COMPUDYNE WINFOSYSTEMS LIMITED
ANNUAL REPORT 2004-2005
We have audited the attached Balance Sheet of Compudyne Winfosystems
Limited, as at at 31, 2005 and also the Profit Loss Account for the year
ended on that date annexed thereto. These financial statements are
responsibility of the company's management Our responsibility is to express
an opinion on these financial starts based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in India. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement An audit includes examining, on test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As required by the Companies (Auditor's Report) Order, 2003 issued by the
Central Government of India in terms of sub-section (4A) of section 227 of
the Companies Act, 1956, we enclose in the Annexure a statement on the
matters specified in paragraph 4 and 5 of the said order wherever
applicable. Further to our comments in the Annexure referred to in
paragraph 3 above, we report that:
1) 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;
2) 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
and regarding overseas branch transactions, records maintained at the Head
3) The Balance sheet and Profit and Loss Account dealt with by this report
are in agreement with the said books of account;
We further report that:
a) Account wise balances in sundry debtors, sundry creditors and loans &
Advances are subject to confirmation and impact of variance on the accounts
cannot be quantified.
b) Branch balances amounting to Rs. 1,75,49,803/- (Cr) are subject to
reconciliation and impact on the accounts on reconciliation can not be
c) Non-provision of salary payable to staff for part of the year has
resulted in loss for the year being understated, the quantification of
which is not possible due to lack of relevant information.
d) Non-provision of remuneration payable to directors for the year has
resulted in loss for the year being understated.
e) Impact on accounts due to non-quantification of cancelled contracts with
respect to software in process, non-marketable products, demos and
prototypes, extra efforts billed but not accepted, products under
development abandoned mid-way non-usable in-house projects including work-
in-progress can not be ascertained.
f) In the absence of confirmation and certification with respect to
physical existence of assets held abroad and in view of inadequate control
measures adopted by the company towards monitoring existence of such assets
and control over the same, erosion if any, in the quality and quantity of
such assets can not be commented upon.
g) Non-compliance of accounting standard-11 and accounting policy (f) under
Schedule 18 of accounts, in case of foreign currency expenditure wherein
conversion rate has been adopted at the average rate and impact on accounts
to such non-compliance remains unascertained.
h) Utilisation without repatriation of net UD$ 2.98 million in earlier
years stated to have been deducted by Vision Art & Design Inc., USA towards
meeting expenses of the company including capital expenditure are subject
necessary approvals from the concerned regulatory authorities.
i) The company does not have a whole-time secretary as envisaged in Section
383A of the Companies Act, 1956.
4) In our opinion, the Balance sheet and Profit and Loss Account dealt with
by this report comply with the accounting standards referred to in sub-
section (3C) of Section 211 of the Companies Act, 1956, to the extent
5) As on March 31, 2005, provisions of clause (g) of sub-section (1) of
Section 274 of the Companies Act, 1956, are applicable to the directors of
the company, in view of non-payment of matured fixed deposits from public
beyond one year after maturity;
6) In our opinion and to the best of our information and according to the
explanations given to us, the said accounts give the information required
by the Companies Act, 1956 in the manner so required and give a true and
fair view in conformity with the accounting principles generally accepted
a) In the case of the Balance sheet, of the state of affairs of the Company
as at March, 31, 2005,
b) In the case of the Profit and Loss account, of the Loss for the year
ended on that date, and
c) In the case of the Cash Flow Statement, of the cash flows for the year
ended on that date.
For VNG NATH ASSOCIATES
Place : Bangalore
Date : 24.06.2005
ANNEXURE TO THE AUDITOR'S REPORT
The annexure referred to in paragraph 3 of the Auditor's report to the
members of Compudyne Winfosystems limited (the Company) for the year ended
March 31, 2005. We report that:
1) In our opinion and according to the information and explanation given to
us, there are internal adequate control procedures commensurate with the
size of the company and the nature of its business except in certain
functional areas such as monitoring and timely recovery of dues to the
company, monitoring physical existence and exercising control over assets
held abroad and expenses incurred at branch offices. The activities of the
company do not involve the sale of goods.
2) There was no internal audit during the year under report.
3) The company has maintained proper records of fixed assets held in India
showing particulars including quantitative details and their location.
Records showing particulars of assets held abroad do not indicate the exact
location of such assets.
4) Fixed Assets are physically verified in accordance with the company's
policy of conducting such verification at a reasonable interval of once in
two year and keeping in line with the policy, the fixed assets have not
been verified during the year in the absence of which material discrepancy,
if any, are not ascertained.
5) In our, opinion and according cc the information and explanation given
to us, a substantial part of the fixed assets have not been disposed-off by
the company during the year. However we are unable to comment on assets
held abroad as to the company's control over the same and their usage.
Work In process
6) In the absence of age wise arid category wise analysis of items under
Work-in-process, value of non-recoverable and non-marketable items, if
any, included therein cannot be commented upon as to adequacy of valuation
of the same.
Loans and Advances
7) The Company has not taken any loans, secured or unsecured, from
companies, firms other parties listed in the register maintained under
Section 301 of the Companies Act, 1956, except a sum of Rs. 13,51,201/-
accepted during the year from the Chairman and Managing Director of the
8) The company has not granted any loans, secured or unsecured, to
companies, firms or other parties listed in the register maintained under
Section 370 (1B) of the Companies Act 1956.
9) During the year, loans or advances in the nature of loans have been
given only to staff members and in few cases, recoveries are pending since
the concerned employees have left the company.
10) Payment of principle and interest in respect of term loans are not
Transactions with parties under Section 301 of the Companies Act, 1956
11) There have been no transactions for purchase of goods and materials,
sale of goods materials made in pursuance of contracts or arrangements
entered in the register maintained under section 301 of the Companies Act,
1956, which aggregated during the year to Rs 5,00,000/- or more in respect
of each party.
12) In our opinion and according to the information and explanations given
to us, the company has not complied with the provisions of Section 58A and
Section 58AA of the Companies Act, 1956 and the Companies (Acceptance of
Deposits) Rules 1975 with regard to the deposits accepted from the public,
shareholders. Details of matured deposits and interest accrued thereon is
not ascertainable since fixed deposits register is not available for
13) The Central Government has not prescribed maintenance of Cost records
under section 209 (1) (d) of the Companies Act 1956.
Staff related matters
14) The company is not regular in depositing the provident fund and
employees state insurance fund dues with the concerned authorities. The
extent of arrears as at the end of the year for a period exceeding six
month from the date they became payable is Rs. 8,13,215/- in case of
Provident Fund and Rs. 2,89,581/- in case of Profession Tax. Further, the
company has not remitted income-tax deducted at source of Rs. 12,94,378/-
and sales tax of Rs. 3,15,213/- both shown under 'Current Liabilities -
Other Outstanding Liabilities'.
15) Accumulated losses of the company at the end of the year are more than
fifty per cent of its net worth and the company has incurred loss in this
financial year and also in the financial year immediately preceding this
16) The company has defaulted in repayments to financial institutions and
banks, the details of which are as below:
Bank particulars Type of facility Amount due
1. Canara Bank Packing credit Rs. 2,47,53,000
Temporary overdraft Rs. 16,01,891
2. State Bank of India Term Loan Rs. 3,63,72,069
Packing Credit Rs. 13,51,82,809
3. EXIM Bank Term loan US $19,20,529-64
17) The company has not availed any term loans over and above those existed
at the beginning of this year.
18) The company has not given any guarantee for loans taken by others from
banks or other financial institutions.
19) Funds raised during the year on short-term basis have not been used by
the company for long-term investment and vice versa.
20) In the absence of any information about any fraud on or by the company,
noticed or reported during the year, we have nothing to comment on the
21) The company has not made any preferential allotment of shares during
the year to parties and companies covered in the register maintained under
section 301 of the Companies Act, 1956.
For VNG NATH ASSOCIATES
Place : Bangalore
Date : 24.06.2005
Management's Reply to Auditors Report: Para 3 (a & b)
The balances under Sundry Debtors, Sundry Creditors and Loans & Advances as
also Branch balances are under reconciliation.
Para 3 (c)
The Employees left the services abruptly without notice. In the absence of
details for attendance etc salary could not be claimed, further any
liability created towards salary (though not paid), would become taxable in
the hands of the employees. However some employees have taken advance.
Para 3 (e)
The products developed for the specific contracts, Demos, Prototypes etc.
are usable developed tools for executing future Projects with minor
changes. These are also capable of being marketed for Demos, Corporate
Presentation, Value addition of contracted product etc. Therefore there are
no unusable WIP in-house projects.
Para 3 (h)
The sum of US $ 2.98 million was used on on-site works for which SOFTEX
forms need not be submitted (though submitted inadvertently). The Statutory
Auditors have certified accordingly. A letter in this regard has been sent
to STPI, Bangalore on 24.06.2005.
The Company is under severe financial crunch. Due to this, deposits could
not be repaid. However all steps will be taken by the Company to secure the