has not granted any loans, secured orunsecured to
companies, firms or other parties covered inthe register maintained
uls.301 of the Act.
(b) The company had taken interest free secured loan from a Company ,
interest-free unsecured loan from another Company and from a party
covered in the register maintained under section 301 of the Companies
Act, 1956. The maximum amount involved during the year was Rs. 31 Lakhs
and the year-end balance of loans taken from such parties was Rs. 31
Lakhs.
(c) In our opinion, the terms and conditions on which loans have been
taken from companies, and parties listed in the register maintained
under section 301 of the Companies Act, 1956 are not prima facie,
prejudicial to the interest of the company.
(d) According to explanations given to us, the lenders have not
specified repayment terms. In view of this we cannot comment upon
whether the payment of principal is regular.
iv) In our opinion and according to the information and explanations
given to us, there are adequate internal control systemscommensurate
with the size of the Companyand the nature of its business with regard
to purchases of inventory,fixed assets and with regard to the sale of
goods and gas. During the course of our audit, we have not observed any
continuing failure to correct major weaknesses in internal control
systems.
v) (a) According to the information and explanations given to us, we
are of the opinion that the particulars of contracts or arrangements
referred to in section 301 of the Act have been entered in the register
required to be maintained under that section; and
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
vi) The company has not accepted the deposits from the public within
the meaning of Section 58Aand 58AA of the Companies Act, 1956 and the
Rules framed thereunder.
vii) The company has no internal audit system.
viii) The Central Government has not prescribed maintenance of cost
records under clause (d) of subsection (1) of Section 209 (1)(d) of the
Companies Act, 1956 for the products/items dealt with by the company.
ix) (a) The company is not regular in depositing with appropriate
authorities undisputed statutory dues including investor education
protection fund, employee's state insurance, sales tax. The extent of
the arrears of outstanding statutory dues as at the last day of the
financial year for a period of more than six months from the date they
became payable are as given below:
S. Name of the Nature of the Amount Period to Due date
no Statue dues (Rs.) which the
amount
relates
1 Companies Investor 22,550 1994-95 19.10.2001
Act, 1956 Education
and Protection
Fund
2 Maharashtra Sales Tax 5,817 2005-06 15.05.2005
Sales Tax Act
3 Maharashtra Sales Tax 9,538 2004-05 15.04.2005
Sales Tax Act
4 Maharashtra Sales Tax 800 2003-04 15.01.2004
Sales Tax Act
5 BST Act Sales Tax and 73,735 1997-98 15.08.2004
Penalty
6 BST Act Sales Tax and 1,34,780 1998-99 15.08.2004
Penalty
7 CST Act Sales Tax and 1,31,000 1997-98 15.08.2004
Penalty
8 CST Act Sales Tax and 5,17,000 1998-99 15.08.2004
Penalty
(b) According to the information and explanations given to us, there
are no dues of sales tax, income tax, customs duty, wealth tax, excise
duty, service tax and cess which have not been deposited on account of
any dispute.
x) The accumulated losses of the company are more than fifty percent of
its net worth. The company has not incurred cash losses during the
financial year covered by our audit and as well as in the immediately
preceding financial year.
xi) During the financial year covered by our audit the Company hadnot
borrowed from financial institutions. Hence, clause (xi) of the above
referred Order is not applicable.
xii) The company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
xiii) The company is neither a chit fund nor a nidhi mutual
benefitfund/society. Therefore, the provisions of clause 4(xiii) of the
above referred Order are not applicable to the company.
xiv) The company is not dealing in or trading in shares, securities,
debentures and other investments. Accordingly, the provisions of clause
4(xiv) of the above referred Order are not applicable to the company.
xv) The Company has not given any guarantee for loans taken by others
from banks or financial institutions.
xvi) During the year the company has not availed any term loans from
banks or financial institutions. Accordingly, the provisions of clause
4(xvi) of the above referred Order are not applicable to the company.
xvii) According to the information and explanations given to us and on
overall examination of the balance sheet of the company, we report that
the no funds raised on short-term basis have been used for longterm
investment.
xviii) The company has not made preferential allotment of shares to
parties and companies covered inthe register maintained under section
301 of the Act during the year.
xix) The company has not issued any debentures. Accordingly, the
provisions of clause 4(xix) of the above referred Order are not
applicable to the company.
xx) During the year the company has not raised money by public issue.
Accordingly, the provisions of clause 4(xx) of the above referred Order
are not applicable to the company.
xxi) According to the information and explanations given to us, no
fraud on or by the company has been noticed or reported during the
course of our audit.
for BRAHMAYYA & CO.,
Chartered Accountants.
Firm's Regn.No.0005135
Sd/-
(D.SEETHARAMAIAH)
Partner
Membership No.002907
Place: Hyderabad
Date : 26-05-2014
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