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« Dec 12
Auditor's Report (Ranbaxy Laboratories) Year End : Mar '14
1.  Report on the Financial Statements
 
 We have audited the accompanying fnancial statements of Ranbaxy
 Laboratories Limited (the Company), which comprise the Balance Sheet
 as at 31 March 2014, and the Statement of Proft and Loss and the Cash
 Flow Statement for the ffteen months ended 31 March 2014 (current
 period), and a summary of signifcant accounting policies and other
 explanatory information.
 
 2.  Management''s Responsibility for the Financial Statements
 
 Management is responsible for the preparation of these fnancial
 statements that give a true and fair view of the fnancial position,
 fnancial performance and cash fows of the Company in accordance with
 the Accounting Standards referred to in sub-section (3C) of section 211
 of the Companies Act, 1956 (the Act) read with the General Circular
 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in
 respect of section 133 of the Companies Act, 2013. This responsibility
 includes the design, implementation and maintenance of internal control
 relevant to the preparation and presentation of the fnancial statements
 that give a true and fair view and are free from material misstatement,
 whether due to fraud or error.
 
 3.  Auditors'' Responsibility
 
 Our responsibility is to express an opinion on these fnancial
 statements based on our audit. We conducted our audit in accordance
 with the Standards on Auditing issued by the Institute of Chartered
 Accountants of India. Those Standards require that we comply with
 ethical requirements and plan and perform the audit to obtain
 reasonable assurance about whether the fnancial statements are free
 from material misstatement.
 
 An audit involves performing procedures to obtain audit evidence about
 the amounts and disclosures in the fnancial statements.  The procedures
 selected depend on the auditors'' judgement, including the assessment of
 the risks of material misstatement of the fnancial statements, whether
 due to fraud or error. In making those risk assessments, the auditor
 considers internal control relevant to the Company''s preparation and
 fair presentation of the fnancial statements in order to design audit
 procedures that are appropriate in the circumstances, but not for the
 purpose of expressing an opinion on the effectiveness of the Company''s
 internal control. An audit also includes evaluating the appropriateness
 of accounting policies used and the reasonableness of the accounting
 estimates made by management, as well as evaluating the overall
 presentation of the fnancial statements.  We believe that the audit
 evidence we have obtained is suffcient and appropriate to provide a
 basis for our audit opinion.
 
 4.  Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the fnancial statements give the information
 required by the Act in the manner so required and give a true and fair
 view in conformity with the accounting principles generally accepted in
 India:
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31 March 2014;
 
 (b) in the case of the Statement of Proft and Loss, of the loss for the
 ffteen months ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash fows for the
 ffteen months ended on that date.
 
 5.  Emphasis of Matter
 
 Without qualifying our opinion, we draw attention to note 41 b) of the
 fnancial statements which explains in detail the prohibition imposed by
 the Food and Drug Administration of the United States of America on the
 Toansa manufacturing unit of the Company, and the communications
 received from/ actions taken by other regulators including the
 Department of Justice of the United States of America and regulators in
 European Union countries. Consequently, the Company has made
 provisions, to the extent of Rs. 2,862.78 million, on the basis of best
 information and estimates presently available with the Company. The
 basis and assumptions used by the management in calculating these
 provisions involve signifcant judgment and estimates (including those
 relating to inventories, sales return, trade commitments, realisability
 of tax assets, etc.). There are inherent uncertainties regarding the
 future actions of the regulators, the impact of which is not
 ascertainable at this stage and therefore, the actual amounts may
 eventually differ.
 
 6.  Report on Other Legal and Regulatory Requirements
 
 (i) As required by the Companies (Auditor''s Report) Order, 2003 (the
 Order), as amended, issued by the Central Government of India in terms
 of sub-section (4A) of section 227 of the Act, we give in the Annexure
 a statement on the matters specifed in paragraphs 4 and 5 of the Order.
 
 (ii) As required by provisions of section 227(3) of the Act, 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 purpose 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, the Statement of Proft and Loss and the Cash
 Flow Statement dealt with by this Report are in agreement with the
 books of account;
 
 d.  in our opinion, the Balance Sheet, the Statement of Proft and Loss
 and the Cash Flow Statement comply with the accounting standards
 referred to in sub-section (3C) of section 211 of the Act read with the
 General Circular 15/2013 dated 13 September 2013 of the Ministry of
 Corporate Affairs in respect of section 133 of the Companies Act, 2013;
 
 e.  on the basis of written representations received from the directors
 as on 31 March 2014 and taken on record by the Board of Directors, none
 of the directors are disqualifed as on 31 March 2014, from being
 appointed as a director in terms of clause (g) of sub-section (1) of
 section 274 of the Act.
 
 Annexure referred to in paragraph 6 of the Independent Auditors'' Report
 
 The Annexure referred to in our report to the members of Ranbaxy
 Laboratories Limited (the Company) for the ffteen months ended 31
 March 2014. We report that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of its fxed
 assets.
 
 (b) The Company has a regular programme of physical verifcation of its
 fxed assets through which all fxed assets are verifed, in a phased
 manner, over a period of three years. In our opinion, this periodicity
 of physical verifcation is reasonable having regard to the size of the
 Company and the nature of its assets. As informed to us, no material
 discrepancies were noticed on such verifcation as carried out under the
 above programme during the current period.
 
 (c) Fixed assets disposed off during the current period were not
 substantial, and therefore, do not affect the going concern assumption.
 
 (ii) (a) The inventories, except goods-in-transit, have been physically
 verifed by the management during the current period. In our opinion,
 the frequency of such verifcation is reasonable.
 
 (b) Subject to our comments in clause (xxi) below, in our opinion, the
 procedures of physical verifcation of inventories followed by the
 management during the current period are reasonable and adequate in
 relation to the size of the Company and the nature of its business.
 According to further information and explanations provided to us, the
 management has also carried out a physical verifcation of its inventory
 as at the period-end, wherein no instances of incorrect inventory
 management, as referred to in clause (xxi), below were noticed at the
 period end.
 
 (c) Subject to our comments in clause (xxi) below, the Company is
 maintaining proper records of inventories and the discrepancies
 observed on verifcation between the physical stocks and the book
 records were not material. The fndings referred to in clause (xxi)
 below have been adequately dealt with in the book records.
 
 (iii) The Company has neither granted nor taken any loans, secured or
 unsecured, to or from companies, frms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956 (''the
 Act'').
 
 (iv) In our opinion, and according to the information and explanations
 given to us, and having regard to the explanation that purchase of
 certain items of inventories and fxed assets are for the Company''s
 specialised requirements, and similarly, certain goods sold and
 services rendered are for the specialised requirements of the buyers
 and suitable alternative sources are not available to obtain comparable
 quotations, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventories and fxed assets, and for the sale of goods
 and services. In our opinion, and according to the information and
 explanations given to us, we have not observed any major weakness
 during the course of audit.
 
 (v) In our opinion, and according to the information and explanations
 given to us, there are no contracts and arrangements, the particulars
 of which need to be entered into the register maintained under section
 301 of the Act.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the Company has an internal audit system
 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 rules prescribed by the Central Government for
 maintenance of cost records under section 209(1)(d) of the Act, in
 respect of its products and are of the opinion that prima facie, the
 prescribed accounts and records have been made and maintained. However,
 we have not carried out a detailed examination of the records with a
 view to determine whether these are accurate or complete.  
 
 (ix) (a) According to the information and explanations given to us, and
 on the basis of our examination of the records of the Company, amounts
 deducted / accrued in the books of account in respect of undisputed
 statutory dues including Provident Fund, Investor Education and
 Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax,
 Wealth Tax, Service Tax, Customs Duty, Excise Duty and other material
 statutory dues have generally been regularly deposited during the
 current period by the Company with the appropriate authorities, though
 there has been a slight delay in a few cases.  According to the
 information and explanations given to us and on the basis of our
 examination of the records of the Company, no undisputed amounts
 payable in respect of Provident Fund, Investor Education and Protection
 Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax,
 Service Tax, Customs Duty, Excise Duty and other material statutory
 dues were in arrears as at 31 March 2014 for a period of more than six
 months from the date those became payable.
 
 (b) According to the information and explanations given to us, there
 are no dues of Income Tax, Wealth Tax and Customs Duty which have not
 been deposited with the appropriate authorities on account of any
 dispute. According to the information and explanations given to us, the
 following dues of Excise Duty, Entry Tax, Value Added Tax, Service Tax
 and Sales Tax have not been deposited by the Company on account of
 disputes:
 
                               Nature of               Amount
 Name of the Statute           the dues               (Rs. in millions)
 
 Central Excise Act,1944       Excise Duty               20.51
 
 Central Excise Act,1944       Service Tax                4.48
 
 Central Excise Act,1944       Excise Duty                1.95
 
 Central Excise Act,1944       Excise Duty                3.77
 
 Central Excise Act,1944       Excise Duty                0.34
 
 Name of the Statute        Period to which the   Forum where dispute is
                            amount relates to     pending
 
 Central Excise Act,1944    2001-02, May 2003 to  Customs, Excise and 
                                                  Service
                            December 2007, 2004   Tax Appellate Tribunal
                            and 2005, 2007, 2008 (CESTAT), Delhi
                            and 2006 to 2010
 
 Central Excise Act,1944    2006 to 2011          CESTAT, Delhi
 
 Central Excise Act,1944    2004 to 2007          CESTAT, Mumbai
 
 Central Excise Act,1944    2005 to 2009          Commissioner (Appeals),
                                                  Chandigarh 
 
 Central Excise Act,1944    2011 to 2012          Commissioner (Appeals),
                                                  Chandigarh
 
 (x) The accumulated losses of the Company at the end of the current
 period are not less than ffty percent of its net worth (without
 adjusting accumulated losses). As explained to us, these are primarily
 due to provision created (net of reversal) for settlement with the
 Department of Justice (DOJ) of the United States of America for
 resolution of civil and criminal allegations by the DOJ (refer to note
 8 of the fnancial statements) in earlier years. The Company has
 incurred cash losses in the current period, though it had not incurred
 cash losses in the immediately preceding fnancial year.
 
 (xi) In our opinion, and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to its
 bankers, debentureholders and fnancial institutions.
 
 (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) In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund or a nidhi/ mutual beneft
 fund / society.
 
 (xiv) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company has issued
 letters of comfort and given guarantees for loans taken from banks by
 subsidiaries and an associate company respectively, are not prejudicial
 to the interests of the Company.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, except for term loans lying unutilised as at 31 March
 2014, the term loans taken by the Company have been applied for the
 purpose for which these were raised.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company as at 31
 March 2014, we are of the opinion that short term funds ofRs. 35,175.73
 million have been used for long-term purposes primarily on account of
 accumulated losses including those related to settlement with the DOJ
 of the United States of America for resolution of civil and criminal
 allegations by the DOJ (refer to note 8 of the fnancial statements).
 
 (xvii) The Company has not made any preferential allotment of shares
 during the current period to companies/parties covered in the register
 maintained under section 301 of the Act.
 
 (xviii) According to the information and explanations given to us, the
 Company has not issued debentures during the current period.
 
 (xix) The Company has not raised any money by public issues during the
 current period.
 
 (xxi) As explained in note 41 c) of the fnancial statements; during the
 current period, the Company has written-down carrying amount of
 inventory by Rs. 424 million, consequent to the fndings of an exercise
 carried out by the management in response to certain internal
 information received by it. The fndings primarily concluded intentional
 incorrect inventory management of certain intermediate products by
 certain manufacturing unit level staff resulting in yield mismanagement
 and consequent incorrect higher quantity of inventories. Being a
 pharmaceutical quality related technical matter, we have relied on the
 management''s assessment of the said adjustment. As informed to us,
 appropriate actions have been taken by the Company including
 strengthening of internal controls. Subject to these comments,
 according to the information and explanations given to us, no fraud on
 or by the Company has been noticed or reported during the course of our
 audit.
 
                                              For B S R & Co. LLP
 
                                              Chartered Accountants
 
                                              Registration No. 101248W
 
                                              Akhil Bansal
 
 Place : Gurgaon, India                       Partner
 
 Dated : 9 May 2014                           Membership No.: 090906
Source : Dion Global Solutions Limited
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