genelec ltd Auditors report

GENELEC LIMITED AUDITORS REPORT TO THE MEMBERS OF GENELEC LIMITED 1. We have audited the attached balance sheet of Genelec Limited as at 30th June 1998 and also the profit & loss account of the company for the year ended on that data annexed thereto. We report as under. 2. As required by the manufacturing and other companies (Auditors Report) order 1988 issued by the company law board in terms of section 227(4A) of the companies act,1956 and on the basis of such checks of the books and records of the company as we considered appropriate and the information and explanations given to us in the course of the audit, we report that: i. The fixed assets records of Aurangabad and Hindco factories were not available for verification as the factories were under closure. Except for the above, we have noted that the company has maintained proper records to show full particulars including quantitative details and situation of its fixed assets. Physical verification of fixed assets was carried out during the year by the management except for Aurangabad and Hindco factories. According to the information and explanation given to us, such verification revealed no material discrepancies. ii. The fixed assets of the company have not been revalued during the year. iii. The stock in trade has been physically verified by the management during the year and in our opinion the frequency of such verification is reasonable. iv. In our opinion the prescribed procedures 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. v. The discrepancies between the physical stocks and book stocks which have been properly dealt with in the books of account were not material in relation to the size of the Companys operation . vi. On the basis of our examination of stock valuation we are of the opinion that the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the previous year. vii. The Company has not taken/ granted any loan secured or unsecured from / to companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956. We have been informed that there is no company under the same management as defined under sub-section (1B) of section 370 of the Companies Act,1956. viii. Loans or advances in the nature of loans being repaid as stipulated together with interest, where applicable, except in case of advances to ex- directors amounting Rs. 1.52 lakhs. We have been informed that steps have been / are being taken by the Company to recover the above amounts. One of the ex-directors however has certain claims payable by the Company. ix. In our opinion there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of trading materials and for the sale of goods. There were no purchases of stores, raw materials, including components, plant and machinery, equipment and other assets during the year. x. According to the information and explanations given to us, there were no transactions of purchase of goods and materials and sale of goods, materials and services made pursuant to contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 aggregating to Rs.50000/- or more during the year in respect of each party. xi. The Company has a system of determining unserviceable or damaged stocks and in our opinion adequate amounts have been provided for such stocks in the books of account. xii. The Company has complied with the provisions of Section 58A of the Companies Act,1956 and the rules framed thereunder with regard to the deposits accepted from the public except that the Company has not repaid fixed deposits amounting to Rs. 424.47 lakhs (including accrued interest of Rs.199.30 lakhs) due on maturity to the parties and has not maintained any liquid assets under Rules 3A of the Companies (Acceptance of Deposit Rules),1975. Repayment of these deposit is however covered under the scope of the package approved by BIFR. We understand that the Company has not maintained liquid assets under Rule 3A of the Companies (Acceptance of Deposit Rules),1975 pending implementation of the aforesaid package which has been stayed by the Honble Delhi Court. xiii. The Company has not undertaken any manufacturing activity during the year and there has been no generation of scrap by products. xiv. No internal audit has been conducted during the year. xv. The central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act,1956 for any of the products of the Company. xvi. The Company is generally regular in depositing Provident Fund and Employees State Insurance dues with the appropriate authorities. xvii. According to the records of the Company and the information and explanations given to us, as at 30th June, 1998, no undisputed amounts in respect of Wealth Tax, Income Tax, Sales Tax, Customs Duty and Excise Duty were outstanding for a period of more than 6 months from the date they became payable. xviii. According to the information and explanations given to us and based on our examination of the books of Account carried out in accordance with the generally accepted auditing practices we have not come across any personal expenses being charged to Profit & Loss Account other than those payable under contractual obligations. xix. The Company is a Sick Industrial Company within the meaning of section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act,1985. Further to the above, we report the following: a) The Company is a sick industrial undertaking under the provisions of Sick Industrial Companies (Special Provision) Act,1985 as indicated in Note -3 in Schedule 19.The Accounts have been prepared on going concern basis, the validity of which depends on implementation of recommendations of the Board for Industrial & Financial Reconstruction and also the availability of continuing finance. In case the Company is unable to continue trading activities relevant adjustments may have to be made relating to the recoverability, valuation and classification of the asset amounts and classification of liabilities and accordingly fixed assets and long term liabilities may have to be reclassified as current assets and current liabilities respectively. b) Interest on unsecured loans from companies (other than loan from Unit Trust of India) and suppliers credit have not been ascertained and provided for in the accounts as indicated in Note - 4 (c) in Schedule 19. c) Loans and Advances amounting to Rs.6.49 lakhs representing net amount out of various unlinked debits and credits appearing in the books of account in respect of a bank, could not be verified in absence of adequate details (Refer Note - 5 in Schedule 19) d) We are unable to comment on the recoverability of Rs.182.59 lakhs included in "Other Current Assets" (Refer Note - 6 in Schedule 19). e) Write back of disputed interest liability of Rs.196.50 lakhs in the accounting year ended 30.6.97 resulting in consequential reduced liability and carried forward losses of corresponding amounts (Refer Note 9 in Schedule 19) f) We are unable to comment on the liability provisions required to be made, if any, regarding disputed sales tax under assessment /appeals. g) Interest on Fixed Deposits for the period 1.4.96 to 30.6.98 amounting to Rs. 70.93 lakhs has not been provided in the books of account and liquid assets under Rule 3A of the Companies (Acceptance of Deposit Rules) 1975 has not been maintained pending disposal of the stay order granted by the Honble Delhi High Court relating to implementation of the BIFR approved package. (Refer Note 4(b) in Schedule 19). 4. Subject to our remarks in paragraphs 3 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 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 these books. c) The Balance Sheet and Profit & Loss Account referred to in the report are in agreement with the books of accounts. d) In our opinion and to the best of our information and according to the explanation given to us the said accounts give the information required by the Companies Act,1956 in the manner so required and together with other notes thereon give a true and fair view: i) In the case of the Balance Sheet of the state of affairs of the Company as 30th June, 1998. ii) In the case of the Profit & Loss Account of the loss of the Company for the year ended on that date. For L. B. Jha & Co. Chartered Accountants Place: Calcutta, T. Niyogi Date : 22.9.98 Partner