Mobile Nav

Market

AUDITOR'S REPORT

Crew B.O.S Products Ltd.

You can view full text of the latest Auditor's Report for the company.
Market Cap. (₹) 3.67 Cr. P/BV -0.06 Book Value (₹) -43.98
52 Week High/Low (₹) 8/3 FV/ML 10/1 P/E(X) 0.00
Bookclosure 07/11/2013 EPS (₹) 0.00 Div Yield (%) 0.00
Year End :2013-03 
Report on the Financial Statements

We have audited the accompanying financial statements of Crew B.O.S. Products Limited (the Company), 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 and financial performance of the Company in accordance with Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (the Act). 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 judgment, 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 which we have been provided are not sufficient and appropriate to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

1. We have not been able to obtain sufficient appropriate audit evidence with regard to the sales and purchases, particularly having regard to:

i) Sale in respect of export sales to its WOS- Alchemy Trade Post, Mauritius, aggregating to ' 4,938.74 lacs made during the first three quarters of the financial year, which was subsequently reversed in the last quarter of the year. (Refer No. 29(a) of the Financial Statements)

ii) Sales in respect of domestic trading sales to various parties aggregating to ' 7075.23 lacs (net of sales return of ' 1376.00 Lacs out of sales made in previous years)made during the year. (Refer No. 19(c) of the Financial Statements)

iii) Purchases in respect of domestic trading purchases from various parties aggregating to ' 6145.16 lacs made during the year. (Refer No. 22 of the Financial Statements)

2. We have not verified the inventory of the Company and relied upon the reports as certified by the management and Chartered Engineer & Valuer: (Refer No. 14 of the Financial Statements)

a. Inventory shown at end of the financial year amounting to ' 12,969.86 lacs.

b. Written-off / disposal of the obsolete and rejected WIP/Finished Goods worth ' 1,692.22 lacs during the year.

3. We have not been able to obtain sufficient appropriate audit evidence/Confirmations with regard to the recoverability of Sundry Debtors and Creditors, particularly having regard to merchant trading done in Dubai, though the company has written off the amount receivable and payable amounting to ' 11,180.08 Lacs and ' 3,111.16 respectively. (Refer No. 29(b) & (c) of the Financial Statements)

4. We have not been able to obtain sufficient appropriate audit evidence with regard to the recoverability of Domestic Trading Debtors amounting to ' 10825.97 lacs Outstanding at the year end, which is after making the provision for bad and doubtful debt of ' 3500 lacs. (Refer No. 29(d) of the Financial Statements)

5. We draw attention to Note No. 31 of the financial statements wherein the management has explained its reasons for preparing the financial statements on a going concern basis. The total outside liabilities of the company exceeds its total assets of the company by ' 3732.40 lacs as such the entire net worth of the company is eroded. The company has also given corporate guarantees to the bankers of the WOS in Mauritius which is in excess of the Net Worth of the company. The I.Biz Trade Post, Mauritius has been put into receivership by Standard Bank (Mauritus) Ltd. to recover their outstanding dues of USD 18.27 Million plus interest accrued till the date of settlement. In the case of another WOS- I. Connect Trade Post in Mauritius, the lending bank namely Bank One Ltd., Mauritius has appointed a Loss Adjustor to recover the insurance claim & outstanding dues of the WOS. The various parties/ financial institutions have filed Winding-up cases against the company in Delhi High Court which are still under sub-judice. These factors raise substantial doubt as to the company's ability to continue as going concern.

6. We draw attention to Note No. 29 of the financial statements wherein the management has informed that the certain activities carried out by the Ex-CFO cum Director International Sales and CEO-Leather Division-Mr. Sanjeev Sehgal were suspect to be dishonest resulting into financial loss to the company. The company has filed a complaint against the erred officer which is pending at the appropriate authority. The company has made adjustments/ provsions in the accounts to the extent known and further adjustments, if any, to be made post completion of the investigation.

In view of the above, we are unable to comment on the adjustments/disclosures which may become necessary as a result of further findings on the ongoing investigations and the consequential impact, if any, on these financial statements.

7. As per discussions with the management, we understand that the management is of the opinion that there is no need of any provision to be made for impairment of its fixed assets which are being carried in the books at a written down value of ' 10,002.91 lacs. However, we are not in agreement with the management and are of the opinion that there may be impairment in the company's fixed assets and same needs to be ascertained and accordingly dealt with in the books of accounts, if required. Accordingly we are unable to comment on the necessity or otherwise to provide for an impairment loss in respect of these assets. The effect of the non- provision of the impairment loss on assets, if any, cannot be quantified.

8. We draw attention to Note No. 17 (a) of the financial statement, regarding no provision for write off the Investments and loans & advance in non-operational WOS / JVs of the company aggregating to ' 2,439.66 lacs even though auditors of these company have commented in their audit report that about concern on the going concern of these subsidiaries/JVS.

9. As stated in Note No. 6 of the financial statement, the company has not made any provision for gratuity during the year.

Disclaimer of Opinion

Because of significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion and the possible effects for not providing sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements. Accordingly, we do not express an opinion on whether the financial statements give a true and fair view in accordance with the applicable financial reporting framework and 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; and

(b) in the case of the Statement of Profit and Loss, of the Loss for the year ended on that date;

(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Emphasis of Matter

We draw attention to Note No. 34 to the financial statements which describes the uncertainty related to the outcome of the lawsuits and winding up petitions filed against the Company by Financial Institutions, Banks and various parties.

Other Matter

We draw attention to Note No. 30 of the financial statement regarding attachment of movable & immovable property by income tax department for non-payment of self-assessment tax for various assessment years aggregating to ' 1,238.00 lacs. The department has already initiated auction of the immovable property of the company located at Jallandhar.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003 ("the Order") 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 not been provided sufficient and appropriate audit evidence including confirmation to provide a basis for an audit Operation.

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 except for the possible effects of the matters described in the Basis for Disclaimer of Opinion;

c. the Balance Sheet and Statement of Profit and Loss dealt with by this Report are in agreement with the books of account;

d. in our opinion, the Balance Sheet and Statement of Profit and Loss comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 except for the possible effects of the matters described in the Basis for Disclaimer of Opinion;

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 directors 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.

f. since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company;

1) a) The Company has generally maintained proper records showing full particulars including quantitative details and situation of Fixed Assets. As confirmed by the Management the records are being compiled for all assets owned by the Company.

b) The Management has occasionally physically verified the fixed assets and no material discrepancies are reported to have been observed on such verification as compared to book records.

c) In our opinion, and according to the information and explanations given to us, the company has not disposed off a substantial part of fixed assets during the year and therefore paragraph 4(i) (c) of the Companies (Auditor's Report) Order, 2003 (hereinafter referred to as the Order) is not applicable.

2) a) The Inventory has been occasionally physically verified during the year by the Management and Auditors appointed by the bankers from whom the company is enjoying various credit facilities. In our opinion the frequency of verification needs to be increased in view of the size and nature of its business. We have relied on the information provided and certified by the management regarding the physical stock count and its value at the year end.

b) In our opinion, the procedures of physical verification of inventory followed by the Management need better scientific method and more frequent in relation to the size of the company and the nature of its business besides also involving Internal Auditors as part of their scope.

c) On the basis of our examination of the inventory records, in our opinion, the company needs to implement a proper ERP System for improvement of inventory records. As confirmed by the Management the discrepancies noticed on physical verification of inventory compared to book records have been dealt with.

3) The Company has granted interest free unsecured loans/advances to eight parties covered in the register maintained under section 301 of the Act, maximum amount outstanding during the year aggregating to ' 4466.72 Lakhs and aggregating amount outstanding at the end of the year is '

3187.08 Lakhs. The terms and conditions thereof are prejudicial to the interest of the company to the extent of interest paid by the company to its bankers for funds borrowed from them. The company has taken interest free unsecured, loans/advances from seven parties covered in the register maintained under section 301 of the Act, maximum amount outstanding during the year aggregating to ' 12290.69 Lakhs and aggregating amount outstanding at the end of the year is ' 9401.96 Lakhs. The terms and conditions thereof are generally not prima facie prejudicial to the interest of the company

4) In our opinion, and according to information and explanations given to us and as reported in Internal Audit Reports conducted by independent third party, the internal control procedure is neither strong nor commensurate with the size of the Company and the nature of its business for the purchase of stores & spare parts, fixed assets, and with regard to purchase/sale of products and maintaining records in accounts thereof. There are no policies or Governance for commercial dealings with associated companies vis a vis commercial terms/ credit period which are inordinately higher and impractical affecting company's affairs badly

5) The transactions that need to be entered into a register in pursuance of section 301 of the Companies Act have been entered. Since the company does not have comparable data of pricing in respect of purchase and sale of goods and services aggregating during the year to ' 5,00,000/ - or more in respect of parties in pursuance of contracts or arrangements entered into the register maintained under section 301 of the Companies Act, 1956, hence we are unable to comment whether prices at which these transactions are made are reasonable or not having regard to prevailing market prices / at arms' length price.

6) In our opinion and according to information and explanations given to us the Company has not accepted any deposits from the public.

7) In our opinion the Company has an internal audit system that is commensurate with the size and nature of its business. The company needs to increase the scope of Internal Auditor including physical stock verification, which will help to enhance the control.

8) The company has not maintained the cost records as per the requirement of clause (d) of sub - section (1) of Section 209 of the Companies Act, 1956.

9) In our opinion and according to the information and explanations given to us, the company is not regular in depositing undisputed statutory dues including Provident Fund, employees' state insurance, investor education and protection fund, income tax, sales tax, wealth tax, service tax, custom duty, excise duty ,cess, and other statutory dues, as applicable to its activities, with appropriate authorities. The arrears of outstanding statutory dues as at 31st March, 2013 are as under:-

S.  Particulars                 Amount
No.                             (' in Lacs)

1 ESI                             188.32

2 Provident Fund                  302.64 

3 Welfare Fund                     16.58
4 Self-AssessmentIncome Tax 1,481.42

5 Interest on Self Assessment Tax 456.90

   TDS                            206.49

6 Excise Duty Payable              21.84 

   WCT                             2.178 

Sales Tax Payable                  26.97

TOTAL                           2,703.33
As explained to us, the Company did not have any dues on account of investor education and protection fund.

According to the records of the Company, following are the disputed liabilities of the Company. The Company has not made the provision for the same in its books of accounts.

Name of    Nature  Amount  Period to
Statute    of Dues (Rs.in  which the
                    Lakhs) amount relates     
Income Tax Income 34.49 AY 2005-06 Act, 1961 Tax

Income Tax Income 33.13 AY 2006-07 Act, 1961 Tax

Income Tax Income 337.53 AY 2007-08 Act, 1961 Tax

Income Tax Income 741.55 AY 2011-12 Act, 1961 Tax

10) The accumulated losses of the company at the end of the ' 9,030.06 lacs as at the end of the financial year. The company has also incurred cash losses of ' 10,022.69 Lacs in the current financial year. The company had not incurred cash loss in the immediately preceding financial year.

11) Based on our audit procedures and as per the information and explanations given by the management, the Company has defaulted in repayment of loans and interest to following banks and financial institutions as at 31st March, 2013.

Delays were noticed in payment of interest & principal on several occasions during the year. Most of the above banks and financial Institutuions have already initiated legal proceedings for recovery of their overdue loans and these legal cases are pending in various courts and are sub-judice. The company has not issued any debentures.

12) In our opinion and according to the information and explanations given to us the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities and therefore paragraph 4(xii)of the Order is not applicable.

13) In our opinion and according to the information and explanations given to us, the provisions of any special statute applicable to chit fund and nidhi/ mutual benefit fund/society are not applicable to the company and therefore paragraph 4(xiii) of the Order is not applicable.

14) The company is not dealing or trading in shares, securities and debentures, therefore paragraph 4(xiv) of the Order is not applicable.

15) According to the records of the company and the information and explanations provided by the management, the company has given guarantees aggregating to USD 33 Million, GBP 5 Million and INR 1300.00 Lacs to the bankers of its overseas and Indian WOS respectively for loans taken by them from banks. The overseas WOS have made defaults in payment their bank liabilities. One of the bank namely Bank One Ltd, Mauritius has appointed Loss Adjuster to recover the outstanding amount from the WOS-I.Connect Trade Post, Mauritius. The another bank namely Standard Bank, Mauritius Ltd., Mauritius has put the WOS-I.Biz Trade Post into receivership to recover their outstanding dues and has also invoked the corporate guarantee given by the Company. The company's operations may substantially be affected in case of encashment of guarantee by their bankers to recover the outstanding amount by these overseas subsidiaries and the company's going concern status may not be a prudent assumption.

16) According to the information and explanations given, the company has not availed any term loan from any bank/financial institutions during the year. However, certain existing working capital loans were restructured/converted into working capital term loans/demand loans. Since no fresh term loan taken by the company during the year therefore paragraph 4(xvi) of the Order is not applicable.

17) According to the information & explanations given to us and based on examination of documents & records made available, we are of the opinion that funds raised on short term basis have prima facie not being used during the year for long term investment.

18) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956 and therefore paragraph 4(xviii) of the Order is not applicable.

19) The company has not issued any debentures during the year and therefore paragraph 4(xix) of the Order is not applicable.

20) During the year under review, no money was raised by public issue and therefore paragraph 4(xx) of the Order is not applicable.

21) The company management has informed that the certain activities carried out by the Ex-CFO cum Director International Sales and CEO-Leather Division-Mr. Sanjeev Sehgal were suspect to be dishonest resulting into financial loss to the company. The company has filed complaint against the erred officer which is pending with the appropriate authority. The company is still investing the matter and financial impact on the financial statements is not yet fully quantified and as such we are not able to comment on the total quantum of loss suffered by the company. For Anil K. Goyal & Associates

                              Chartered Accountants 

                             (Firm Regn. No.: 04558N)

                              Sd/-

                              V. P Sony

Place : New Delhi            (Partner)

Date : 30/09/2013             M. No.: 86718
Attention Investors :
Prevent Unauthorised transactions in your account --> Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile / email at the end of the day .......... Issued in the interest of investors
Attention Investors :
Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL on the same day......................issued in the interest of investors.
Attention Investors :
KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
Attention Investors :
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account.
“Investment in securities market are subject to market risks, read all the related documents carefully before investing”.