coventry spring engineering co ltd Auditors report

COVENTRY SPRING AND ENGINEERING COMPANY LIMITED ANNUAL REPORT 2004-2005 AUDITORS REPORT To the members 1. We report that we have audited the balance sheet of Coventry Spring & Engineering Company Limited, as at 31st March 2005 and the Profit and Loss Account of the company for the year ended on that date both as annexed here to which are in agreement with the companys books of accounts. 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 conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) (Amendment) Order, 2004 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 and 5 of the said Order. 3. Further to our comments in the Annexure referred to above, we report that: (i) 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. (ii) In our opinion, proper books of account have been kept by the company as required by the law so far as appears from our examination of those books. (iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account, (iv) 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 except for AS15 RE: Retirement benefit for which actuarial valuation has not been made and AS2 as disclosed in para (c) below. (v) As per disclosures made by the Directors and taken on record by the Board, no Directors are disqualified from being appointed as Directors u/s 274(1)(g) of the Companies Act, 1956. (vi) No provision has been made a) against the advance / sundry debtors considered doubtful of recovery amounting to Rs.12751596/- (refer note no. 13 and 14 (a)), b) against material lying with 3rd parties amounting to Rs.985460/- who have closed their business (refer note no. 11). The effects of (a) & (b) has resulted in overstatement of sundry debtors and work in progress by Rs.12751596/-, Rs.985460/- respectively and understatement of loss by Rs.13737056/ c) i) Work in progress at Nagpur unit have been valued at certain percentage of current order value irrespective of actual cost after allocating overhead. ii) Finished goods (except slow moving items) have been valued at current order value irrespective of the date and order value of the respective items. In the absence of the costing systems, it is not ascertainable whether the cost is more/less than the amount at which it has been valued. The extent of loss effected due to this basis of valuation stated above is not readily ascertainable. (vii) Attention is drawn to the note no. i) 14(b) regarding legal steps take against Debtors for recovery. We are unable to form any opinion pending disposal of the cases. ii) 18 regarding appointment of Auditors. iii) 17 regarding Appointment of Directors iv) 28 regarding position of Cash Credit account with State bank of India and non provision of interest thereon. (viii) In our opinion, and to the best of our information and according to the explanations given to us, the accounts, subject to para vi above, and read together with para vii the Significant Accounting Policies and Notes appearing thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view: i) in the case of the Balance Sheet, of the state of affairs of the company as on 31st March, 2005 and ii) in the case of the Profit & Loss Account, of the loss of the company for the year ended on that date. iii) in the case of the Cash Flow Statement of the Cash Flow of the Company for the year ended 31st March, 2005 For S. S. Kothari & Co. Chartered Accountants R.K. ROYCHAUDHURY Partner India Steamship House 21, Old Court House Street, Membership No. 8816 Kolkata - 700 001 29 October, 2005. Annexure to auditors report (i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However fixed assets acquired prior to 30th April, 1987 have been incorporated at their respective block written down value as on that date. (b) The fixed assets have been physically verified by the Management during the year. No material discrepancies as stated by the Management were noticed on such verification. (c) No substantial part of the fixed assets has been disposed of during the year. (ii) (a) The inventory has been physically verified during the year by the management. The frequency of verification is reasonable. (b) 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. (c) The company has maintained proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of accounts. (iii) (a) The Company has not granted any loan, secured or unsecured, to the Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 in view of above clauses (b), (c) and (d) of the Order are not applicable to the Company. (e) The Company has taken an unsecured loan from one party covered in the register maintained under Section 301 of the Companies Act, 1956 and also from a Director by way of Fixed Deposit aggregating to Rs.2300000/-. Maximum balance due at any time during the year is Rs.2327493/- and year end balance Rs.2327493/-. (f) The rate of interest and other terms and conditions of the loan is not prejudicial to the interest of the company. (g) The Payment of principal amount is regular. However the company is not regular in the payment of interest on such deposit due to paucity of funds. (refer note no. 29). (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system. (v) (a) According to the information and explanations given to us we are of the opinion that the particulars of contract or arrangements reffered to in Section 301 of the Companies Act, 1956, have been entered in the registered required to be maintained under that section. (b) The transactions of purchase of material from one party made pursuant to contract / arrangement entered in the registered maintained u/s 301 of the Companies Act, 1956, aggregating during the year to Rs.5,00,000/- or more have been made at price at which purchase have been made from other parties. However in respect of services made pursuant to the contract/arrangement entered in the register maintained under section 301 of the Companies Act, 1956, aggregating during the year to Rs.5,00,000/- or more has been made at prices which are not comparable as the process of material is of special nature specifically made for the particular party and no alternate source of supply is available to enable a comparison for the prices paid. (vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 as amended upto date with regard to the deposits accepted from the public. (vii) The Company has no system of internal audit. (viii) The Central Government has not prescribed maintenance of cost records ws 209(1)(d) of the Companies Act, 1956, for the Company. (ix)(a) The Company is not regular in depositing undisputed Provident Fund. Employees State Insurance, Labour Welfare Fund, Professional, Tax Sales Tax and TDS dues within the stipulated time with the appropriate authorities. Other undisputed statutory liabilities have been deposited on a regular basis except delays in the few cases. The Company has no liability of Investors Education and Protection Fund, Wealth Tax and Custom Duty. According to the information and explanations given to us and as examined by us, undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Labour Welfare Fund, Professional Tax, Sales Tax and TDS of Rs.4924768/-, Rs.350899/-, Rs.31174/-, Rs.64301/-, Rs.762980/- & Rs.219385/- respectively were in arrears, as at 31st March 2005 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, There are no dues of Income Tax, Customs Duty, Excise Duty and Service Tax which have not been deposited on account of any dispute. In case of Sales Tax the disputed amount not deposited and there status as on 31.03.2005 are as follows: Name of Statute Amount (Rs.) Period Forum B.F.(ST), 1941 8020 86-87 Revision Board CST 68783 95-96 Revision Board W.B.S.T. 474416 97-98 Revision Board CST 190454 99-00 D.C.Appeal CST 326143 01-02 D.C.Appeal W.B.S.T. 106840 02-03 D.C.Appeal CST 782333 02-03 D.C.Appeal. (x) In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. The company has incurred cash losses during the financial year covered by our audit and also in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us the company has defaulted in repayment of dues to a financial institution, the over due amount of Corporate Loan taken from a financial institution is Rs.64706/-. (xii) We are of the opinion that the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore Clause (xii) is not applicable. (xiii) In our opinion, the company is not a chit fund or a nidhi / mutual benefit fund/society. Therefore Clause (xiii) is not applicable. (xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Therefore Clause (xiv) is not applicable. (xv) The guarantees given by the company for loans taken by others (a company promoted by Coventry Spring & Engg. Co. Ltd.) from a financial institution is under dispute pending before the Court of Law. Therefore we are unable to comment on the same. (xvi) The Company has not raised any term loan during the year. (xvii) According to the information and explanations given to us and as confirmed by the Management no funds raised on short terra, basis have used for long-term investment. (xviii) The Company has not made any issue and allotment of shares during the year. Therefore clause (xviii) is not applicable. (xix) The Company has not issued any debentures during the year. Therefore Clause (xix) is not applicable. (xx) The Company has not raised any money by public issue during the year. Therefore Clause (xx) is not applicable. (xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. For S. S. Kothari & Co. Chartered Accountants R.K.ROYCHAUDHURY Partner India Steamship House 21, Old Court House Street, Membership No. 8816 Kolkata - 700 001 29 October, 2005.