Jun 30, 2010
1. We have audited the attached Balance Sheet of IOL NETCOM LIMITED (Formerly known as "IOL Broadband Limited") hereinafter referred to as "the Company" as at 30th June 2010 and also the Profit and Loss Account of the Company and the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys man agement. Our responsibility is to express an opinion on these financial statements based on our audit. The accounts have been prepared as a going concern concept considering that the company is in the midst of restructuring.
2. We conducted our 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 presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditors Report) Order, 2003 as amended by 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 enclose in the Annexure on the matters specified in paragraphs 4 and 5 of the said Order, to the extent they are applicable to the Company.
4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as under:
(a) 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 except as stated in paragraph 6 (ii) below.
(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.
(c) The Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books of account.
(d) 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 the section 211 of the Companies Act, 1956 except as stated in paragraph 6 below.
5. On the basis of the written representations received from the directors as on 30th June 2010 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 30th June 2010 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.
6. In our opinion and to the best of our information and according to the explanations given to us, Subject to
i. Note no. 2 of schedule N regarding non-provision of interest on unpaid statutory liabilities of Rs. 1.38 Crores and note no. 3 of schedule N regarding uncertainty of collection of sundry debtors of Rs. 7.38 Crores and consequential effect thereon.
ii. In the absence of adequate information with respect to revenue recognized in the Financial Statements, we are unable to comment on the correctness or otherwise of the same. However, the Sale / Purchase & Losses are affected to that extent.
iii. Note no. 9 of schedule N regarding non-compliances with Accounting Standard 17 "Segment Reporting" and note no 7 of schedule N, the said account read with significant accounting policies and notes to 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 30th June 2010.
b) In the case of the Profit and Loss Account, of the loss for the year ended on the date; and
c) In the case of the Cash Statement, of the cash flows for the year ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF IOL NETCOM LIMITED ON THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30TH JUNE 2010
On the basis of such checks of the books of account and other records as we considered appropriate and the information and explanation given to us during the course of audit we report that-
1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
2. During the year, Fixed Assets have not been physically verified by the management, in our opinion, the Company needs to implement a programme for physical verification of fixed assets having regard to the size of the Company and nature of its assets.
3. During the year, the Company has not disposed off a substantial part of the fixed assets.
4. The inventories have been physically verified during the year by the management. In our opinion having regard to the nature and location of the stocks, the frequency of the verification is reasonable.
5. The procedures of physical verification of stocks followed by the management were found reasonable and adequate in relation to the size of the Company and the nature of its business.
6. The Company is maintaining proper records of inventories. The discrepancies noticed on physical verification were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.
Loans & Advances
7. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956, Accordingly, paragraph 4 (iii) of the Order is not applicable to the Company.
8. In our opinion and according to the information and explanations given to us, although the company has put in place the internal control procedures, the Company needs to strengthen the same to be commensurate with the size of the Company and the nature of its business for purchase of fixed assets and with regard to the 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. Further, refer paragraph 11 below regarding internal audit system.
Transactions with parties under section 301 of the Companies Act, 1956
9. There are no contracts or arrangements, the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956, Accordingly, paragraph 4 (v) of the Order is not applicable.
10. The company has not accepted any deposit from the "public" attracting the provisions of Sections 58A and 58AA of the Companies Act 1956 or the rules framed there under.
11. The company had put a formal internal audit system. However, in view of non-furnishing the internal audit reports from the internal auditor, we are unable to comment on the same.
12. To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 for any of the services rendered by the Company, Accordingly, paragraph 4 (viii) of the order is not applicable.
13. a) The Company has not been regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income tax, VAT, Wealth Tax, Service tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. Further, since the central government has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are not in position to comment upon the regularity or otherwise of the Company in depositing the same.
b) According to the information and explanation given to us, the extent of arrears which are outstanding, excluding interest and consequential penalty, if any, on the same, as at 30th June 2010 for a period of more than six months from the date they became payable are as follows.
Amount (Rs. In Lacs)
Particulars 2009-10 2008-2009
TDS 753.90 564.95
Provident Fund 23.62 12.39
Professional Tax 16.40 13.61
ESIC 9.57 5.67
Service Tax 0.00 136.51
FBT 0.00 29.83
VAT 0.00 0.02
c) There are no dues of Income Tax, VAT, Custom Duty, Wealth Tax, Service Tax or Cess as at 30th June 2010, which have not been deposited on account of any dispute.
14. The accumulated losses at the end of financial year are not more than fifty Five Percent of its net worth. The company has incurred cash losses amounting to Rs. 7.95 crores during the immediately preceding financial year.
Repayment of Dues
15. The company has defaulted in repayment of dues to the financial institution.
Utilization of Funds
16. On an overall examination of the balance sheet of the Company, no funds raised on short-term basis have been used for the purpose of long term investment.
17. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Hence, paragraph 4(xii) of the order is not applicable.
18. In our opinion and according to the information and explanation given to us, the Company is not Chit Fund or Nidhi/Mutual Benefit Fund / Societies. Accordingly paragraph 4(xii) of the order is not applicable.
19. According to the information and explanation given to us, the company is not dealing or trading in shares, securities, debentures, and other investments. Accordingly paragraph 4(xii) of the order is not applicable.
20. According to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly paragraph 4(xii) of the order is not applicable.
21. During the year, the Company has not availed/obtained any fresh term loan. Accordingly, clause 4 (xvi) of the Order is not applicable.
22. 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.
23. The Company has not created any securities in respect of debentures during the year.
24. The Company has not raised any money by public issues during the year. Accordingly paragraph 4(xii) of the order is not applicable.
25. We have neither come across any instance of fraud on or by the company noticed or reported during the year, nor have we been informed of any such case by management.
For DARGAR & CO.,
Date: - January 4, 2011