SKYLINE LEATHER INDUSTRIES LIMITED
AUDITORS' REPORT TO THE SHAREHOLDERS OF SKYLINE LEATHER INDUSTRIES LIMITED
1) We have audited the attached Balance Sheet of SKYLINE LEATHER INDUSTRIES
LTD., as on 31st March, 1999 and the Profit and Loss Account for the year
ended on that date annexed there to together with the Notes forming part of
the accounts. These accounts are prepared on the going concern basis though
the company was only doing certain jobworks and there was no manufacturing
activity of its own. BIFR has appointed IDBI as the Operating Agency for
the purpose of drawing up a rehabilitation scheme and place it before the
Board. However, so far during the year ended under report no proposal has
been submitted to the Board.
2) The fixed assets including plant and machinery have been verified by the
management during the year. The Company has maintained records of such
fixed assets. During the year certain furniture were sold. Except for the
above, the assets have been shown at the same figure as at the end of first
year after making additions to machinery on account of exchange fluctuation
on Japanese Yen loan and after charging depreciation.
3) Inventories on the date of Balance Sheet representing raw materials,
packing materials, consumables, semi-finished goods and finished goods have
been stated at the same amount as stated in the previous year. Subject to
the above we are not in a position to express any opinion as to the exact
realizable value of the inventories.
4) There are no balance confirmation certificates for sundry debtors,
sundry creditors, loans and advances and in-operative bank balances.
Moreover in the most of cases no request letters were sent for such
5) At the beginning of the accounting year there was brought forward
balance of Rs.8,71,310.00 (previous year Rs. 1,63,322.00) under the head
Advance for shoes. During the year under report the company has received as
sum of Rs. 19,6510.00 as advance for shoes inclusive of taxes. It is seen
from the records that the above advance for shoes represents the sale
proceeds of rejected shoes. However the company has not recognized the same
as sales during the year contrary to the accounting policy regarding sales
followed by the company.
6) As required by the Manufacturing and other Companies (Auditors Report)
Order,1988, issued under Section 227(4A) of the Companies Act 1956, we make
on the basis of such checks of the books and records as we considered
appropriate, the following statement on such of the matters specified in
the said order as are applicable to the Company.
a) The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets. The assets
have been physically verified by the management during the year and there
is no regular programme of verification which in our opinion is reasonable
having regard to the size of the company and nature of its business. No
discrepancies were noticed on verification.
b) None of the fixed assets have been revalued during the years.
e) The stock of finished goods, semi-finished goods, raw materials of the
company have been physically verified by the management during the year. In
our opinion the frequency of verification is reasonable.
d) In our opinion and according to the information and explanation given to
us, the procedure of physical verification of stock followed by the
management are reasonable and adequate in relation to the size of the
company and the nature of its business.
e) The discrepancies noticed on physical verification of stocks as compared
to book records were not material and have been properly dealt with in the
books of accounts.
f) In our opinion and on the basis of the examination, the valuation of
stock is fair and in accordance with the normally accepted accounting
principles. The valuation of stock is on the same basis as in the previous
g) In our opinion, the rates of interest and terms and conditions of loans,
secured or unsecured, taken by the Company during the year from Companies,
firms and other parties listed in the register maintained u/s 301 of the
Companies Act, 1956 and/or Companies under the same management as defined
under sub-section (1B) of section 370 of Companies Act, 1956, are not prima
facie prejudicial to the interest of the Company.
h) The Company has not granted any loans to companies, firms or other
parties listed in the Register maintained under Section 301 and/or to the
Companies under the same management as defined under sub section (IB) of
section 370 of the Companies Act, 1956.
i) Loans and advances in the nature of loans given free of interest to the
employees are generally repaid as per stipulation wherever applicable.
j) The Company has adequate internal control procedures. However the same
needs to be strengthened.
k) According to the information and explanations given to us, the company
has not entered into any transactions of purchase of goods and materials,
sale of goods and service with parties listed in the registers maintained
under section 301 and aggregating during the year to Rs. 50,000/- or more
in respect of each party made in pursuance of contracts or arrangements
entered in the Register maintained u/s 301 of the Companies Act, 1956.
l) No unserviceable or damaged stores and spares, raw materials and
components and finished goods have been determined. There being no
production during the year the question of maintaining reasonable records
for sale or disposal of realizable by-product and scrap does not arise.
m) The Company has not accepted any deposits from the public and as such
provisions of section 58A of the Companies Act, 1956 and the Companies
(Acceptance of Deposits) Rule, 1975 and the provisions of para 4A(xiii) of
the order are not applicable.
n) In our opinion, the company is maintaining reasonable records of sale
and disposal of realizable scrap. However, the company has no realizable
o) During the year there was no internal audit carried out by the company
as required by the Companies Act, 1956.
p) According to the information and explanations given to us, the Central
Government has not prescribed the Company to maintain cost records as
required under sect 209(1)(d) of the Companies Act, 1956, and hence the
provisions of para 4A(xvi) of the Order are not applicable.
q) According to the information given to us, the company has not deposited
Provident Fund and Employees State Insurance dues with the appropriate
authorities during the year. As at the end of the year, outstanding dues
towards Provident Fund and Employee State Insurance are Rs.7.33 lacs and
Rs.4.84 lacs respectively.
r) According to the information and explanation given to us, there were
undisputed amounts payable in respect of income tax deducted at source
amounting to Rs.6.47 lacs as at the end of the year 1998-99. During the
year the company has not deducted Income Tax at source although it is
liable to deduct.
s) According to the information and explanations given to us, no personal
expenses of employees and directors have been charged to revenue accounts
other than those payable under contractual obligations or in accordance
with generally accepted business practice.
t) The Company has been declared by the Board for Industrial Financial
Reconstruction as a Sick Industrial company with in the meaning of Section
3(1)(0) of Sick Industrial Companies (Special Provisions) Act, 1985.
7) Further to the above, we report as follows:
a) In view of paragraph 3 to 5 here in above and in view also of note no. 8
(regarding ascertainment of gratuity liability) we can not say that we have
obtained all information and explanation which, to the best of our
knowledge and belief, were necessary for purpose of audit.
b) The said Balance sheet and Profit & Loss are in agreement with books of
c) In our opinion the Balance Sheet and Profit and Loss referred to in this
report comply with the Accounting standards referred to in sub section 3(c)
of section 211 of the Companies Act 1956, subject to Para S here in above.
d) In view of paragraph 3 to 5 above, and in view also the note no. 8,
(regarding non ascertainment of gratuity liability) it can not be said that
proper books of account required by us have been kept by the company, or
the accounts gives the information required by the companies act 1956, In
the manner so required, and a true and fair view, in the case of Balance
sheet, of the company's state of affairs as at 31st March 1999 and in the
case Profit & loss, of its loss for the year ended as on that date.
for RODRIGUES & D'SOUZA
Place : Bangalore EDMOND D'SOUZA
Date : 31.07.99 Partner