1. We have audited the attached Balance Sheet of KABSONS INDUSTRIES
LIMITED, HYDERABAD (A.P) as at 31st March, 2012 and also the Statement
of Profit and Loss for the year ended on that date annexed thereto and
the cash flow statement for the period ended on that date. These
financial statements are the responsibility of the Company''s
Management. Our responsibility is to express an opinion dn these
financial statements based on our audit.
2. 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 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 management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion :
3. As required by the Companies (Auditors'' Report) Order, 2003,
issued by the Central Government of India in terms of Section 227(4A)
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. .
4. Further to our comments in the Annexure referred to above we report
i) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
ii) In our opinion, proper books of account as required by law have
been kept by the Company so far as appeal''s from our examination of
iii) The Balance Sheet, Statement of Profit and Loss and cashflow
statement,dealt with by this report are in agreement with the books of
iv) In our opinion, the Balance Sheet, Statement of Profit & Loss and
Cashflow Statement dealt with by this report comply with the Accounting
Standards referred to in sub-section (3C)''of Section 211 of the
Companies Act,1956, excepting AS-15''''Employee Benefits. ,
v) On the basis of the written representations received from the
Directors as on 31st March, 2012 and taken on record by the Board of
Directors, we report that, none of the Directors is disqualified as on
31st March, 2012 from being appointed as a Director in terms of clause
(g) of sub-section (1) of Section 274 of the Companies Act, 1956. -
5. a)lnterest for the year and for earlier years Rs.6,41,221/- and
against Trade Deposits received from Dealers/Distributors are not
providied resulting in overstating the profit for the year by
Rs.6,41,221/- and understating the current labilities by Rs.71,65,255/-
(Refer Note No.25.3 of financial statements).
b)We draw attention to note No.25.1 of financial statements. The
Company''s current liabilities exceeded its current assets by Rs.497.07
Lakhs as on 31.03.2012. This factor along with the other matters as
setforth in the note referred to, raise substantial doubt that whether
the Company will be able to continue as a Going concern. .
c)The Company has not complied with the requirements of AS-15
‘Employee Benefits'' in respect of gratuity. In view of this, the
liability of the Company could not be ascertained. Consequently, we
are unable to comment about the impact of this on the profit for the
d)There are no confirmation of balances in respect of sundry debtors,
loans and advances and sundry creditors other than due from/to related
6. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read with the notes
thereon and subject to our comments in para 5 above, give the
information as 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 the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2012;
ii) In the case of the Statement of Profit and Loss Account, of the
profit of the Company for the year ended on that date; and
iii)In the case of Cashflow Statement of the cash flows for the year
ended on that date.
Statement on the Companies- (Auditor''s Report) Order 2003 Re: KABSONS
i) a)The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets.
b) AH the assets have not been physically verified by the management
during the year but there is a regular programme 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
c) During the year, the company had disposed off fixed assets which
does not affect the going concern basis.
ii) a)The inventory has been physically verified during.the year by the
management. In our opinion, the frequency of verification is
b)The procedures of physical verification of inventories followed by
the management are reasonable and adequate in relation to the size of
the cdmpany 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 the.books of account.
iii) a) The company has not granted any loans, secured or unsecured to
companies, firms or other parties covered in the register maintained
u/s.301 of the Act. ''
b)The company had. taken interest free loans from two Companies 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 72.00 Lakhs and the year-end balance of loans taken from such
parties was Rs.53.0Q Lakhs. ''
c)ln 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)Aceording 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 systems commensurate
with the size of the Company and 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
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
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) Central Government has not prescribed maintenance of cost records
under clause (d) of sub-section (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 and the payments tnade during the year are as given
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 become payable and the payments made during the year are as
of Nature of
the dues Amount Period
to which Due Date of
statue Rs. the amount
relates date payment
Education 22,550 1994-95 19.10.2001}
Act Sales Tax 3,467 1999-00 15.05,1999} Unpaid
Act Sales Tax 1,209 2004-05 15.03.2005}
Act Sales Tax 190 2000-01 15.05.2000}
Act Sales Tax 3,271 2001-02 15.03.2002}
Tax Act Sales Tax 7,525 2000-01 15.04.2001}
Act Sales Tax 5,817 2005-06 15.05.2005}
Act Sales Tax 9,538 2004-05 15.04.2005}
Act Sales Tax 800 2003-04 15.01.2004}
Act Sales Tax 5,535 2004-05 05.11.2004}
Act Sales Tax 547 2004-05 15.01.2005}
Act Sales Tax 23 2005-06 15.09.2005}
Act Sales Tax 669 2005-06 15.10.2005} Unpaid
14.BST Act Sales Tax
& Penalty 73,735 1997-98 15.08.2004}
15.BST Act Sales Tax &
Penalty 1,34,780 1998-99 15.08.2004}
16.CST Act Sales Tax
& Penalty 1,31,000 1997-98 15.08.2004}
17.CST Act Sales Tax
& Penalty 5,17,000 1998-99 15.08.2004}
18.CST Act Sales Tax
& Penalty 2,040 1998-99 21.02.2002}
19.ESI Act Employees
Insurance 104 2006-07 21.06.2006)
20.ESI Act Employees
Insurance 14 2006-07 21.11.2006}
Insurance 265 1999-00 21.04.2000}
b) According to the information and explanations given to us, there are
no dues of sales fax, income tax, customs duty, wealth tax, excise
duty, service tax and cess which have not been deposited on account of
x) In our opinion, the accumulated losses of the company are more than
fifty percent of its networth. The Company has not incurred cash losses
during the financial year covered by our audit and as well as in the
immediately proceeding financial year.
xi) During the financial year covered by our audit the Company had not
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 benefit
fund / 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
xv) The company has not given any guarantee for loans taken by others
from banks or financial stitutions.
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
no funds raised on short-term basis have been used for long -term
xviii) The Company has not made preferential allotment of shares to
parties and companies covered in the 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 noted or reported during the
course of our audit.
For BRAHMAYYA & CO.,
Firm Regn. No.000513S
Place : Hyderabad (D.SEETHARAMAIAH)
Date : 01-06-2012 Partner, Membership No 2907