1) We have audited the attached Balance Sheet of KABSONS INDUSTRIES
LIMITED, HYDERABAD (A.P) as at 31st March, 2008 and also the Profit and
Loss Account 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 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
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 accounts as required by law have
been kept by the company so far as appears from our examination of
iii) The Balance Sheet, Profit & Loss account and Cash flow statement
dealt with by this report are in agreement with the books of account.
iv) Ii our opinion, the Balance Sheet, Profit & Loss account 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.
v) On the basis of the written representations received from the
Directors as on 31 st March, 2008 and taken on record by the Board of
Directors, we report that, none of the Directors is disqualified as on
31st March, 2008 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) Interest for the year and for earlier years Rs.6,75,2717- and
Rs.40,70,427/- respectively against trade deposits of
Dealers/Distributors are not provided resulting in understating the
Loss for the year by Rs.6,75,271/- and understating the liabilities by
Rs.47,45,698/- (Refer Note No.6 of Notes on Accounts).
b) We draw attention to note no.2 of Notes on accounts in the financial
statements The companys current liabilities exceeded its current
assets by Rs.645.56 Lakhs. 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-1S Employee
Benefits in respect of gratuity in view of this, the liability of the
Company in this regard could not be ascertained. Consequently, we are
unable to comment about the impact of this on the loss for the year.
6. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts give the information as
required by the companies Act, 1956, the matter 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, 2008;
ii) In case of the Profit & Loss account, of the Loss 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 the date.
Statement on the Companies (Auditors Report) Order 2003
Re: KABSONS INDUSTRIES LIMITED * ,
i) a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
b) All the assets have not been physically verified by the management
during the year but there is a regular program 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 has disposed off fixed assets. In our
opinion disposal off the fixed assets perse would not effect going
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 company 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 loan from three 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.59.07
Lakhs and the year - end balance of loans taken from such parties was
c) In our opinion, the rate of interest and other terms and conditions
on which loans have been taken from companies, firms or other parties
listed in the register maintained under section 301 of the Companies
Act, 1956 are not, prima facie, prejudicial to the interest of the
d) The Company is not regular in repaying principal and interest as
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. 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 contractors or arrangements
referred to in section 301 of the Act have been entered in the register
required to be maintained under that section and
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 58A and 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 the 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 provident fond,
investor education protection fund, employees state insurance, income
tax, 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 become payable is given below:
Name of Nature of the dues Amount
Maharastra Sales Tax Act Sales Tax Dept. Repayment 4,24,600
Maharastra Sales Tax Act Sales Tax Dept. Repayment 4,24,600
Companies Act Investor Education 22,550
and protection Fund
Karnataka Sales Tax Act Sales Tax 3,467
Karnataka Sales Tax Apt Sales Tax 1,209
Maharashtra Sales Tax Act Sales Tax 190
Jharkhand Sales Tax Act Sales Tax 3,271
ARSales Tax Act Sales Tax 7,525
Maharastra Sales Tax Act Sales Tax 5,817
Maharastra Sales Tax Act Sales Tax 9,538
Maharastra Sales Tax Act Sales Tax 800
Maharastra Sales Tax Act Sales Tax 5,535
West Bengal Sales Tax Act Sales Tax 547
West Bengal Sales Tax Act Sales Tax 23
Gujarat Sales Tax Act Sales Tax 669
Bombay Sales Tax Act Sales Tax 73,735
Central Sales Tax Act Penalty 1,31,000
Bombay Sales Tax Act Sales Tax & Penalty 1,34,780
Central Sales Tax Act Sales Tax & Penalty 5,17,000
Central Sales Tax Act Sales Tax & Penalty 2,040
ESI Act Employees state Insurnace 104
ESI Act Employees state Insurnace 14
ESI Act Employees state Insurnace 265
Period to which Due Date of
the amount relates date Payment
1999-00 15.05.1999} Un-paid
b) According to the information and explanations given to us, there are
no dues of sales tax, 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 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 company.
xv) The company has not given any guarantee for loans taken by others
from banks or financial institutions.
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
all 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 noticed or reported during the
course of our audit.
For BRAHMAYYA & CO.,
Place : Hyderabad (D.SEETHARAMAIAH)
Date : 19.08.2008 Partner (Membership No.2907)