To The Members Of The Committee Of Management
M/S KIRLOSKAR INVESTMENTS AND FINANCE LIMITED
We have audited the attached BALANCE SHEET of M/S. KIRLOSKAR INVESTMENTS AND FINANCELIMITED, Unity Buildings, II Floor, C Block, J.C. Road, Bangalore - 560 002 as at 31stMarch 2008, the PROFIT AND LOSS ACCOUNT and cash flow statement for the year ended on thatdate annexed thereto. These financial statements are the responsibility of the company'smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audit.
1. We conducted our audit in accordance with the auditing standards generallyaccepted in India. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.
2. As required by the Companies (Auditor's Report) order, 2003, issued by the CentralGovernment 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 and5 of the said order.
3. Further to our comments in the Annexure referred above, we report that:
i. We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purpose of our audit.
ii. In our opinion, proper books of account as required by law have been kept by thecompany so far as appears from our examination of those books.
iii. The Balance sheet and Profit and Loss account dealt with by this report are inagreement with the books of accounts.
iv. In our opinion, the Balance sheet and Profit and Loss account dealt ' with by thisreport, subject to our observation in Para. 6, of this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act 1956;
v. The Hontile High Court of Karnataka, in terms of the interim order passed on 8thAugust 2001 has appointed a Committee of Management to manage the affairs of the company.All powers of management are accordingly vested with the said Committee, who have assumedoffice on 17th August 2001. In view of the High Court Order and there being noBoard in power, the compliance of clause (g) of sub section (1) of Section 274 of theCompanies Act, 1956, does not arise.
vi Attention is drawn to the following Notes, as shown in Schedule 10 :
a. Note No.1: Significant Accounting Policies
b. Note No.1 (C): Fixed Assets and Depreciation
c. Note No.1 (E): Valuation of inventories.
d. Note No.2: Non Classification of Assets as required by NBFC Prudential Norms (RB)Directions, 1998.
e. Note No. 3: Provision for Non Performing Assets not done.
f. Note No.4: Provision for interest accrued on Public Deposits not provided for.
g. Note No.5: Repayment of public deposits
h. Note No.9: Non-Reconciliation of Bank Accounts.
i. Note No. 10: Classification of Loans and Advances,
j. Note No. 15: Confirmation of Balances.
k. Note No. 16: Redeemable Cumulative Preference Shares.
1. Note No. 17: Contingent Liability.
m. The Company has not furnished the requisite statements, information or particularsas required to be furnished by a Non Banking Financial under Chapter III B of the ReserveBank of India Act, 1934 (2 of 1934) Non Banking Financial Companies (Reserve Bank)Directions 1998. to the extent applicable, to the Reserve Bank of India. Under thecircumstances, we have been unable to verify the same and express an opinion on the saidstatements as required under Section 45 MA of the Reserve Bank of India Act, 1934.
Subject to above observation, in our opinion and to the best of our information andaccording to the explanations given to us, the said accounts read together with the notesthereon and subject to our observations referred to in annexure to para 3 of the reportgive the information required by the Companies Act, 1956, in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India :
i. In the case of the Balance Sheet, of the state of affairs of the Company as at March31, 2008, and
ii. In the case of the Profit and Loss Account, of the loss for the year ended31 March 2008.
vi. Consequent upon the Company's default in repayment of Public Deposits and interestthereon, the Reserve Bank of India has filed a Winding up Petition against the companybefore the High Court of Karnataka which was admitted and an interim order passed on 8thAugust 2001 appointing a Committee of Management to manage the affairs of theCompany. All the powers of the management have been accordingly vested with the saidCommittee who assumed office on 17th August 2001. As per the information andexplanations given to us, in view of the High Court Order and there being no Board inactual power, the said Committee of Management has signed the Annual Accounts.
viii. The Committee of Management by virtue of powers vested by the Hon'ble High Courtof Karnataka, under C.O.P. No. 214 and 257 to 62/1999 has appointed us to conduct auditfor the Financial 2007 - 08 Vide letter No. KIFL:SECT: 119:2007 dated 28.5.2007.
|Place : Bangalore ||For H.R.SURESH & CO., |
|Date : 5th SEPTEMBER 2008 ||CHARTERED ACCOUNTANTS |
Re: M/S. KIRLOSKAR INVESTMENTS AND FINANCE LIMITED
Referred to in paragraph 3 of our report of even date,
(I) (a) The fixed assets register maintained by company is not updated showing fullparticulars including quantitative details and situation of fixed assets. The Committee ofManagement is taking steps to update the records and reconcile the balances.
(b) The assets of the company have not been physically verified by the managementduring the year.
(c) During the year, the company has not disposed off any major part of the fixedassets.
(II) (a) The physical verification of inventory of stock on hire under hire purchaseagreements and inventories of repossessed property including shares and governmentsecurities has not been conducted during the year by the management.
(b) There are no laid down procedures by the management for physical verification ofinventories.
(c) The company has not maintained records of inventory and therefore it is notpossible to ascertain whether there are any material discrepancies and therefore have notbeen properly dealt with in the books of account.
(III) The Company has not produced register as required to be maintained under section301 of the Companies Act, 1956. Therefore we are not in a position to state whether thecompany has granted or taken any loans, secured or unsecured, from companies, firms orother parties listed in the register to be maintained under Section 301 of the CompaniesAct, 1956 or from the Companies under the same management as defined under sub section(IB) of Section 370 of the Companies Act, 1956, and therefore we are not in a position tostate whether the rate of interest and other terms and conditions of loans given or takenby the company, secured or unsecured are prima-facie prejudicial to the interest of thecompany and whether the payment of principle amount and interest are regular.
(d) According to the information and explanations given to us the company has takenreasonable steps for recovery / payment of the principle and interest exceeding Rs. 1.00Lakh.
(IV) In our opinion and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size of the companyand the nature of its business operations.
(V) According to the information and explanations given to us, we are of the opinionthat the transactions that need to be entered into the register to be maintained undersection 301 of the Companies Act, 1956 have not been so entered.
(VI) In our opinion and according to the information and explanations given to us thecompany has not accepted any deposits from public during the year. However the company hasnot complied with the provisions of Section 58A of the Companies Act, 1956, in so far asit has defaulted in the repayment of principal as well as interest on public deposits. Thedeposits held by the Company are in excess of the limits permissible under the provisionsof Non Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)Directions, 1998.
(VII) In our opinion, the company does not have an internal audit system commensuratewith the size and nature of its business.
(VIII) The Central Government has not prescribed maintenance of cost records U/s.209(l)(d) of the Companies Act, 1956.
(IX) (a) The company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund, employees' state Insurance, and Income tax, salestax, custom duty, cess and other applicable material statutory dues.
(b) According to the information and explanations given to us, no undisputed amountspayable in respect of income tax, wealth tax, sales tax, customs duty, excise duty andcess were in arrears, as at 31-3-2008 for a period of more than six months from the datethey became payable.
(c) According to the information and explanations given to us, there are dues of incometax amounting to Rs. 22,41,31,000/-.
(X) The company has accumulated losses. The company has earned cash profit of Rs.68.44lakhs during the financial year covered by our audit and during the immediately precedingfinancial year.
(XI) In our opinion, and according to the information and explanations given to us, thecompany has defaulted in repayment of dues to depositors covered u/s 58A of the company'sAct 1956.
(XII) The company has not granted any loans and advances on the basis of security byway of pledge of shares, debentures and other securities.
(XIII) In our opinion, the company is not a chit fund or a nidhi /mutual benefitfund/Company. Therefore, the provisions of clause 4(XIII) of the companies (Auditor'sReport) order, 2003 are not applicable to the company.
(XIV) During the year, the company has dealt with shares held as investments. In ouropinion, proper records have been maintained of the transactions and contracts and timelyentries have been made therein, the shares, securities other investments are held in thename of the company.
(XV) In our opinion, and according to the information and explanations given to us, thecompany has not given any guarantees for loans taken by others from banks or financialinstitutions.
(XVI) According to the information and explanations given to us and on an overallexamination of the balance sheet of the company, we report that the funds raised onshort-term basis have not been used for long-term investment. No long-term funds have beenused to finance short-term assets except permanent working capital.
(XVII) According to the information and explanations given to us, the company has notmade any preferential allotment of shares to parties and companies covered in the registermaintained under section 301 of the Companies Act, 1956.
(XVIII) According to the information and explanations given to us, during the periodcovered by our audit report, the company has not issued any securities.
(XIX) According to the information and explanations given to us, the company has notraised any money by public issues.
(XX) According to the information and explanations given to us, no fraud on or by thecompany has been noticed or reported during the course of our audit.
For H.R.SURESH & CO.,
Date: 5th SEPTEMBER 2008