arihant industries ltd Auditors report

ARIHANT INDUSTRIES LIMITED AUDITORS REPORT The Members, Arihant Industries Limited We have audited the attached Balance Sheet of ARIHANT INDUSTRIES LIMITED as at 31 st March,1998 and the Profit & Loss Account for the year ended on that date annexed thereto both signed by us under reference to this report and report 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 our 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 such books. c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of accounts. d) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts, subject to Note No.6 regarding non confirmation of balances and the effects thereof on Profit & Loss Account cannot be reflected, Note No.11 regarding non-provision of Gratuity 8 Leave with Wages during the year amounting to Rs.5330734/ - aggregating Rs.9601379/- (Previous year Rs.42,70.645/-) resulting in under statement of Loss for the year by Rs.5330734/ -, non provision of interest on over-due bills Rs.97,605/- and Lease rent on machine amounting to Rs.20435798/- being accounted for on cash basis Note No. 12 regarding allocation of debentures and rights-cum public issue expenses amounting to Rs.12979426/- to fixed assets instead of treating a deferred revenue resulting in higher provision of depreciation by Rs.976489/- and lower provisions of deferred revenue expenditure by Rs.12,97,943/-, consiquently the revaluation & deferred revenue expenditure has been under stated by Rs. 6593185/-, Note No.13 regarding provisions for bad and doubtful debts Note No.14 regarding previous year expenses/income Rs.189081/- & Rs. 2500180 respectively, Note No.18 regarding financial expenses shown net of interest income of Rs.11508746/-, Note No.21 regarding revaluation of some of the fixed assets namely Land, Building and Plant and Machinery, Note No.22 regarding capital work-in-progress, regarding allocation of trial run expenditure net of income amounting to Rs.19707168/- to plant & machinery instead of charging to Profit & Loss Account, during 1995-96, consequently depreciation for the year has been over stated by Rs.1112721/- (upto Previous year 3130828/-). Plant & Machinery and Reserve and Surplus over stated for Rs.15463619/- and revaluation reserve understated by Rs. 15463619/- and general reserve overstated by Rs.15463619/-, Regarding delay in creation of securities, in favour of debenture-trustees on which additional interest amounting to Rs.14.83 lacs not provided. Regarding non compliance of Section 205A(4) and 205A(5) of the Companies Act, 1956 relating to transfer of un- claimed dividend and interest thereof amount to Rs.4229536/- to General Revenue Account of the Central Government regarding cash-in-hand including imprest with staff of Rs.232.05 lacs account thereof is yet to be adjusted, regarding Note No.16 Balance with scheduled banks in current accounts, Secured loans from banks which includes cheques deposited/in hand for Rs.1247.66 lacs and cheque issued amounting to Rs.1293.33 lacs and read together with other notes(as per Annexure U) give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view: i) in case of Balance Sheet of the state of affairs of the Company as at 31 st March, 1998 and ii) in case of Profit and loss account, of Loss for the year ended on that date. As required by the Manufacturing and other Companies (AUDITORS REPORT) Order, 1988 issued by the Central Government in exercise of the power conferred by Section 227 (4A) of the Companies Act,1956 and according to the information and explanations given to us and on the basis of such checks as we considered appropriate, we further state that: A.1. The Company has maintained proper records showing full particulars including quantitatives details and situation of Fixed Assets. All the assets have not been physically verified by the Management during the year but there is a regular programme of verification which in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on verification. 2. Some of the Fixed Assets namely land, Building and Plant Machinery have been revalued during the year at their fair market value on the basis of the valuers report. The difference arising on the re-valuation have been separately disclosed in the Balance Sheet. 3. The Stock of finished goods, spare parts and raw materials have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. 4. The procedure of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. 5. The discrepancies noticed on verification between the physical stocks and the book records were not material. 6. On the basis of our examination of stock records, we are of the opinion that the valuation of stock is fair and proper in accordance with the normally accepted accounting principles and is of the same basis as in the preceeding Year. 7. The company has not taken any loans, secured or unsecured from Companies, Firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 (1 of 1956) and defined under sub- section (1 B) of section 370 of the Companies Act, 1956 (1 of 1956). 8. The Company has not granted any loans Secured or Unsecured to Companies, Firms or other parties listed in the register maintained under Section 301 of the Companies Act,1956 (1 of 1956), however, the company has granted Loan to the Company under the same management within the meaning of Section 370 (18) of the Companies Act 1956 (1 of 1956). 9. In respect of loans and advances given by the company to the employees the principal amounts are recovered as stipulated but no interest is being charged, in respect of other loans and advances there is no stipulation regarding repayment of principal. However, the company has provided interest on most of these advances. 10. In our opinion and according to the information and explanations given to us there are adequate internal control procedure commensurate with the size of the company and the nature of its business with regard to purchase of stores, raw materials including components, plant 8 machinery, equipment and other assets and also with regard to the sale of goods. 11. In our opinion and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of Contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.50,000/- or more in respect of each party have been made at prices which are reasonable having regard to prevailing market price for such goods, materials or services, the price at which transactions for similar goods materials or service have been made with other parties. 12. During the period under review, no part of stores, raw materials and finished goods were determined as unserviceable or damaged by the management. 13. In our opinion and according to information and explanation given to us, the company has compiled with provisions of Section 58A of the Companies Act, 1956 and Companies (Acceptance of Deposit Rules, 1975) with regard to the deposit accepted from the Public. 1,. In our opinion, reasonable records have been maintained by the Company for the sale and disposal of its realisable by products and scrap. 15. The Company has an adequate internal audit system commensurate with size and nature of the business of the company. 16. We have broadly reviewed the books of accounts maintained by the company pursuant to the Order made by the Central Govt. for the maintenance of cost Records under Section 209 (1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. 17. According to the records of the Company provident fund and employees state insurance dues have been regularly deposited during the year with the appropriate authorities. 18. According to information and explanations given to us, No undisputed amount in respect of Income Tax, wealth Tax, Sales Tax, Customs Duty and Excise Duty were outstanding as at 31 st March, 1998 for a period of more than six months from the date they become payable. 19. According to information and explanations given to us, no personal expenses of employees or directors have been charged to revenue account other than those payable under contractual obligations or in according with generally accepted business practices. 20. The Company is not a sick industrial company within the meaning of clause "O" of sub section (1) of Section (3) of the Sick Industrial Companies (Special Provisions) Act, 1985. B. In respect of service activities of the company i) The company has a reasonable system of recording receipts, issues and consumption of materials and stores cum-mensurate with the size and nature of its business and the charges are made on the basis of predetermined rates which do not require the allocation of man hours consumed to the relative jobs. il The company has reasonable system of authorisation at proper levels with necessary control on the issue of stores but the allocation of stores and labour to jobs does not arise due to reasons stated above. C. In respect of trading activities of the company there are no stock of damaged goods. for DASS KHANNA & CO. CHARTERED ACCOUNTANTS Sd/- (Rakesh Soni) PARTNER Place: Ludhiana Dated: 27.11.98