soma papers industries ltd Auditors report

SARIKA PAINTS LIMITED ANNUAL REPORT 2004-2005 AUDITORS REPORT The Members Sarika Paints Ltd. Ahmedabad. We have audited the attached Balance Sheet of M/s Sarika Paints Limited as on 31st March, 2005 and the Profit and Loss Account of the Company 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 statement based on our audit. We Conducted our audit in accordance with the auditing standards generally accepted inn India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts, and disclosure, in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 it appears from our examination of such books. c. The Companys Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of accounts. d. In our opinion Balance Sheet and Profit & Loss Account dealt with by this report comply with the accounting standard referred to in sub section (3c) of section 211 of the Companies Act, 1956, e. On the basis of our review of the confirmations received from the Directors of the Company and taken on record by the Board of Directors, the Directors of the company do not prima facie have any disqualification as referred to in section 274 (1) (g) of the Companies Act, 1956. f. In our opinion and to the best of our information and according to do explanations given to us, the accounts read together with the notes in Schedule R forming, part of accounts, and subject to : I. The Company has reduced its debtors balance by Rs.1014119.93 from the closing debtors balance as on 31.3.2004 on account of difference in the balances of the CSA when compared with the books of the Head office. There fore, the loss in the profit and Loss account on account of reduction in debtors is overstated to this extent. II. Loans & Advance of Rs. 17668933/-, includes an amount of Rs. 13330861/- advanced to a company and others which has not been recovered for a long dine and the company has not made any provision in the books of accounts for the same. As a result the loss for the year is understated to the extent of Rs. 13330861/-. III. The Company has not made any provision for interest receivable on the loans and advance made to a company in which the old promoters of the Company were interested and the interest receivable on the same is accounted for on cash basis. IV. No provision has been made by the Company in respect of bank balances for which the confirmations have not been received from the banks amounting to Rs.455681/- and the losses to this extent is understated by the company. Gives the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India. (i) In the case of Balance Sheet, of the State of affairs of the Company as at 31st March, 2005. (ii) In the case of Profit and Loss Account, of the Profit for the year ended on that date. As required by the Companies (Auditors Report) Order 2003 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956. We give hereunder a statement on the matters specified in paragraph 4 and 5 of the said order. i) a) The company has maintained proper records showing full particulars including quantitative details and situation of the Fixed Assets on the basis of available information. b) We are informed that during the year the management has undertaken physical verification of the Fixed Assets at reasonable intervals and no material discrepancies were noticed during such verification. c) The Company has not disposed off substantial part of fixed assets during the year and the going concern status of the company is not affected. ii) a) As informed to us physical verification of inventory has been conducted at reasonable intervals by the management during the year. b) The procedures of physical verification of inventory followed by the management its reasonable and adequate in relation to the size of the company and the nature of its business. c) As explained to us the company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification by the management. iii) a) As informed to us the Company had made an advance of Rs. 129.16 lacs to one of the Concerns in which the erstwhile promoters of the company had substantial interest. The Company has also received interest free unsecured loan from Directors of the Company and their associate concerns amounting to Rs.99.07 lakhs. b) As informed to us the advance given to the associate concern above was in the ordinary course of business. The Company is not charging any interest on the above advance. The terms and conditions of advance given by the company, secured or unsecured, are prima facie prejudicial to the interests of the company. c) As informed to us the advances were made in the ordinary course of business and the company is not able to recover the advance made. The principal and interest on such advance is not being received by the company the loans taken by the company are from the Directors and their associate concerns which have been given to the company interest free. d) As informed to us the company is taking steps to recover the amount advanced. However no progress has been made in the recovery of the amount as they are long overdue. iv) a) It has been informed to us and as observed by us there is an 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. It has been informed to us that the company takes reasonable care to remove the weakness if any immediately upon observing the weakness and they do not continue. v) a) As informed to us the transactions that need to be entered into a register in pursuance of Section 301 of the Act have been so entered in the register. b) It has been informed to us that each of these transactions have been made at price which are reasonable having regard to the prevailing market prices at the relevant time. vi) a) It has been informed to us that the Company has not accepted any deposit from the public, and the directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA of the Act and the rules framed there under, and its compliances are not applicable to the company in view of the above. vii) a) We have been informed that the company has an adequate internal audit system conducted by its own staff which commensurate with its size and nature of its business. viii) a) We have been informed that the maintenance of cost records has not been prescribed by the Central Government under clause (d) of sub section (1) of section 209 of the Act, for the company. ix) a) We have been informed that the company is regular in depositing undisputed statutory dues including Provident Fund, Income-tax, Wealth Tax, Custom Duty, Excise Duty, cess and any. other statutory dues with the appropriate authorities. However We observe that the company is not paying the sales tax dues regularly or in time. Similarly we observe that for the year ended 31-3-2005 the company has not deposited the amount of Provident fund, EDLI, Family pension fund etc., with the appropriate authorities since July 2004. A demand of Rs.15000/- by the Income tax Department for the Asst. year 1998-99 which has not been contested by the company in appeal has not been paid. As has been informed to us the, ESI is not applicable to the Company and no contribution to the investor education and protection fund has been made by the company. b) We have been informed that there are undisputed dues of sales tax and Income Tax demand of Rs.15000/-, which has not been deposited by the company in view of liquidity crunch being faced by the company. (Refer to note 2. in notes to accounts forming part of this report. x) a) We have been informed and as observed by us, its accumulated losses at the end of the financial year are more than fifty per cent of its net worth and it is sick industrial company as defined in clause (o) of sub section (1) of section 3 of SICA Act 1985. The Company has approached GBIFR (Gujarat Board for industrial and Financial Reconstruction) and has been registered as a sick unit. xi) a) We have been informed that the company has not defaulted in repayment of dues to a financial institution or bank or debenture holders?. The Bankers of the Company M/s Bank of Baroda have granted an adhoc facility of Rs.25.00 lacs to the Company to be repaid in three months. However the same was overdue and outstanding at the end of the year. xii) a) We have been informed that the company has not granted any loans or advance, on the basis of security by way of pledge of shares, debentures and other securities. xiii) We have been informed that the provisions of any special statue applicable to chit fund nidhi /mutual benefit fund/ societies are not applicable to the Company. xiv) The company is not dealing or trading in shares, securities, debentures and other investments and it has not undertaken any transaction during the year. xv) The company has not given any guarantee for loans taken by others from bank car financial institutions. xvi) It has been informed to us that no term loans were taken by the company during the year hence, the application for the purpose for which they were taken does not arise. xvii) According to the information and explanation given to us and on an overall examination of the balance sheet of the Company we are of the opinion that the company has not utilized any funds from chart term sources towards repayment of long term borrowings and or acquisition of fixed assets. xviii) 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 Act. xix) During the year the company has not issued any debentures hence no security is required to be created. xx) During the year the Company has not raised any money from public issue xxi) In our opinion and according to the explanations given to us no fraud on or by the company has been noticed or reported during the year. For S K Jha & Co. Chartered Accountants Satyendra K. Jha Partner Place : Ahmedabad Dated : 17.06.2005