Enso Secutrack Ltd Auditor Reports

ENSO SECUTRACK LIMITED ANNUAL REPORT 2010-2011 AUDITORS REPORT To, The Members of Enso Secutrack Limited, We have audited the attached Balance Sheet of Enso Secutrack Limited as at 30th September 2011, the Profit & 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. We conducted our audit in accordance with auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from any 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 the management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003 and the Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in Paragraphs 4 & 5 of the said Order to the extent applicable. Further to our comments in the annexure referred to 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 audit; b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of such books; c) The Balance Sheet, the Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account of the Company; d) In our opinion, subject to the following non compliances the impact of which is not quantifiable except wherever stated, the Balance Sheet, the Profit & Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standard referred to in Section 211(3C) of the Companies Act, 1956. Reference Particulars Note No. 2(b) of Schedule 18 Recognition of Annual Maintenance Charges as and when the invoices are raised irrespective of whether the service is provided partly in current year or next year and thus non compliance of Accounting Standard - 9. Note No. 2(d) of Schedule 18 Recognition of interest on some fixed deposits on receipt basis thus non compliance of Accounting Standard - 9. Note No. 5(b) of Schedule 19 Non provision of foreign exchange loss (net) of Rs. 1,63,17,493 and thus non compliance of Accounting Standard - 11. Note No. 9 of Schedule 19 Non provision of leave salary as per actuarial valuation and provision of gratuity done is not in accordance with actuarial valuation and thus non compliance of Accounting Standard - 15. Note No. 12 of Schedule 19 Non-availability of Net Realizable Value of inventory and thus non-compliance of Accounting Standard - 2. e) Based on the representations and declarations made by the directors and taken on record by the Board and according to the information and explanation given to us, none of the director is prima facie disqualified from being appointed as director in terms of section 274(1)(g) 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 accounts subject to the following non compliances, the impact of which is not quantifiable except wherever stated and read together with the other notes thereon Reference Particulars Note No. 2(b) of Schedule 18 Recognition of Annual Maintenance Charges as and when the invoices are raised irrespective of whether the service is provided partly in current year or next year and thus non compliance of Accounting Standard - 9. Note No. 2(d) of Schedule 18 Recognition of interest on some fixed deposits on receipt basis thus non compliance of Accounting Standard - 9. Note No. 3(c) of Schedule 19 Pending allotment of shares in Wholly Owned Overseas Subsidiary M/s Enso Global Securities Limited, Mauritius. Note No. 5(b) of Schedule 19 Non provision of foreign exchange loss (net) of Rs. 1,69,70,209/- and thus non compliance of Accounting Standard - 11. Note No. 6 of Schedule 19 Non-Availability of audited accounts of the Wholly Owned Overseas Subsidiary M/s Enso Global Securities Limited, Mauritius and therefore the accounts cannot be consolidated and therefore non-compliance of Accounting Standard - 21 Note No. 7(a) of Schedule 19 Non-payment of TDS liability of Rs. 1,50,71,140/- and interest and penalty thereon are unascertained. Note No. 7(b) of Schedule 19 Non-payment of Provident Fund Liability to the extent of Rs 34,49,054/- towards Employers Contribution and Rs. 31,62,763/- towards Employees Contribution and interest and penalty thereof are unascertained. Note No. 7(c) of Schedule 19 Non-payment of Employee State Insurance Liability to the extent of Rs 10,43,210/- towards Employers Contribution and Rs. 3,85,348/- towards Employees Contribution and interest and penalty thereof are unascertained. Note No. 7(d) of Schedule 19 Non-payment of Professional Tax to the extent of Rs 1,43,610/- on employees salary and on directors salary and interest and penalty thereof are unascertained. Note No. 7(e) of Schedule 19 Non-payment of Self Assessment Income Tax of Rs. 1,36,20,969/- pertaining to assessment year 2008-09. Note No. 7(f) of Schedule 19 Non-payment of Self Assessment Fringe Benefit Tax of Rs. 51,105 pertaining to assessment year 2008-09 and Rs.7,72,333/- pertaining to assessment year 2009-10, aggregating to Rs. 8,23,438/- Note No. 9 of Schedule 19 Non provision of leave salary as per actuarial valuation and provision of gratuity done is not in accordance with actuarial valuation and thus non compliance of Accounting Standard - 15. Note No. 12 of Schedule 19 Non-availability of Net Realizable Value of inventory and thus non-compliance of Accounting Standard - 2. Note No. 16 of Schedule 19 Non confirmation of debit/ credit balances of debtors/ creditors/ advances and Fixed Deposit with various banks in India. give the information required by the Companies Act, 1956, in the manner so required and present 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 on 30 September 2011. b) In the case of the Profit & Loss Account, of the loss for the year ended on that date; and c) In the case of the Cash Flow Statement, of the cash flows for the period ended on that date. For R. KABRA & CO. Chartered Accountants FRN: 104502W Date: 11.11.2011 Sanjay Surana Camp: Hyderabad Partner Membership No. 046568 ANNEXURE REFERRED TO IN OF AUDITORS REPORT OF EVEN DATE ON THE ACCOUNTS FOR THE PERIOD ENDED 30 SEPTEMBER, 2011 OF ENSO SECUTRACK LIMITED: On the basis of such checks as we considered appropriate and in terms of the information and explanation given to us, we state that:- i) a) The fixed assets register of the Company is under updation. As explained to us, the company has generally maintained records showing full particulars including quantitative details and situation of fixed assets, however, the same needs to be fully reconciled pending updation of records. b) As explained to us, fixed assets are physically verified by the management in accordance with the phased verification program, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its fixed assets. To the best of our knowledge, the material discrepancies, if any, on such verification cannot be ascertained in view of pending updation of the fixed asset register and reconciliation of records. c) The Company has not disposed off substantial part of its fixed assets so as to affect its status of going concern. ii) a) As explained to us, the inventories have been physically verified during the period by the management at reasonable intervals. b) In our opinion and according to the information and explanations given to us, 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) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory and there were no material discrepancies noticed on physical verification. iii) a) As per the information and explanation given to us and the records produced before us for our verification, the company has not granted loans either secured or unsecured, except business advance to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and therefore clause 3b, 3c and 3d are not applicable. b) As per the information and explanation given to us and the records produced before us for our verification, the company has taken loans and advances, secured or unsecured, from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. The number of such parties is six. The maximum balance outstanding during the year is Rs.718.61 lacs and the closing balance as on the year end is Rs.713.61 lacs. c) The loans taken are interest free and other terms & conditions are prima facie not prejudicial to the interest of the company. d) The loans taken are payable on demand basis and therefore the question of irregularity does not arise. 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 Company and the nature of its business with regard to purchase of inventory, purchase of fixed assets and sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls. v) a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. b) As explained to us, transaction made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from public and therefore the question of complying with the directives issued by the Reserve Bank of India and the question of complying with the provisions of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 does not arise at all. vii) In our opinion, the Company has an internal audit system commensurate with the size of the company and the nature of its business, however, the scope of the same further needs to be strengthened. viii) As explained to us by the management, the maintenance of cost records has not been prescribed by the central government and therefore the question of maintaining accounts and records as required under the section 209(1)(d) of the Companies Act, 1956 does not arise at all. ix) According to the information and explanations given to us, the Company has either delayed in depositing or in some cases is not depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty etc. The arrears of outstanding statutory dues as at 30 September 2011 for a period of more than 6 months from the date they became payable are as under: a) The Provident Fund Liability as per the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 is outstanding of Rs.22,54,467/- towards the Employers Contribution and Rs. 20,67,571/- towards the Employees Contribution. b) The Employees State Insurance Liability as per Employee State Insurance Corporation Act is outstanding of Rs 7,67,380/- towards the Employers Contribution and Rs 2,83,263/- towards the Employees Contribution. c) The Professional Tax liability is outstanding of Rs 1,49,635/- on Employees Salary. d) The TDS liability of Rs. 1,50,71,140/-, Self Assessment Income Tax of Rs. 1,36,20,969/-pertaining to assessment year 2008-09 and Self Assessment Fringe Benefit Tax of Rs. 51,105 pertaining to assessment year 2008-09 and Rs. 7,72,333/- pertaining to assessment year 2009-10, aggregating to Rs.3,00,62,654/-. According to the information and explanations given to us, details of statutory dues which have not been deposited as on 30 September 2011 on account of any dispute are given below: Particulars Year to which the Forum where matter is Amount matter pertains pending (Rs. in lacs) Sales Tax A. Y 2004-05 DC Appeal-II, Ernakulam 6.53 Sales Tax A. Y. 2007-08 DC Appeal-II, Ernakulam 6.52 Service Tax A.Y. 2009-10 Customs, Excise & Service 23.85 Tax Appellate Tribunal Income Tax A. Y. 2008-09 Commissioner of Income 1710.35 Tax (Appeal), Hyderabad. x) The losses of the company as on 30 September 2011 are less than 50% of the net worth of the company. However the company has incurred cash losses during the year covered by our audit and also in the immediately preceding financial year. xi) According to the information and explanations given to us, the Company has defaulted in repayment of dues to following banks/ financial institutions: Bank/ Financial Nature of Loan Period of Default Amount (in Rs.) Institution (in years) Industrial Working Capital One 4,97,13,252 Development Loan Bank of India State Bank of Working Capital Three 11,25,99,967 India Loan xii) 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 securities and therefore question of maintaining adequate documents and records thereof does not arise. xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society and therefore clause (xiii) a,b,c & d of the order is not applicable. xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments and therefore clause (xiv) of the order is not applicable. xv) According to the information and explanation given to us, the company has not given any guarantee for loan taken by others from bank or financial institution and therefore this clause is not applicable xvi) According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow of the Company we understand that the term loans were applied for the purpose for which they were obtained. xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow of the Company we understand that the funds raised on short term basis have not been used for long term investment purpose. xviii) 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 and therefore clause (xviii) of the order is not applicable. xix) The Company has not issued any debentures during the period and therefore the question of creating any security/ charge does not arise at all. xx) The Company has not raised any money by public issue during the period and therefore this clause is not applicable. 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 and therefore this clause is not applicable For R. KABRA & CO. Chartered Accountants FRN: 104502W Date: 11.11.2011 Sanjay Surana Camp: Hyderabad Partner Membership No. 046568