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· The requirements of Revised Schedule VI with regard to other commitments were not disclosed.

· The company had not complied with the Guidance Note on Revised Schedule VI, which provides that the caption ‘cash and cash equivalents’ should be changed to ‘cash and bank balances’. Also, the net (gain)/ loss on foreign currency transactions except where there are borrowing costs involved, should be shown under other expenses instead of finance cost.

· The company has not shown sales under broad heads in its financial statements.

· The company disclosed capital advances under short term loans and advances, instead of long term loans and advances. Moreover, it has not specified the nature of other loans and advances.

· The borrowings from related parties repayable on demand had been disclosed as long term borrowings instead of unsecured short term borrowings, since, as per Revised Schedule VI, long term borrowings are those which contractually are repayable after one year as on balance sheet date.

· The quoted investments were treated as unquoted investments and no distinction had been made under unquoted investments for Current and Non Current Investments.

· The entity had wrongly classified and disclosed short term loans from Banks as Trade Acceptances in contravention of disclosure requirements of Revised Schedule VI. Nature of security and terms of repayment were also not stated in respect of Bank loan.

· The amounts set aside to provisions made for meeting specific liabilities should be separately disclosed as a charge to the Statement of Profit and loss. The entity had debited miscellaneous expenses including Bad Debts written off and credited other income on account of provision for doubtful debts and advances no longer required.

· The payment made by the entity to ‘Employee State Insurance Fund’ had been included in the welfare expenses instead of being disclosed separately as “contribution to provident and other funds” as per Revised Schedule VI.

· The disclosure under the head ‘Trade Payable’ in relation to amount due to Micro & Small enterprises had not been made, and the note given was insufficient to comply with the provisions.

· The company treated provision of Gratuity as long term provision instead of short term, though it was being payable by the company to the trust within next financial year.

· The entity had not disclosed other manufacturing expenses under appropriate head which resulted in understatement of consumption of raw material and packing material.

· Consolidation of Non Current Assets into Current Assets in Consolidated Financial statements. An amount was classified as short term security deposits in consolidated financial statements of the company but in the signed balance sheet of one of its subsidiary, security deposit had been classified as Non Current Assets.

· Format used for presentation of B/S and P&L was not as per Revised Schedule VI.

· While disclosing short term borrowings, the financial statements prepared by the company did not incorporate the phrase “Loan repayable on demand” as warranted by ‘General instructions for preparation of Balance Sheet’.

· According to the Revised Schedule VI, bonds/ debentures shall be stated in descending order of maturity, or conversion starting from the farthest date, however, the auditee had disclosed series of bonds in ascending order.

· As per the Revised Schedule VI, corresponding amounts (comparatives) for the immediately preceding reporting period shall be given for all the items shown in the financial statements including notes. However, the notes to the consolidated accounts; significant accounting policies, did not disclose the percentage of ownership of preceding year.

· As per Revised Schedule VI the aggregate value of quoted current investments and their market value has to be disclosed. However, the company had not disclosed the market value of quoted investments.

· The entity classified MAT Credit entitlement and Advance Tax/ TDS receivable as Short term loans and advances but as per the Guidance Note on the Revised Schedule VI, they should be classified as long term loans and advances.

· The entity has classified Margin Money/ Security under the head “Cash & Bank Balances”. However, Margin Money/ Security with the banks were non-current in nature and should have been classified as “other Non-Current Assets instead of “Other Bank Balances” as per the Revised Schedule VI to the Companies Act, 1956.

· The company had converted stock in trade to capital work in progress, however, there was no evidence of verification of minutes of the Board resolution having being verified by the firm for the decision to convert the stock.

· Term Loan repayable within a year did not constitute Term Loan alone. The balance pertained to Deferred Sales Tax Liability, but was not shown separately.

· Investments in subsidiaries in fully paid equity instruments and other investments were not classified as held for trade or non trade investments.

· Para 8.7.2.3 of Guidance Note on Revised Schedule VI was not complied with, as it recommends to disclose the amount of provision netted off for each long term investment.

· Investments in mutual funds were not disclosed as quoted or unquoted in accordance with the Revised Schedule VI.

· Profit on sale of mutual funds instead of being shown as ‘Other income’ was shown on netting basis under the expenditure head of ‘Finance & Treasury Charges’ resulting in its understatement and generating an impression of higher operating income.

· One misstatement was not corrected by the management i.e. Interest expense not payable for pension fund whereby the profit was understated and liability was overstated.

· In respect of revaluation reserve appearing in the balance sheet, the company had no details regarding year/date of revaluation made, items revalued, and whether those assets have been disposed off/scrapped.

· Long term loans& advance, security deposit included amount from related parties. This was not separately disclosed as per Revised Schedule VI.

· There was no explanatory note as to how the following amounts were identified and measured: o Reserves and surplus- Hedging reserve o Other Non-current Assets- derivative Assets

· Payment made to statutory auditor with respect to IPO related work was not disclosed at all in the financial statement as required in payments to the auditor [Clause (j) of Note 5 (i) of Revised Schedule VI to the Companies Act, 1956].

· The disclosure and presentation of long term borrowings were not done as per the requirement of Revised Schedule VI. As required the borrowing should be further sub – classified as secured and unsecured.

· Leasehold land for factory had been erroneously classified as factory freehold land.

· Items shown under the head “other” in long term loan and advances included a sum given to Director and Chairman of the Company. Disclosure requirements of Revised Schedule VI have not been complied with. Further a sum of advance given to suppliers/creditors for expenses had been wrongly classified as Long term advances.

· The presentation under ‘Note of inventories’ in the financial statement was not in compliance with the requirements of Revised Schedule VI of the Companies Act, 1956. It was not possible to determine break-up of the “stock –in-transit” relating to raw material, work-in-progress, finished good and stores and spares.

· The presentation of deposits with more than twelve months maturity was not in conformity with the requirement of the Revised Schedule VI as the bifurcation between current and non-current portion of the deposits was not made. Non-current portion should have been classified as “other non-current assets” along with a separate disclosure.

· Advance to Excise/Custom and other departments had not been classified as “short term loans and advances” and not “other current assets”.

· Break-up of sales and excise duty was not disclosed as per the requirement of Revised schedule VI /AS 9. Further, included in sales were freight outward (CST & VAT) and insurance.

· No disclosure had been made giving a breakup of the amount paid to auditors as per the provisions of Revised Schedule VI.

· Bad debts included written off amount of Inter-corporate deposit. As the Intercorporate deposit are not “Trade Receivables”, thus the presentation was inaccurate and not in compliance with the requirement of Revised Schedule VI.

· The rate of interest on the long term and short term borrowings had not been disclosed. · Company had not shown the comparative figures with respect to the additions and disposals/adjustments made during the year under the Tangible Assets. (Refer Revised Schedule VI under General instructions head in point No. 5)

· There was wrong classification of Long Term Assets in Short Term assets in the Consolidated Financial Statements.

· The expenditure capitalized was not disclosed.

· Company had not disclosed the details of applicable rate of interest on the term loans in Note.

· The Company had not de-recognized the financial asset (debtors) and had not recognized a financial liability (amount received from banks at the time of factoring) in case of assignment of debtors without insurance backing.

· No disclosure had been made/note given in financial statements with regard to the debtors assigned to bank (without insurance backing).

· Company disclosed in note “Trade payables and other current liabilities”, as “other Payable”. However, as per Para 8.6.3 of the Guidance Note on Revised Schedule VI, a Company is required to specify the nature of “Other Payables”.

· Bifurcation between current and non-current portion of leave encashment provision was not made and total provision was shown under short term provisions only. Gratuity provision was not shown separately but was shown under ‘other current liabilities’.

· Share capital in financial statement for previous year figure was not correctly brought out.

· Terms and right attached to shares were not disclosed either on the face of the financial statement or in the notes to accounts.

· The notes on classification of Assets & liabilities refer to Company’s normal operating cycle. But operating cycle was not defined.

· Company had taken the foreign currency loan for acquisition of fixed assets. However, the policy on exchange difference on loan contracted for acquiring fixed assets was not stated.

· Marketing division had accounted for accrual of Commission. There was nothing on record to compare the treatment of such accrual in previous year.

· Nature of Other Advance Payments and Other Receivables was not disclosed, neither were they disclosed item wise as per the Guidance Note on Revised Schedule VI.

· Company had investment in the Equity shares of Associate Companies and the same had not been separately disclosed as per Revised Schedule VI, further it has also not been disclosed whether the investments were partly paid or fully paid.

· The company added capital advances of WIP in the capital WIP and did not show it under the head capital advances.

· Notes in the consolidated financial statement did not disclose the terms of borrowing with respect to its repayment, interest, and securities.

· Other operating revenue included rent and hire charges, interest income, dividend income etc., which should be classified as other income instead of other operating revenue.

· Other current liabilities included excise duty & service tax payable, however, it was observed that previous year outstanding was after netting off Advance payments whereas current year figure was without netting off advance tax.

· There was a mismatch of classification which on the one hand had been disclosed as advance towards Share Capital under “Other Current liability” by the subsidiary, and on the other hand had been disclosed under “Long Term Loans and Advances” by the Holding Company.

· Bifurcation of sundry debtors as more than six months and less than six months was not disclosed in the financial statements.

· Printed financial statements of the company were not signed by the Chief financial officer of the company.

· There were variations in the printed financial statements and the signed copy of the financial statements of the company.

· Deferred Tax Asset was clubbed under Non-Current Asset instead of being separately disclosed on the face of the balance sheet in the annual report.

· The terms & conditions mentioned by the Company in relation to preference shares were those prevalent at the time of issue of these preference shares. There had been a major change in the terms of redemptions of preference shares and the revised terms and conditions for the redemption of preference shares were not disclosed.

· As per Management Representation Letter, roll-over of the inter-corporate deposits had been done based on mutual discussion, and in respect of few cases management had initiated legal proceedings. However, no independent balance confirmations had been

obtained and held on record by the auditors for inter-company deposit. (Refer explanations of Guidance Note on Revised Schedule VI).

· Reconciliation of number of shares, other details of equity shares for period of 5 years, immediately preceding the year-end with respect to shares allotted for other than cash, shares allotted as fully paid up, bonus shares, aggregate numbers of shares bought back and shares reserved for issue under option were not disclosed.

· Note in standalone financial statement of non-current investment did not disclose the details of investments in various subsidiaries. Further, whether these were held for trade or non-trade and were they quoted and unquoted was not classified.

· Note on Long term loans & advances did not disclose whether these were secured and classified whether considered good or doubtful.

· Other Current Assets were not classified into secured/unsecured and good/ doubtful.

· MAT Credit available to the company as per income tax return was inconsistent with that shown in the financial statements.

· Certain provisions were not classified under the head Other Long terms Liabilities rather as trade payable in accordance with Revised schedule VI.

· The short term loans had been understated in the financial statements, as the company repaid it through cheque as at the end of the financial year with due date falling subsequent to the end of the financial year however, there was not enough balance in the Bank account as on the balance sheet date and the amount was lying under bank reconciliation.

· Company had shown an amount as received from one of the related company towards loans and advances given to related parties; however, this amount was actually received on a date falling subsequent to the end of the financial year and was lying in bank reconciliation as at the year-end.

· Lien on the deposit was not disclosed.

Quality Review Board Report on Quality Review Findings (2012-15) Click Here >>

Quality Review Board (QRB) Report 2012-15- Observations on Compliances to Revised Schedule VI of the Companies Act, 1956 |18-08-2015|