Pentasoft Technologies Ltd merged Auditor Reports

PENTASOFT TECHNOLOGIES LIMITED ANNUAL REPORT 2007-2008 AUDITORS REPORT To The members of Pentasoft Technologies Limited. 1. We have audited the attached balance sheet of Pentasoft Technologies Limited, as at 31st March 2008, the profit and loss account and also 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. 2. We conducted out audit in accordance with the 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 our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 (as amended) hereinafter referred to as the order issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956, hereinafter referred to as the Act we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extent applicable. 4. Further to our comments in the Annexure referred to above, we report that: 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 audit ii. In our opinion, proper books of account as required bylaw have been kept by the company so far as appears from our examination of those books, iii. The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account iv. In our opinion, the balance sheet, profit and loss account and cash flow 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 subject to our disclaimer of: a. The details relating to valuation of projects in progress amounting to Rs. 89.78 Crores is relied by the management on the certificate of independent Chartered Accountant specially engaged for the purpose and consequent implications of Accounting Standard - 13 and 10. b. The value of Loans and Advances amounting to Rs. 2.42 Crores is based on confirmation from management as to recoverability and consequent implications of Accounting Standard - 28. c. The company has not made provision for retirement benefit as required under Accounting Standard 15, as the Management opines that the number of permanent employees on regular role is less and the commitment can be met as and when it arises. v. On the basis of written representations received from the Board of Directors, as on 31st March 2008 and taken on record by the Board of Directors, we report that none of the directors are 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; vi. Attention is invited to the following: The actual amount due to the banks included in Secured loans is based on claim made by the banks before Debt Recovery Tribunal; the actual payments that may arise depends upon the decision of the tribunal and further negotiation by the company with the banks (refer point no.(xi) of the CARO) vii. The effect of the qualifications in Item (4) above on the profit of the company cannot be ascertained owing to the non-quantifiable and non- ascertainable causes for the same. viii. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view subject to paras (iv) & (vi) above 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 31st March 2008; b. in the case of the profit and loss account, of the profit for the year ended on that date; and c. in the case of the cash flow statement, of the cash flows for the year ended on that date. For SUDHINDRAN & CO., Chartered Accountants CA. P. SUDHINDRAN, Partner Place : Chennai Membership No. 32100 Date : 31st July 2008. ANNEXURE TO THE AUDITORS REPORT Referred to in paragraph 3 of our report of even date, (i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets for most of the cases. (b) We have been informed by the company that the physical verifications of its fixed assets have not been carried out during the year. Discrepancy, if any will be ascertained after the physical verification is done and necessary adjustment will then be made in the books of accounts. (c) The company has disposed a portion of the fixed assets during the year. (ii) (a) The Management has conducted physical verification of inventories at reasonable intervals during the year. (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 adequate records of inventory. (iii) (a) According to the records of the company and information and explanations given to us, the company has taken loans, secured, unsecured loans from the companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. The Company has granted loan free of interest to company covered in the register maintained under section 301 of the Companies Act, 1956. However the terms & conditions under which the loan has been granted are not prima- facie prejudicial to the interest of the company. iv) In our opinion and according to the information and explanations given to us, there are adequate internal control system 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 sale of goods. During the course of our audit, we have not observed continuing failures to correct major weaknesses in internal controls. v) According to the information and explanations given to us, we are of the opinion that no transactions made in pursuance of contracts or have been entered with the companies in the register maintained under section 301. vi) Since the company has not accepted any deposits from public the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public is not applicable. vii) In our opinion the company has an internal audit system commensurate with the size and nature of its business. viii) The provisions of section 209(1)(d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable for the Company. ix) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, employee state insurance, income tax, wealth tax, service tax sales tax, custom duty, excise duty, cess and other material statutory dues applicable and there have been slight delays in some cases. (b) According to the information and explanations given to us there were no undisputed amounts payable in respect of income tax, wealth tax, sales tax, custom duty, excise duty and cess which are in arrears as at 31st March 2008 for a period of more than six months from the date they became payable except service tax amounting to Rs.4,43,740/- and TDS of Rs. 83,146/-. (c) According to the information and explanation given to us there are no dues of income tax, wealth tax, sales tax, custom duty, excise duty and cess which have not been deposited on account of any disputes except in the following cases for an amount of Rs.110.20 crores. Sl. Name of dispute Forum where Assesment Amount of No. Dispute is Year Dispute pending (in Rs.) 1 Income Tax Act 1961 CIT - Appeals Chennai 2001-02 709,156,913 2 Income Tax Act 1961 CIT-Appeals, Chennai 2002-03 209,082,227 3 Income Tax Act 1961 CIT-Appeals, Chennai 2004-05 160,773,315 4 Income Tax Act 1961 CIT - Appeals, Chennai 2005-06 22,952,789 x) In our opinion, the accumulated losses of the company are not more than 50% of its net worth. The company has not incurred cash losses during the financial year covered by our audit and immediately preceding financial year. xi) In our opinion and according to the information and explanations given to us the company has defaulted in repayment of following dues to banks Sl. Name of the Bank Principal amount due as on No. 31.03.2008 (Rs. in Crores) 1 Dhanalakshmi Bank -DRT 10.08 2 Axis Bank (UTI Bank) DRT 14.85 xii) The Company has not taken any Loans/Advances on the basis of security by way of pledge of shares, debentures and other securities. xiii) In our opinion, the company is not a chit fund or nidhi/mutual benefit fund/society. Therefore the provisions of Clause 4(xiii) of the Companies (Auditors report) Order, 2003 are not applicable to the company. xiv) In our opinion, the company is not dealing in or trading in shares, securities and other investments. Accordingly, the provisions of Clause 4(xiv) of the Companies (Auditors report) Order, 2003 are not applicable to the company. xv) In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the Company. xvi) No term loans have been raised during the year. xvii) According to the information and explanation given to us and on an overall examination of the balance sheet of the company, we report that funds raised on short term have not been used for long term. xviii) According to the information and explanation given to us the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act, xix) According to the information and explanation given to us, during the period covered by our audit report, the company has not issued any Debentures xx) The company has not raised any money by issue of shares to the Public during the year. xxi) According to the information and explanation given to us, no fraud on or by the company has been noticed or reported during the course of our audit. FOR SUDHINDRAN & CO. Chartered Accountants CA.P. SUDHINDRAN Place : Chennai Partner Date : 31st July 2008 Membership No 32100