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Updated:25 Apr, 2014, 10:48 AM IST

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Updated:25 Apr, 2014, 10:49 AM IST

INDEPENDENT AUDITOR'S REPORT

To the Members of

KWALITY DAIRY (INDIA ) LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of M/s Kwality Dairy (India ) Limited , which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 . This responsibility includes the design, implementation and maintenance of internal control

relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material

misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the

information required by the Act in the manner so required and give 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 at March 31, 2013;

(b) in the case of the statement of Profit and Loss , 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. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the order.

2. As required by Section 227(3) of the Act, 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 appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from branches not visited by us

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the director is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITOR'S REPORT OF M/S KWALITY DAIRY (INDIA) LIMITED FOR THE YEAR ENDED 31ST MARCH 2013

1. In respect of Fixed Assets :

a) The Company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) All the assets have not been physically verified by the management during the year but there is a regular programme of verification of its fixed assets in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancy was noticed on such verification.

c) During the year, the Company has not disposed off a substantial part of the fixed assets. Based on the information and explanation given by the management and on the basis of audit procedures performed by us, we are of the opinion that the sale of the fixed assets, if any, has not affected the going concern status of the Company.

2.The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

a) 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.

b) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory The discrepancies noticed on verification between the physical stocks and the book records were not material.

3.In respect of Loans, Secured or Unsecured, granted or taken by the Company to/ from companies, firms or other parties covered in register maintained under section 301 of the Companies Act, 1956 :

a) The Company has not given any loan to companies, firms or other parties covered in register maintained under Section 301 of the Companies Act, 1956.

b) The Company has taken unsecured loans from one company covered in the register maintained under Section 301 of the Companies Act 1956. The maximum amount outstanding at any time during the year was Rs.7500.00 lacs and year end balance is Rs. 7500.00 lacs.

c) The Company has taken interest free loans from the parties covered in the register maintained under Section 301 of the Companies Act,1956. In our opinion and according to the information and explanation given to us, the companies, firms or other parties listed in the registers maintained under Section 301 of the Companies Act, 1956, are not, prima facie, prejudicial to the interest of the Company.

d) The Company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest wherever agreed.

e) There is no overdue amount of loans received from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

4 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 and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control systems.

5 In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956.

a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

b) According to information and explanations given to us , the transactions made in pursuance of contracts / arrangements entered in the Register maintained under section 301 of the Companies Act , 1956 and exceeding the value of Rs. 5 Lac in respect of each party duringthe year have been made at prices which appear reasonable as per information available with the Company.

6 In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits covered by 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 and hence the provisions of clause 4 (vi) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

7In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8 We have broadly reviewed the cost records maintained by the company pursuant to the Companies ( Cost Accounting Records ) Rules , 2011 prescribed by the Central Government under Section 209 (1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained . We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

9 In respect of Statutory dues :

a) According to the records of the Company examined by us, the Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including, investor educations protection fund, employees' state insurance, sales tax ,Vat, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues with appropriate authorities. There have been delays in depositing undisputed Advance Income Tax and the amount outstanding as at the last day of the financial year for a period exceeding six months from the date they become payable , amounts to Rs. 951.89 Lacs (prev year Rs. 110.61 Lacs). There were no dues during the year towards Investor Education and Protection Fund and Excise Duty.

b). According to the records of the Company examined by us and according to the information and explanations

10 The company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

11 Based on our audit procedures and according to the information and explanations given by the management, We are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks . The company has not issued any debenture.

12 As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities the provisions of clause 4 (xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

13 In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society, hence the provisions of clause 4 (xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company

14 According to the information and explanation given to us , the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause (xiv) of paragraph 4 of the Companis (Auditor's Report) order 2003 ( as amended) are not applicable to the Company.

15 According to the information and explanation given to us , the Company has not given any guarantee for loans taken by others from bank or financial institutions.

16 In our opinion and according to the information and explanations furnished to us, the term loans have been applied for the purpose for which they were obtained.

17 According to the information and explanations given to us and on an 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 investment.

18 The Company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19 As the Company has not issued any debentures the provisions of clause 4 (xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

20 As the Company has not raised any money by public issue the provisions relating to end use thereof as per clause 4 (xx) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

21 In our opinion and according to the information and explanation given to us , no material fraud on or by the Company has been noticed or reported during the year .

Place: New Delhi

Dated: 5th July 2013

For P.P Mukerjee & Associates

Chartered Accountants

Firm's Registration Number 023276N

Sd/- P.P. Mukerjee

Proprietor

Membership No.089854