Statuatory Audit Report - Standarad

T Kannan (Practicing Chartered Accountant) (24 Points)

29 January 2010

Need a standard statutory audit report of a big manufacturing organisation with audit observation comment sheets.

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1. We have audited the attached Balance Sheet of TATA CONSULTANCY SERVICES LIMITED (the Company) as at March 31, 2009, and also the Profit and Loss Account and the Cash Flow Statement of the Company 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 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 our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government 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 and 5 of the said Order to the extent applicable. 4. Further to our comments in the Annexure referred to in paragraph 3 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 by law have been kept by the Company so far as it 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 Statemen dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (v) on the basis of written representations received from the directors, as on March 31, 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and (vi) 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 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, 2009; (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. 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. (b) According to the information and explanations given to us, the fixed assets were physically verified by the management in accordance with the programme of verification, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies noticed on physical verification were not material and have been properly dealt with in the books of account. (c) There was no disposal of a substantial part of fixed assets. (ii) (a) The Company has conducted physical verification of inventory at reasonable intervals during the year. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory 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 no material discrepancies were noticed on physical verification. (iii) In respect of unsecured loans granted to companies covered in the register maintained under Section 301 of the Companies Act, 1956 and according to the information and explanations given to us - (a) During the year, the Company has given unsecured interest-free loans aggregating to Rs. 63.65 crores to two of its wholly owned subsidiaries. The Company has also given unsecured loans aggregating to Rs. 5.56 crores to one of its subsidiary. At the year end, the loans granted to three subsidiaries aggregates to Rs. 522.50 crores. The maximum balance outstanding during the year is Rs. 598.48 crores. (b) The rates of interest and other terms and conditions are prima facie not prejudicial to the interests of the Company. (c) The receipt of the principal amount and interest is as per the terms of the loan agreements and are (d) There are no overdue amounts and hence the provisions of sub-clause (d) of clause 4(iii) of the Order are not applicable to the Company. (e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of sub-clauses (e), (f) and (g) of clause 4 (iii) of the Order are not applicable to the Company. (iv) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources do not exist for obtaining comparable quotations, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing major weakness in such internal controls. (v) (a) To the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section; and (b) Transactions 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 deposits from the public during the year. Therefore, the provisions of clause 4 (vi) of the Order are not applicable to the Company. (vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) We have broadly reviewed the books of account and records maintained by the Company relating to the manufacture of electronic products, pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information given to us, the Central Government has not prescribed the maintenance of cost records for any other products of the Company. (ix) (a) According to the information and explanations given to us, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident fund, Investor Education and Protection Fund, Employees state insurance. Income tax, Wealth tax, Sales tax, Customs duty, Excise duty, Service tax, cess and other material statutory dues applicable to it. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund. Investor Education and Protection Fund, Employees state insurance, Income tax. Sales tax, Customs duty. Excise duty and cess were in arrears, as at March 31, 2009 for a period of more than six months from the date they became payable. An amount of Rs. 0.10 crores is outstanding for more than six months with respect to the Labour Welfare Fund. (c) According to the information and explanations given to us, details of dues of Sales tax, Service tax and Income tax which have not been deposited on account of any dispute are given below: Particulars Period to which the amount relates Sales Tax 2001 - 02, 2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06, 2007 - 08, 2008 - 09 2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06 2006 - 07 2001 - 02, 2002 - 03 2004 - 05 2004 - 05 2003 - 04, 2004 - 05 2001- 02 2006 - 07 Service Tax 2004 - 2005 Income Tax 2004 - 05 Forum where the Amount dispute is pending Rs High Court 5.31 Tribunal 4.66 Appellate Deputy Commissioner 2.95 Commissioner of Sales Tax 0.03 Joint Commissioner 0.09 Deputy Commissioner of Commercial Taxes 5.11 Assistant Commissioner 0.69 Assistant Commissioner, Appeals 0.28 Inspecting Assistant Commissioner 0.27 Commissioner of Service Tax 3.15 Commissioner of Income Tax (Appeals) 91.72 (x) The Company does not have accumulated losses. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank. (xii) In our opinion and 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. (xiii) In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. (xiv) In our opinion and according to the information and explanations given to us, the Company has not given guarantee for loans taken by others from banks or financial institutions. (xv) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which they were raised. (xvi) In our opinion and 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. (xvii) According to the information and explanations given to us, during the period covered by our audit report, the Company has not made preferential allotment of equity shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956. (xviii) During the year covered by our audit report, the Company has not raised any money by way of public issue. (xix) To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit. Clauses 4(xiii) and 4(xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. For DELOITTE HASKINS & SELLS Chartered Accountants N. VENKATRAM Partner Membership No. 71387 Mumbai, April 20, 2009