The Members of
KABSONS INDUSTRIES LIMITED
Report on the Standalone Financial Statements
1. We have audited the accompanying Standalone Financial Statements of KABSONSINDUSTRIES LIMITED HYDERABAD (Telangana)(The Company") which comprisethe Balance Sheet as at 31st March 2017 the Statement of Profit and Loss cash flowstatement for the year then ended and a Summary of Significant Accounting Policies andother explanatory information.
Management's responsibility for the Standalone Financial Statements
2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Financial Statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
3. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
4. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and Matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under. We conducted our audit inaccordance with the Standards on Auditing specified under Section 143(10) of the Act.Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free frommaterial misstatement.
5. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
6. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the standalone financial statements.
Basis for qualified opinion:
7. The Company has not adopted and complied with the requirements of AS-15Employee Benefits' in respect of the Gratuity liability which constitute a departurefrom the Accounting standards referred in section 133 of the Act. In view of this theliability of the company in this regard could not be ascertained. Consequently we areunable to comment about the impact of the same on the profit for the year income tax andshareholder's funds.
8. In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the basis for QualifiedOpinion Paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India: of the state of affairs of the company as at March31 2017;of the profit and of the cash flows for the year ended on that date.
Emphasis of matter
9. (a) We draw attention to Note 24.1 in the financial statements which state that theCompany's current assets exceeded its current liabilities (previous year Currentliabilities exceeded the current assets by Rs.205.74 Lakhs) as at March 31 2017 andthere is no threat to the operations of the Company.
(b) We draw attention to Note 24.3 in the financial statements which states that theCompany has not provided for the interest expense amounting to Rs. 633691 for the yearand Rs. 9707879 for earlier years against the Trade Deposits received from the Dealers/Distributors. Consequently the same has resulted in understatement of loss for the yearby Rs. 633691 understatement of the balance in the statement of profit and loss by Rs.Rs. 10341550 and understatement of Current Liabilities by Rs. 10341550.
10. The Company could not get confirmation of balances in respect of:
(a) Trade Receivables amounting to Rs. 2929210/- and (b) Trade Payables amounting toRs. 1715905/-. Consequently we are unable to determine if any adjustments are requiredto the amounts reflecting in the Balance Sheet as at March 31 2017 and the impact of thesame on the profit for the year income tax and shareholder's funds. Our opinion is notqualified in this regard.
Report on other Legal and Regulatory requirements
1. As required by the Companies(Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section(11) of section 143 ofthe Companies Act 2013 we give in the Annexure- A a statement on the matters specifiedin paragraphs 3 and 4 of the Order .
2. As required by Section 143 (3) of the Act we report that:
(a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
(b) in our opinion proper books of account as required by law have been kept by thecompany so far as it appears from our examination of those books;
(c) the Balance Sheet the Statement of Profit and Loss and Cash Flow statement dealtwith by this report are in agreement with the books of account;
(d) except for the matter described under the basis for qualified opinion paragraph inour opinion the Balance sheet Statement of Profit and Loss and Cash flow Statementcomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014;
(e) on the basis of the written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a director in terms of Section164 (2) of the Act;
(f) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure- B; and
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. the Company does not have any pending litigations which would impact its financialposition
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. the instance of delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company is as given below.
|Amount (Rs.) ||Period to which the amount relates ||Due date |
|22550 ||1994-95 ||19.10.2001 |
iv. The Company has provided requisite disclosures in the financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8thNovember 2016 to 30th December 2016. Based on audit procedures and relying onthe management representation we report that the disclosures are in accordance with thebooks of account maintained by the Company and as produced to us by the Management - ReferNote 25.4 to the Financial Statements.
For BRAHMAYYA & CO.
ANNEXURE-A REFERRED TO IN PARAGRAPH 11 OF OUR REPORT OF EVEN DATE Statement on theCompanies (Auditor's Report) Order 2016 Re: KABSONS INDUSTRIES LIMITED
On the basis of such checks as we considered appropriate and according to theinformation and explanation given to us during the course of our audit we report that:
i) (a) the Company has maintained proper records showing full particulars includingquantitative Details and situation of fixed assets;
(b) all the assets have not been physically verified by the management during the yearbut there is a regular program of verification which in our opinion is reasonable havingregard to the size of the company and the nature of its assets. No material discrepancieswere noticed on such verification;
(c) the title deeds of the immovable properties are held in the name of the Company;
ii) the inventory has been physically verified during the year by the management. Inour opinion the frequency of verification is reasonable. The discrepancies noticed onverification between the physical stocks and the book stocks were not material and havebeen properly dealt with in the books of account;
iii) the company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained u/s.189of the Act;
iv) the Company has not advanced any loan not made investments not given guaranteesand not provided any security. Hence para 3(iv) of the aforesaid Order is not applicable;
v) the Company has not accepted deposits from the public. Hence the provisions ofSections 73 to 76 and other relevant provisions of the Companies Act 2013 and theCompanies (Acceptance of Deposits) Rules 2014 are not applicable to the Company.
vi) maintenance of cost records has not been specified by the Central Government u/s148(1) of the Act. Hence para 3(vi) of the aforesaid Order is not applicable;
vii) (a) the Company is not regular in depositing with appropriate authoritiesundisputed statutory dues Including investor education protection fund sales tax. Theextent of the arrears of outstanding statutory dues as at the last day of the financialyear for a period of more than six months from the date they became payable are as givenbelow:
|Name of the . Statue ||Nature of the dues ||Amount Rs. ||Period to which the amount relates ||Due Date |
|Maharashtra Sales Tax Act ||Sales Tax ||5817 ||2005-06 ||15.05.2005 |
|Maharashtra Sales Tax Act ||Sales Tax ||9538 ||2004-05 ||15.04.2005 |
|Maharashtra Sales Tax Act ||Sales Tax ||800 ||2003-04 ||15.01.2004 |
|BST Act ||Sales Tax and Penalty ||73735 ||1997-98 ||15.08.2004 |
|BST Act ||Sales Tax and Penalty ||134780 ||1998-99 ||15.08.2004 |
|CST Act ||Sales Tax and Penalty ||131000 ||1997-98 ||15.08.2004 |
|CST Act ||Sales Tax and Penalty ||517000 ||1998-99 ||15.08.2004 |
(b) according to the information and explanations given to us there are no dues ofsales tax income tax customs duty excise duty service tax and cess which have not beendeposited on account of any dispute;
viii) during the financial year covered by our audit the Company had not borrowed fromfinancial institutions. Hence clause 3(viii) of the above referred Order is notapplicable;
ix) the Company has not raised moneys by way of Initial Public Offer or Further PublicOffer(including debt instruments) and term loans. Hence clause 3(ix) of the above referredOrder is not applicable;
x) no fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the year;
xi) no managerial remuneration has been paid or provided during the year under report.Hence clause 3(xi) of the above referred Order is not applicable;
xii) the Company is not a Nidhi Company.
xiii) the Company is in compliance with Section 188 and Section 177 of the Actwherever applicable for all transactions with related parties and the details of relatedparty transactions have been disclosed in the financial statements as required by theapplicable accounting standards;
xiv) the Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures .Hence clause 3(xiv) of the above referred Orderis not applicable;
xv) the Company has not entered into any non-cash transactions with its directors orpersons connected with him and hence provisions of Section 192 of the Act are notapplicable;
xvi) the Company is not required to be registered under Section 45-IA of the ReserveBank of India Act1934.
For BRAHMAYYA & CO.
ANNEXURE - B REFERRED TO IN PARAGRAPH 12 (f) OF OUR REPORT OF EVEN DATE
Re: KABSONS INDUSTRIESLIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of
Section 143 of the Companies Act 2013 ("the Act")
1. We have audited the internal financial controls over financial reporting of KabsonsIndustries Limited ("the Company") as of March 312017 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
2. The Company's management is responsible for establishing and maintaining internalfinancial controls based on "the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India". These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
3. Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 312017 based on"the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India"
For BRAHMAYYA & CO.