We have audited the attached Balance Sheet of Kwality Dairy (India)
Limited as at 31st March 2007 and related Profit and Loss Account and
the Cash Flow Statement for the year 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.
1. We have 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
2. As required by the Companies Auditors Report Order, 2003, as
amended by the Companies (Auditors Report) (Amendment) Order, 2004
issued by the Central Government in terms of Section 227(4A) of the
Companies Act, 1956 and on the basis of such checks of the books and
records as we considered appropriate and according to the information
and explanations given to us, we set out in the Annexure a statement on
the matters specified in paragraphs 4 and 5 of the said Order.
3. Further to our comments in the Annexure referred to in paragraph 2
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 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 Statement
dealt with by this report are in agreement with the books of account.
d) In our opinion, the Balance Sheet and Profit and Loss Account dealt
with by this report have been prepared in compliance with the
applicable accounting standards referred in sub-section (3C) of Section
211 of the Companies Act, 1956
e) On the basis of the written representations received from the
directors, as on 3 1st March, 2007 and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st March 2007 from being appointed as directors in terms of clause
(g) of sub-section (1) of Section 274 of The Companies Act, 1956.
f) In our opinion and to the best of our information and according to
the explanations given to us, the said financial statements together
with the notes thereon/attached thereto give in the prescribed manner
the information required by the Companies Act 1956 and also 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 2007.
ii) In the case of the Profit & Loss Account, of the profit of the
Company for the year ended on that date.
iii) In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
ANNEXURE TO THE AUDITORS REPORT
(Referred to in paragraph 2 of our report of even date)
(1) (a) The company is maintaining proper records showing full
particulars including quantitative details and situations of its
(b) In our opinion, the fixed assets have been physically verified by
the management at reasonable intervals, having regard to the size of
the Company and nature of its assets. No material discrepancies between
the book records and physical inventory are noticed.
(c) During the year ,in our opinion, a substantial part of fixed assets
has not disposed off by the Company.
(2) (a) The inventory has been physically verified by management during
the year. In our opinion, the frequency of verification is reasonable.
(b) In our opinion and according to the information and explanation
given to us, the procedures of physical verification of inventory
followed by the management were found reasonable and adequate in
relation to the size of the company and the nature of its business.
(c) On the basis of our examination of the records of the inventory, we
are of opinion that the company is maintaining proper records of
inventory. The discrepancies noticed on physical verification between
the physical stocks and the books records were not material in relation
to the operations of the company.
(3) (a) The Company has not granted loans, secured or unsecured, to
companies , firms or other parties listed in the Register maintained
under Section 301 of the Companies Act, 1956 , paragraphs (iii)(b), (c)
and (d) of the Order , are not applicable. The company has taken
unsecured loan from five companies covered in the Register maintained
under Section 301 of the Companies Act, 1956. The maximum amount
involved during the year of such loans aggregates to Rs 1757.29 Lacs.
(b) In our opinion and according to the information and explanation
given to us, the rate of interest and other terms and conditions of
loans taken by the company are not prima facie prejudicial to the
interest of the company.
(c) The payment of principal amount and interest are regular.
(4) In our opinion, and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the company and the nature of its business, for the
purchase of fixed assets and sale of services. Further on the basis of
our examination of the books of account and according to the
information and explanations given to us, we have not come across nor
have we been informed of any instance of major weaknesses in internal
(5) (a) In our opinion and according to the information and
explanations given to us, the transactions made in pursuance of
contracts or arrangements, that needed to be entered in the Register
maintained under Section 301 of the Companies Act, 1956 have been so
(b) In our opinion and according to the information and explanations
given to us, there are no transactions in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 aggregating during the year to Rs.
5,00,000/-(Rupees five lacs only) or more in respect of any party in
the said financial year.
(6) The Company has not accepted any deposits from the public within
the meaning of Section 58A and 58AA of the CompaniesAct 1956 and the
rules framed there under.
(7) In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
(8) We have broadly reviewed the books of account maintained by the
company in respect of products where, pursuant to the Rules made by the
Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub-section (1) of Section 209 of the
Companies Act, 1956 and are of opinion that prima facie, the prescribed
accounts and records have been maintained. We have not, however made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
(9) (a) According to the books of account and the records as produced
and examined by us with generally accepted auditing practices in India
and also management representations in our opinion the company is
generally regular in depositing undisputed statutory dues in respect of
Provident Fund, Investor Education and protection fund, Employees
State Insurance, Income-tax, Sales-tax, Wealth Tax, Custom Duty, Excise
Duty, cess and other statutory dues as applicable with appropriate
authorities in India, except for some delay in few cases.
(b) As at 31 st March, 2007, according to the records of the company
and the information and explanations given to us, the following are the
particulars of dues on account of income tax, sales tax, wealth tax,
service tax, custom duty, excise duty and cess matters that have not
been deposited on account of any dispute: Name of the statute Nature of
dues Amount (Rs in lacs) Period to which the amount relates Forum where
Pending Haryana Livestock Development Board, Gurgaon Milk Cess 145.76
2002-2007 High Court
(10) The Company does not have accumulated losses as at 31st March ,
2007 and has not incurred cash losses during the financial year ended
on that date or in the immediately preceding financial year.
(11) According to the information and explanation given to us, the
company has not defaulted in repayment of dues to any bank or financial
institutions or bank. The Company has not issued any debenture.
(12) 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 security.
(13) The provisions of any special statute as specified under paragraph
(xiii) of the Order are not applicable to the Company.
(14) In our opinion and according to the information and explanations
given to us, the Company is not a dealer or trader in securities.
(15) As informed to us, the company has not given any guarantee for
loans taken by others from bank or financial institution.
(16) According to the information and explanations given to us, the
term loans have been applied for the purposes for which they were
(17) Based on the information and explanations given to us and on an
overall examination of the Balance Sheet of the Company, in our
opinion, there are no funds raised on short-term basis have been used
for long-term investment.
(18) The company has not made any preferential allotment of shares to
parties and companies covered in the Register maintained under Section
301 of the Companies Act, 1956 during the year.
(19) As the company has no debentures outstanding at any time during
the year , paragraph (xix) of the Order is not applicable to the
(20) The company has not raised any money by public issue during the
(21) According to the information and explanations given to us, during
the year, no material fraud on or by the company has been noticed or
For Mukesh K Arora & Co.
September 04, 2007
P. P. Mukerjee