We have audited the attached Balance sheet of Encore Software Limited
(the Company) as at March 31, 2012, the Profit and Loss Account and
Cash Flow Statement for the year ended on that date annexed thereto.
These Financial Statements are the responsibility of the Company''s
Management. Our responsibility is to express an opinion on these
Financial Statements 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 misstatements. An audit includes
examining, on a 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 the Management as well as evaluating the overall financial Statement
presentation. We believe that our audit provides a reasonable basis for
As required by the Companies (Auditor''s Report) Order, 2003, as amended
by the Companies (Auditor''s Report) ''(Amendment) Order, 2004 (the ''order''
) 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 paragraphs 4 and 5 of
the said Order.
Further to our comments in the Annexure referred to above, we report
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
b) In our opinion, proper books of account as required by the law, have
been kept by the Company so far as appears from our examination of
c) The Balance Sheet, Profit and Loss Account and Cash Flow Statements
dealt with by this report are in agreement with the books of accounts;
d) In our opinion, the Balance Sheet, the Profit and Loss Account and
the Cash Flow Statements dealt with by this report comply with the
Accounting Standards referred to in Sub-Section (3C) of section 211 of
the Companies Act, 1956;
e) On the basis of the written representation received from the
Directors, as on March 31, 2012 and taken on record by the Board of
Directors, we report that none of the Directors are disqualified as on
March 31, 2012 from being appointed as a Director in terms Clause (g)
of Sub-Section (1) of Section 274 of the Companies Act, 1956.
f) The accounts of the Company have been prepared on going concern
concept despite the complete erosion of Shareholders'' funds.
g) In our opinion and to the best of our information and according to
the explanations given to us, subject to preparation of accounts of the
Company on '' going concern concept'' despite the complete erosion of
shareholders'' funds the said accounts read together with the
significant accounting policies and notes applicable are 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 in India;
I. In so far as it relates to the Balance Sheet, of the state of
affairs of the Company as at March 31, 2012;
II. In so far as it relates to the Profit and Loss Account of the loss
of the Company for the year ended on that date.
III. In case of the Cash Flow Statement of the Company of the cash
flows for the year ended on that date.
Annexure to the Auditors'' Report to the members of Encore Software
Limited for the year ended March 31, 2012.
(i) Fixed Assets
(a) The Company has maintained proper records showing full particulars,
including quantitative details and the situation of its fixed assets;
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion is reasonable, having regard to the
size of the Company and nature of its business, In accordance with such
programme the Management has physically verified fixed assets during
the year and no material discrepancies were noticed on such
(c) As per the information and explanation furnished to us, fixed
assets are not disposed of during the year by the Company.
(a) The Management has conducted physical verification of inventories.
In our opinion, the frequency of t verification is reasonable.
(b) In our opinion and according to the information and explanation
furnished to us, the procedures followed by the Management for the
physical verification of inventories are reasonable and adequate in
relation to the size of the Company and nature of its business.
(c) In our opinion and according to the information and explanation
furnished to us, the Company has maintained proper record of
inventories. The discrepancies noticed between the physical stock and
book records were not material.
(a) The Company has not granted any loans secured or unsecured to
Companies, firms or other parties '' listed in the register maintained
under Section 301 of the Companies Act, 1956.
(b) The Company has taken the following loans from the parties listed
in the Register maintained under section 301 of the Companies Act,
(i) An unsecured interest free loan from a Company in which maximum
amount involved during the year was Rs. 3,32,849 and the year-end
balance was Rs.3,32,849.
(ii) An unsecured loan from a Director in which maximum amount involved
during the year was Rs, 45,79,501/- and the year-end balance was Rs.
(c) In our opinion, the terms and conditions on which an unsecured
interest free loan taken was not, prima facie, prejudicial to the
interest of the Company.
(d) We have been informed that there is no stipulation as to repayment
of the above referred unsecured interest free loan.
(e) As there is no stipulation as regards to repayment of interest free
unsecured loan taken by the Company from a Company listed in the
register maintained under Section 301 of the Companies Act ,1956
question of overdue outstanding does not arise.
(iv) Internal Control Procedures:
In our opinion and according to the information and explanations
provided to us there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchase of inventory, fixed assets and for
sale of goods and services. During the course of our audit, we have not
observed any continuing major weakness in such internal controls.
(v) In respect of transactions covered under Section 301 of the
Companies Act, 1956:
(a) In our opinion and according to the information and explanations
given to us, the transactions that need to be entered into the register
maintained under Section 301 of the Companies Act, 1956 have been
entered in the register;
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contacts and
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 any deposits from the public and
consequently, the directives issued by the Reserve Bank of India, the
provisions of Section 58A; 58AA or any other relevant provisions of the
Companies Act, 1956 and rules framed there under are not applicable.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of the business.
(viii) Central Government has not prescribed maintenance of cost
records under section 209 (1) (d) of the Companies Act, 1956 in respect
of any of the activities of the Company.
(ix) In respect of statutory dues:
(a) According to the information and explanations given to us
undisputed statutory dues including Provident Fund, investor education
and protection fund, Employees'' State Insurance, Income-Tax,
Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and
any other statutory dues applicable have not been regularly deposited
with the appropriate authorities. According to the information and
explanation given to us, there are no outstanding statutory dues as at
March 31, 2012 for a period of more than 6 months from the date of
becoming payable except for
Name of the Nature of Amount Period to Due Date Date of
Statute dues (Rs.) which the
Excise Service Tax Rs.
and Various Not paid
Act 2010-11 dates the date
The above data has been furnished to the extent dues payable have been
identified from the records of the Company.
(b) According to the information and explanations provided to us, the
disputed statutory dues that have not been deposited on account of
disputed matters pending before appropriate authorities are as -
Name of the Nature of Amount (Rs.) Period to
which Forum where
Statute dues the amount is pending
Tax Act, Income Tax Rs.
68,77,586/- 2000-2001 Honorable
1961 of 1961
(x) In our opinion, the accumulated losses of the Company are more than
fifty percent of its net worth. The Company has cash losses during the
year under review and also during the immediately preceding year.
(xi) According to the information and explanations given to us, the
Company has not defaulted in repayment of dues to the Banks. The
Company has neither taken any loans from Financial Institutions nor
issued any Debentures.
(xii) Based on our examination and according to the information and
explanations given to us, the Company has not granted loans and
advances on the basis of security by way of pledge of Shares,
Debentures and other securities. Accordingly, Clause 4 (xii) of the
order is not applicable.
(xiii) The Company is not a chit / nidhi / mutual benefit fund /
society and Clause xiii of the Order is not applicable.
(xiv) The Company is not dealing or trading in shares, securities,
debentures and other investments. The investments made by the Company
in the shares and other securities are in the name of the Company.
(xv) On the basis of the information and explanations given to us the
Company has not given any guarantee for loans taken by others from Bank
or Financial Institutions;
(xvi) Based on information and explanation given to us by the
Management, term loans were applied for the purpose for which the loans
(xvii) According to the information and explanations given to us and on
overall examination of the Balance Sheet and Cash Flow Statement of the
Company, we report that no funds raised on short term basis have been
used for long term investments.
(xviii) During the year under review, the Company has not made
preferential allotment of Shares to parties listed in the Register
maintained under Section 301 of the Act.
(xix) The-Company has not issued Debentures. Accordingly, Clause 4(xix)
of the order is not applicable.
(xx) The Company has not raised any money by public issues during the
year. Accordingly, Clause 4(xx) of the order is not applicable.
(xxi) Based on the audit procedures performed and information and
explanations given to us by the Management, we report that no fraud on
or by the Company has been noticed or reported during the course of our
For Ishwar & Gopal
K V Gopalakrishnayya
Place: Bangalore Partner
Date: May 30, 2012 Membership No. 21748
Firm Registration No 001154S