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Auditor Report of IQ Infotech Ltd.

Mar 31, 2010

We have audited the attached Balance Sheet of the "iQ infotech Limited, # 17A, Kumbalagodu Industrial Area, Mysore Road, Bangalore - 560 074, as at 31st March, 2010 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.

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 of our opinion.

As required by the Companies [Auditors Report] Order, 2003 (as amended) 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 paragraph 4 and 5 of the said order to the extent applicable.

Further to our comments in the Annexure referred to in paragraph 3 above, we state 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 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 the books.

c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the books of accounts.

d. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in section 211 [3C] of Companies Act, 1956.

e. On the basis of the written representations received from the Directors, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2010 from being appointed as a Director in Terms of Clause [g] of sub-section [1] of section 274 of the Companies Act, 1956.

f. In our opinion and according to the information and explanations given to us, the accounts read together with the notes and accounting policies thereto, give the information required by the companies Act 1956, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India subject to:

i. Note No. 2.1(a) of accounting policies regarding accounting of Gratuity and Encashment of Leave on cash basis as mentioned in Note 8.2 of accounting policy read

with Note No.12 of Notes to Accounts regarding non provision for gratuity liability, which is inconsistent with Accounting Standard -15 (revised) notified under the Companies Accounting Standard Rules, 2006.

ii. Note No. 6 regarding disclosure of quantitative particulars and capacity utilization is not in accordance with Part II of Schedule VI of the Companies Act.

iii. Note No.13 of Notes to accounts regarding Intangible Assets disclosure is not in accordance with the Accounting Standard -26(Intangible Assets) notified by the Companies Accounting Standard Rules,2006. Further, the Company has not assessed the probability of the future economic benefits from the research and development activities.

iv. Note No.15 of Notes to accounts regarding reconciliation of sundry debtors, bank balance, creditors and VAT and Excise duty balances.

v. Note No. 16 of Notes to Accounts regarding non payment of statutory liabilities and non provision for interest and penalty payable for default in payment of statutory liabilities.

vi. Note No. 18 of Notes to account regarding non availability of share certificates for investments made in equity shares of ASIA HR Technologies Limited (Formerly known as SMR Universal Softech Ltd)., and Suntrack Diamond Ltd., amounting to Rs. 6,19,716/- and Rs. 45,00,000/- respectively.

vii. Note No. 18 of Notes to Accounts regarding non provision for diminution in the value of investments in ASIA HR Technologies Limited (Formerly known as SMR Universal Softech Ltd), and Suntrack Diamond Ltd. The amount of diminution value is not ascertained by the Company.

viii. Accounting Policy No 7, with regards to Inventory Valuation of Raw Materials and Method of Valuation of Inventory is inconsistent with the Accounting Standard - 2 notified by the Companies Accounting Standard Rules,2006

a. In the case of Balance Sheet, of the state of affairs of the Company as on 31st March 2010.

b. In the case of the Profit and Loss Account of the Loss of the Company 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 REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS REPORT TO THE MEMBERS OF THE iQ INFOTECH LIMITED FOR THE YEAR ENDED 31st MARCH 2010

1. a) The Company has maintained records showing full particulars including quantitative details and location of the fixed assets.

b) There is a regular program of physical verification, which in our opinion is reasonable, having regard to the size of the Company and the nature of fixed assets. No materials discrepancies have been noticed by the management in respect of the assets physically verified during the period.

c) Company has not sold substantial part of fixed assets during the year.

2. a. Inventories have been physically verified during the year by the management.In our opinion, the frequency of verification is reasonable.

b. The Procedures of physical verification of stocks followed by the management are adequate in relation to the size of the Company and the nature of its business.

c. The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records were not material and have been properly dealt with in the books of account.

3. a. As informed to us, the Company has not granted loans, secured or unsecured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

b. As the Company has not granted any loans during the year to the parties covered in the register maintained under section 301 of the Companies Act, 1956 clause (b), (c) and (d) are not applicable

c. The Company has taken unsecured loans during the period from parties covered in the register maintained under section 301 of the Companies Act, 1956. The company has taken loan from two parties. The year end balance from both the parties put together is Rs 1.55 lakhs.

d. In our opinion, having regard to the long term involvement with the parties covered in the register maintained under section 301 of the Companies Act, 1956 and considering the explanation given to us, in this regard the rate of interest and other terms and conditions of loans taken by the company, secured or unsecured, wherever stipulated are not prima facie prejudicial to the interest of the company.

e. The Company is generally regular in repayment of principal amount and interest as per the stipulated terms.

4. In our opinion, and according to the information and explanations given to us, there are internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of raw materials, stores and spares, plant and machinery, equipment and other assets. In our opinion, the internal control in the area of receivables and advances needs to be further strengthened.

5. a. All the transactions with parties covered under section 301 of the Companies Act, 1956 have been properly entered, if and when transaction takes place, in the register maintained under section 301 of the Act

b. In our opinion and according to the information and explanations given to us, the Company has not entered into transactions of sale of goods, made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956.

6.The Company has not accepted any deposits from the public during the year.

7. The company has an internal audit system. However in our opinion the same is not commensurate with the nature and size of the business of the company.

8.Maintenance of cost records as per clause (d) of sub-section (1) of section 209 of the Companies Act is not applicable to the Company.

9.a. 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, sales tax, service tax and Excise Duty with appropriate authorities. The company is generally regular in payment of Income Tax and Customs Duty.

b.According to the information and explanations given to us, undisputed amounts payable in respect of the following except income tax, service tax, customs duty, excise duty and cess were in arrears, as at 31st March 2010, for a period of more than six months from the date they became payable;

Tax Deducted at source Rs. 123,560.00

Service Tax Rs. 2,73,387.00

ESI Rs 64,400.00

PF Rs 214,831.00

VAT Rs 10,73,550.00

10. The Companys accumulated losses at the end of the financial year is Rs.5, 37, 10,088/- . The company has incurred cash losses during the current year, Immediately preceding financial year company has not incurred any cash losses.

11. The company does not have any outstanding due to any financial institutions, banks or debenture holders during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. As the Company is not a chit fund, nidhi, mutual benefit fund or society the provisions of clause 4[xiii] of the Companies [Auditors Report Order, 2003 is not applicable to the Company.

14. The Company is not dealing or trading in shares/securities/debentures and other investments.

15. The Company has not given any guarantees for loans taken by others from bank or financial institutions during the period under review.

16. In our opinion and according to the information and explanations given to us by the management, term loans are applied for the purpose for which the loans 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 neither any short-term funds have been used for long-term purposes nor any long-term funds have been used to finance short-term assets except permanent working capital.

18. According to the information and explanations given to us, during the period covered by our audit report, the company has not made any preferential allotment of share to parties and companies covered in the register maintained under section 301 of the Act.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by way public issue during the year.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For G.V. SUNDER & CO., Chartered Accountants (ICAI FRN: 007248S)

G.V.SUNDER Partner Membership No: 019190

Place : Bangalore Date : 28/08/2010


Mar 31, 2009

We have audited the attached BaJance Sheet of the "iQ infotech Limited, # 17A, Kumbalagodu industrial Area, Mysore Road, Bangalore 560 074, as at 31st March, 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.

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 of our opinion.

As required by the Companies [Auditors Report] Order, 2003 (as amended) 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 paragraph 4 and 5 of the said order to the extent applicable.

Further to our comments in the Annexure referred to in paragraph 3 above, we state 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 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 the books.

c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the books of accounts.

d. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in section 211 [3C] of Companies Act, 1956.

e. On the basis of the written representations received from the Directors, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31s March 2009F from being appointed as a Director in Terms of Clause [g] of sub-section [1] of section 274 of the Companies Act, 1956.

f. In our opinion and according to the information and explanations given to us, the accounts read together with the notes and accounting policies thereto, give the information required by the companies Act 1956, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India subject to:

Note No. 2.1(b) of accounting policies regarding accounting of encashment of leave on cash basis, and provision made for gratuity made on estimated basis as mentioned in Note 8.2 of accounting policy read with Note No. 12 of Notes to Accounts regarding non provision for gratuity liability, which is inconsistent with Accounting Standard -15 (revised) notified by the Companies Accounting Standard Rules, 2006.

Note No. 15 of Notes to accounts regarding non reconciliation of Sundry debtors, creditors and VAT and Excise duty balances.

ii. Note No. 16 of Notes to Accounts regarding non payment for statutory Liabilities.

iv. Note No. 17 and 18 of Notes to account regarding non availability of share certificates for investments made in equity shares of SMR Universal Softech Ltd., and Suntrack Ltd., amounting to Rs. 6,19,716/- and Rs. 45,00,000/- respectively

v. Note No. 18 of Notes to Accounts regarding non provision for diminution in the value of investments in SMR Universal Softech Ltd., and Suntrack Ltd. The amount of diminution value is not ascertained by the Company.

a. In the case of Balance Sheet, of the state of affairs of the Company as on 31st March 2009.

b. In the case of the Profit and Loss Account of the Loss of the Company 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 REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS REPORT TO THE MEMBERS OF THE IQ INFOTECH LIMITED FOR THE

YEAR ENDED 31st MARCH 2009

1. a) The Company has maintained proper records showing full particulars

including quantitative details and location of the fixed assets.

b) There is a regular program of physical verification, which in our opinion is reasonable, having regard to the size of the Company and the nature of Fixed assets. No materials discrepancies have been noticed in respect of the assets physically verified during the period.

c) During the year the Company has sold a portion of the land for total consideration of Rs.130.91 lakhs.

2. a. Inventories have been physically verified during the year by the management. In ouropinion, the frequency of verification is reasonable,

b. The Procedures of physical verification of stocks followed by the management are adequate in relation to the size of the Company and the nature of its business.

c. The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and hook records were not material and have been properly dealt with in the books of account.

3. a. The Company has not granted loans, secured or unsecured or unsecured companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

b. As the Company has not granted any loans during the year to the parties covered in the register maintained under section 301 of the Companies Act, 1956 clause (b), (c) and (d) are not applicable

c. The Company has taken unsecured loans during the period from parties covered in the register maintained under section 301 of the Companies Act, 1956. The company has taken loan from two parties. The year end balance from both the parties put together is Rs 1.54 lakhs.

d. In our opinion, having regard to the long term involvement with the parties covered in the register maintained under section 301 of the Companies Act, 1956 and considering the explanation given to us, in this regard the rate of interest and other terms and conditions of loans taken by the company, secured or unsecured, wherever stipulated are not prima facie prejudicial to the interest of the company.

e. The Company is regular in repayment of principal amount and interest as per the stipulated terms.

4. In our opinion, and according to the information and explanations given to us, there are internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of raw materials, stores and spares, plant and machinery, equipment and other assets. In our opinion, the internal control in the area of receivables and advances needs to be further strengthened.

5. a. All tile transactions with parties covered under section 301 of the Companies Act, 1956 have been properly entered, if and when transaction takes place, in the register maintained under section 301 of the Act.

b. In our opinion and according to the information and explanations given to us, the Company has not entered into transactions of sale of goods, made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956.

6. The Company has not accepted any deposits from the public during the year.

7. The company has an internal audit system, which in our opinion, not commensurate with the size and nature of the business of the company.

8. Maintenance of cost records as per clause (d) of sub-section (1) of section 209 of the Companies Act is not applicable to the Company.

9. a. 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, Income Tax, Customs Duty, sales tax, service tax and Excise Duty with appropriate authorities.

b. According to the information and explanations given to us, undisputed amounts payable in respect of the following except income tax, service tax, customs duty, excise duty and cess were in arrears, as at 31st March 2009, for a period of more than six months from the date they became payable;

Tax Deducted at source Rs. 80,060.00

Service Tax Rs.2,73,387.00

10. The Companys accumulated losses at the end of the financial year is Rs.4,22,83,712/-. The company has not incurred any cash losses during the current year. Immediately preceding financial year company has not incurred any cash losses.

11. The company does not have any outstanding due to any financial institutions, banks or debenture holders during the year.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. As the Company is not a chit fund, nidhi, mutual benefit fund or society the provisions of clause 4[xiii] of the Companies [Auditors Report] Order, 2003 is not applicable to the Company.

14. The Company is not dealing or trading in shares/securities/debentures and other investments.

15. The Company has not given any guarantees for loans taken by others from bank or financial institutions during the period under review.

16. The Company has obtained Rs.88,06,342/- term loans from the bank during the year. According to the information and explanations given to us same has been applied for the purpose for which the loan was 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 neither any short-term funds have been used for long-term purposes nor any long-term funds have been used to finance short-term assets except permanent working capital.

18. According to the information and explanations given to us, during the period covered by our audit report, the company has not made any preferential allotment of share to parties and companies covered in the register maintained under section 301 oftheAct.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by way public issue during the year.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

Place: Bangalore. For G.V.SUNDER & CO.,

Date: 01-08-2009 Chartered Accountants

G.V.SUNDER Partner



 
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