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Moneycontrol.com India | Auditor's Report > Auto - 2 & 3 Wheelers > Auditor's Report from Kinetic Motor Company - BSE: 505190, NSE: KINETICMOT

Kinetic Motor Company

BSE: 505190  |  NSE: KINETICMOT  |  ISIN: INE267B01015  |  Auto - 2 & 3 Wheelers

Explore Kinetic Motor connections « Mar 07
Auditor's Report Year End : Sep '08
1.  We have audited the attached Balance Sheet of Kinetic Motor Company
 Limited as at 30th September, 2008 and also the Profit and Loss Account
 and the Cash Flow Statement for the 18 months period ended on that date
 annexed thereto. These financial statements are the responsibility of
 the Companys management.  Our responsibility is to express an opinion
 on 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 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.
 
 4.  Further to our comments in the annexure referred to in paragraph 3
 above, 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 purposes 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, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement comply with the accounting standards referred to in
 sub-section (3C) of section 211 of the Companies Act, 1956;
 
 (e) on the basis of written representations received from the
 directors, as on 30th September, 2008, and taken on record by the Board
 of Directors, we report that none of the directors is disqualified as
 on 30th September, 2008 from being appointed as a director in terms of
 clause (g) of sub-section (1) of section 274 of the Companies Act,
 1956;
 
 (f) (i) we refer to note 26 of the Notes to the Accounts regarding
 certain transactions of purchase of components which require approval
 of the Central Government under section 297 of the Companies Act, 1956;
 (ii) we refer to note 10 of the Notes to the Accounts regarding
 remuneration of Rs. 137.88 lacs paid to the executive directors which
 is subject to the approval of the Central Government.
 
 (g) 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 in India:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 30th September, 2008;
 
 (ii) in the case of the Profit and Loss Account, of the loss of the
 Company for the 18 months period ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the 18 months period ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 Annexure referred to in paragraph 3 of the report of even date of the
 Auditors to the members of Kinetic Motor Company Limited on the
 accounts for the 18 months period ended 30th September, 2008.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) As informed to us, the fixed assets have been physically verified
 by the management during the period and no material discrepancies were
 noticed on such verification. In our opinion, the frequency of physical
 verification of fixed assets is reasonable having regard to the size of
 the Company and nature of assets.
 
 (c) The fixed assets disposed off during the period are not substantial
 and hence it has not affected the going concern assumption.
 
 (ii) (a) Inventories have been physically verified during the period by
 the management. In respect of stocks lying with third parties,
 confirmations have been obtained for some of the inventories. In our
 opinion, the frequency of verification is reasonable.
 
 (b) In our opinion, the procedures for physical verification of
 inventory 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 has maintained proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book stocks were not material having regard to the size of
 operations of the Company and have been properly dealt with in the
 books of accounts.
 
 (iii) (a) According to the information and explanations given to us ,
 the Company has not granted any loans , secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956.
 
 Sub-clauses (b), (c) and (d) are not applicable.
 
 (e) The Company has taken from time to time loans aggregating
 Rs.2719.45 lakhs from two Companies covered in the register maintained
 under section 301 of the Companies Act, 1956. The maximum amount
 outstanding during the period was Rs.2719.45 lakhs and the period end
 balance is Rs.2719.45 lakhs.
 
 (f) In our opinion the rate of interest and other terms and conditions
 in respect of loans taken by the Company from the parties (referred to
 in (e) above) are not prima facie prejudicial to the interest of the
 Company.
 
 (g) As explained to us, in respect of the loans taken by the Company
 (referred to in (e) above), generally there are no stipulations for
 repayment of the principal amount of loan and interest thereon. Loan of
 Rs.2, 560 lakhs was taken during the period. No payments with respect
 to interest or loan repayment have been made during the period.
 
 (iv) In our opinion and according to the information and explanations
 given to us and having regard to the explanation that most of the items
 purchased are of a special nature and alternative quotations are not
 available, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business, with
 regard to the purchase of inventory and fixed assets. In respect of
 sale of goods and services, the internal control system is generally
 adequate.  During the course of our audit, no major weakness has been
 noticed in the internal controls system.
 
 (v) (a) In our opinion and based upon our audit procedures performed
 and according to the information and explanations given to us, the
 particulars of contracts or arrangements that need to be entered into
 the register maintained under section 301 of the Companies Act, 1956
 have been entered in the said register.
 
 (b) In our opinion and according to the information and explanations
 given to us, having regard to our comments in paragraph (iv) above, 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 the
 prevailing market prices for such transactions at the relevant time.
 
 (vi) The Company has not accepted any deposits from the public to which
 the provisions of sections 58A, 58AA or any other provisions of the
 Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,
 1975 apply.
 
 (vii) The Company has an internal audit system, which is commensurate
 with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the notification of the Central Government for the
 maintenance of cost records under section 209(1 )(d) of the Companies
 Act, 1956 and on the basis of the information received, are of the
 opinion that prima facie the prescribed accounts and records have been
 made and maintained except that the final statements are in the process
 of being compiled. We have not, however, made a detailed examination of
 the said records.
 
 (ix) (a) Based on our audit procedures and according to the information
 and explanations given to us, there are no arrears of statutory dues
 which has remained outstanding as at 30th September, 2008 for a period
 of more than six months from the date they became payable. According to
 the records of the Company, undisputed statutory dues (including
 Provident Fund, Employees State Insurance, Investor Education and
 Protection Fund, Income tax, Sales tax, Wealth tax, Service Tax, Custom
 Duty, Excise Duty, cess and other statutory dues) have not generally
 been regularly deposited with the appropriate authorities and the
 period of delays range from 1 day to 194 days.
 
 (b) According to the information and explanations given to us and
 records of the Company, the details of the dues of sales tax/income
 tax/ custom duty/ service tax/ wealth tax/ excise duty/ cess, which
 have not been deposited on account of any dispute, are given below:
 
 Nature of the dues       Amounts involved Forum where dispute is
                         (dues to the 
                          extent not       pending
                          deposited) 
                         (Rs.in lakhs.)
 
 Central Sales Tax           39.74         Appellate Deputy
 (Assessment years 1994-                  Commissioner,
 1995, 1999-2000. 2000-                    Commercial Tax, Indore
 2001)
 
 Central Sales Tax           30.27         Madhya Pradesh
 (Assessment year 2001-                    Commercial
 2002)                                     Tax Tribunal, Bhopal
 
 Central Sales Tax            5.34         Madhya Pradesh
 (Assessment year 1998-                    Commercial
 1999)                                     Tax Tribunal, Bhopal
 
 Sales Tax                    0.60         Sales Tax Tribunal,
 (Assessment year 2001-                    Kolkatta
 2002)
 
 Central Sales Tax           16.91         Appellate Deputy
 (Assessment year 2002-                    Commissioner,
 2003)                                     Commercial Tax, Indore
 
 Central Sales Tax           27.70         Appellate Deputy
 (Assessment year 2003-                    Commissioner,
 2004)                                     Commercial Tax, Indore
 
 Sales Tax                    4.50         Special Additional
 (Assessment years 1999-                   Commissioner,
 2000, 2000-2001, 2001-                    Commercial Tax,
 2002)                                     Behrampur
 
 Entry Tax                    0.64         Deputy Commissioner,
 (Assessment years 1994-                   Commercial Tax,
 1995,1995-1996)                           Indore
 
 Madhya Pradesh               1.88         Madhya Pradesh
 Commercial Tax                            Commercial Tax
 (Assessment year 1998-                    Tribunal, Bhopal
 1999)
 
 Madhya Pradesh               0.78         Appellate Deputy
 Commercial Tax                            Commissioner,
 (Assessment year 1999-                    Commercial Tax, Indore
 2000)
 
 Excise duty                 50.47         Supreme Court
 Excise duty                 21.05         High Court Madhya
 
 Pradesh - Indore Bench
 
 Excise duty                  1.22         Commissioner Appellate
 Tribunal
 
 (x) The Companys accumulated losses are not less than 50% of its net
 worth as at 30th September, 2008. The Company has incurred cash losses
 during the period covered by our audit and in the immediately preceding
 financial year.
 
 (xi) In respect to term loan from Canara Bank, 3 out of 6 installment
 of Rs. 37.50 lacs each due during the period were delayed and the
 period of delay range from 14 days to 145 days. The balance 2
 installment of Rs. 37.50 lacs each and Rs. 14.35 lacs out of one of the
 Installment has not been repaid by the company till 30th September
 2008. There is no delay in repayment of interest.
 
 In respect of term loan of State Bank of Indore, 2 installment of Rs.
 18.75 lacs each and Rs 5.12 lacs out of one of the Installment has not
 been repaid by the Company till 30th September 2008. In respect of the
 said loan, the payment of interest in 3 instances, aggregating to Rs.
 3.76 lacs have also not been paid by the Company till 30th September,
 2008.
 
 In respect of debentures, one installment of Rs. 229.50 lacs has not
 been repaid by the Company till 30th September, 2008. In respect of the
 said debentures the payment of interest in one instance, aggregating
 Rs.  65.63 lacs has also not been paid by the Company till 30th
 September, 2008.
 
 Having regard to the above, based on our audit procedures and on the
 information and explanation given by the management, the company has
 not defaulted in repayment of dues to financial institutions or banks
 or debenture holders except as stated above.
 
 (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 not a chit fund, nidhi / mutual benefit fund and
 therefore the requirements pertaining to such class of companies are
 not applicable.
 
 (xiv) The Company is not dealing or trading in shares, securities,
 debentures and other investments.  
 
 (xv) The Company has not given any guarantee for loans taken by others
 from banks or financial institutions.
 
 (xvi) There were no term loans taken during the year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that funds raised on short-term basis have not been used for long- term
 investment.
 
 (xviii)ln our opinion and according to the information and explanations
 given to us, the price at which preferential allotments of shares have
 been made during the period, to parties and companies covered in the
 Register maintained under section 301 of the Companies Act, 1956 are
 not prejudicial to the interest of the Company.
 
 (xix) In respect of the debentures issued during the period, the
 Company has created/ is in the process of creating the necessary
 security/charge.
 
 (xx) The Company has not made any public issue during the period and
 therefore the question of disclosing the end use of money does not
 arise.
 
 (xxi) Based upon the audit procedures performed and according to the
 information and explanations given and representations made by the
 management, we report that no fraud on or by the Company had been
 noticed or reported during the period.
 
                                             For A.F. FERGUSON & CO.
                                              Chartered Accountants
 
                                                          G.SHANKAR
                                                            Partner
                                              Membership No.: 27023
 Place: Pune
 Date : 20th December, 2008
Source : Religare Technova

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