midland plastics ltd Auditors report

MIDLAND PLASTICS LIMITED ANNUAL REPORT 2006-2007 AUDITORS REPORT TO THE SHAREHOLDERS OF MIDLAND PLASTICS LIMITED We have audited the attached Balance Sheet of MIDLAND PLASTICS LIMITED as at 31st March 2007, and also the Profit and Loss Account and the Cash Flow Statement 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 have conducted our audit in accordance with auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principle used and significant estimates made by management as well as evaluating the overall presentation of financial statements. We believe that our audit provides a reasonable basis for our opinion. We report as follows: 1. As required by the Companies (Auditors Report) Order, 2003 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 paragraphs 4 & 5 of the said order. 2. Further to our comments in the Annexure referred to in Paragraph 1 above, we 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 cur opinion proper books of account as required by law have been kept by the Company so far, as appears from our examination of those books. (c) The Balance Sheet, Profit & Loss Account and Cash Flow Statements dealt with by this report are in agreement with the books of account. (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. (e) On the basis of written representation received from Directors, as on 31st March, 2007 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956 except the Managing Director and the Whole time director of the company who are directors of a public company for which Annual Accounts have not been filed for continuous period of three years. 3. We report that in our opinion and to the best of our information and according to the explanations given to us the said accounts subject to Note 18 of schedule L relating to non-provision of accrued gratuity amount to Rs. 3151138/- has resulted in understatement of liabilities and loss by the said amount and read together with other notes thereon give the information required by the Companies Act, 1956 in the manner so required, give a true and fairview in conformity with the accounting principles generally accepted in India:- a) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2007; b) in the case of Profit & Loss Account, of the LOSS for the year ended on that date; and c) in the case of Cash Flow Statement, of the cash flows for the year ended on that date. For RATHI & COMPANY Chartered Accountants SARAFAROAD, GWALIOR (R.S. Rathi) Dated : 17th July 2007 Partner M.No. 12121 ANNEXURE TO THE AUDITORS REPORT (Refer to the paragraph (3) of our report of even date) 1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) As explained to us, most of the fixed assets have been physically verified by the management during the year in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the company and nature of its assets. No material discrepancies were noticed on such physical verification. (c) In our opinion, the company has not disposed of substantial part of fixed assets during the year and the going concern status of the company is not affected. 2. (a) As explained to us, Inventories have been physically verified by the management at reasonable intervals during the year. (b) In our opinion, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. 3. (a) The Company has taken loan from the parties covered in the register maintained under Section 301 of the Companies Act, 1956. The Company has not granted any loans, secured or unsecured to companies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956. (b) In respect of loan taken, the terms & conditions on which such loans are taken not prima facie prejudicial to the interests of the company. The repayment of loans is not stipulated. The maximum amount involved during the year was Rs.26.55 lacs and the year end balance of loan taken from such parties (2 No.) was Rs. 25.75 lacs. (c) There is no overdue amount of loan taken from companies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956. 4. 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 for the purchase of inventory and fixed assets and for the sale of goods. To the best of our knowledge, no major weaknesses in internal control were either reported or noticed by us during the course of our audit. 5. (a) In our opinion and according to the information and explanations given to us, the transactions of purchase of contract or arrangements, that needed to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanations give to us, there are no transaction of purchases of goods and material and sale of goods, material and services made in pursuance of contract or arrangement entered in the register maintained under section 301 and aggregating during the year to Rs.5,00,000/- (Rs. Five Lacs only) or more in respect of each party have been made at prices which are reasonable having regards to the prevailing market prices for such goods, material and services as the prices of which transactions for similar goods, material and services have been made with other parties. 6. In our opinion and according to the information and explanations give to us, the company has not accepted any deposit within the provisions of section 58-A and 58-AA of the Companies Act, 1956 and the rules made there under. Accordingly paragraph 4 (VI) of the Companies (Auditors Report) order, 2003 is not applicable. 7. The Company has an Internal Audit System carried through a firm of Chartered Accountants, In our opinion, the scope of audit needs to be strengthened. 8. The Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of Companys products. 9. (a) According to records of the Company, undisputed statutory dues including Provident Fund, Employee State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues have been generally deposited with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respects of the aforesaid dues were outstanding as at 31st March2007 for a period of more than six months from the date of becoming payable. (b) The disputed statutory dues aggregating to Rs. 57.24 Lacs, that have not been deposited on account of matters pending before appropriate authorities are as under : Name of the Nature of the Forum were dispute Amount Statute Dues is pending Rs. In Lacs Sales Tax Act Sales/ Commercial (a) M.P. High Court 7.67 Tax/ Entry Tax (b) Asst. Commissioner 20.69 of Commercial Taxes Central Excise and Excise Duty M.P. High Court 5.27 Custom Act Employees State ESI Dues M.P. High Court 10.26 Insurance Act Electricity Duty Act Electricity Duty Energy Secretary Govt. of M.P. 13.35 10. The Companys accumulated losses at the end of the financial year exceeded the net worth of the company. It has incurred cash losses in the current year and in the immediately preceding financial year. 11. Based on our audit procedures and according to the information and explanations given to us, the company has not defaulted in repayment of dues to bank. 12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. In our opinion, the company is not a Chit Fund or a Nidhi / Mutual Benefit Fund / Society. Therefore, clause 4(xiii) of the Companies (Auditors Report) Order, 2003 is not applicable to the company. 14. In our opinion, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly the provision of clause 4 (xiv) of the companies (Auditors Report) Order, 2003 is not applicable to the company. 15. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions. 16. According to the information and explanations given to us, the company has not availed of any term loan during the year. 17. According to the information and explanations given to us and on all overall examinations of the Balance Sheet and Cash Flow Statement of the company, we report, that no funds raised on short term basis have been used for long-term investment or vice versa. 18. During the year, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956. 19. The company did not have any outstanding debentures during the year. 20. The company has not raised any money through public issue during the year. 21. In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year, that causes the financial statements to be materially misstated. For RATHI & COMPANY Chartered Accountants SARAFAROAD, GWALIOR (R.S. Rathi) Dated : 17th July 2007 Partner M.No. 12121