Auditor’s remarks failed to prevent UTI, LIC from investing in DSQ

Sujoy Manna

Mumbai, Aug 10: Auditors qualifications in the annual report of DSQ Software failed to prevent Unit Trust of India (UTI), the country’s largest fund, from investing in the shares of the company during 2000-01.

Even the Life Insurance Corporation (LIC), the public sector insurance behemoth, seems to have been attracted to invest in DSQ’s shares irrespective of the auditors remarks.

According to figures available with The Financial Express, as on March 31, 2001, UTI had 5,46,492 shares in DSQ Software Ltd with the Trust holding 3,61,092 shares and its India Growth Fund Unit Scheme 1988 holding the remaining 1,85,400 shares.

Similarly, LIC and LIC Mutual Fund have holdings of 4,16,230 shares and 1,60,480 shares in DSQ Software respectively, aggregating 5,76,710 shares.

The investment in the company is questionable as auditors have made qualifications about various transactions in the eighth annual report of 1999-00.

One of the many qualifications include sales made to overseas subsidiary/associates, a domestic associate company amounting to Rs 22,313 lakh and adjustments to sundry debtors by issue of credit notes amounting to Rs 6,935 lakh as well as adjustments to current accounts of the above entities amounting to Rs 2,971 lakh that have been accounted for by the company based on arrangements not supported by complete documentation.

Further, the arrangement/ adjustments have yet to obtain the approval from the Reserve Bank of India.

The auditors have also expressed their inability to comment upon the completeness and validity with regard to transactions relating to the Abu Dhabi branch. The company has incorporated in their books, income of Rs 1,431 lakh and expenditure amounting to Rs 1,024 lakh for opening the Abu Dhabi branch.

The auditors, in their report, further said that absence of complete supporting documentation has precluded them to validate the amounts of Rs 8,658 lakh shown as additions to plant and machinery in the fixed asset schedule, which has included Rs 2,125 lakh as additions made.

The company has yet to file softex forms with the auditors and the auditors were not able to verify transaction regarding work in progress amounting Rs 79 lakh.

Apart from UTI and LIC, many other institutions including banks like IndusInd Bank, HDFC Bank, Standard Chartered Bank, Kotak Securities, DSP Merrill Lynch, First Global Stock Broking and
Tata Mutual Fund have holdings in DSQ Software as on March 31, 2001.

IndusInd Bank has 7,19,800 shares followed by HDFC Bank at 66,000 shares, Tata Mutual fund 32,766 shares and DSP Merill Lynch at 39,945 shares.