madras petrochem ltd Auditors report
MADRAS PETROCHEM LIMITED
AUDITORS REPORT
To
The Members of Madras Petrochem Limited
We have examined the accounts of "MADRAS PETROCHEM LIMITED" for the year
ended March 31, 1998 and the attached Balance Sheet as at March 31, 1998
and the Profit and Loss Account for the said year annexed thereto and
report that:
1.1 In our opinion and to the best of our information and according to
the explanations given to us, the said accounts, read with the statement on
accounting policies and Notes to the accounts, subject to the following
remarks, viz. (i) no provision has been made for arrears of depreciation on
fixed assets (including current years depreciation) to an extent of
Rs.511.03 lakhs vide note 2 under schedule 1.3 (ii) recoverability and
classification of the dues from M/s.Sikri & Grover to an extent of
Rs.303.31 lakhs and other Rs.60.00 lakhs depends on the outcome of legal
proceedings vide note 2 under Schedule 1.5 (iii) no provision has been made
for gratuity liability and for leave encashment as retiral benefit
estimated at Rs.144.73 lakhs and Rs.22.43 lakhs respectively vide Note 7 of
Notes to the accounts as required under the mandatory Accounting Standard
(AS-15) issued by the Institute of Chartered Accountants of India (iv)
debts considered bad/doubtful vide Note 1 (ii) under schedule 1.5
aggregating to Rs.257.07 lakhs, advances considered doubtful vide Note
under schedule 1.7 and advances mentioned in Note 4 (a), (b) and (c) under
Schedule 1.7 aggregating to Rs.86.35 lakhs which are subject matter of
waiver application, assessments/ appeals and legal proceedings, awaiting
finalisation, the recoverability of which depends on the outcome of the
above pending proceedings, have not been written off/provided (v) balances
in two accounts with two banks are yet to be reconciled and consequently
the amounts stated in the Balance Sheet and Profit and Loss Account are
subject to such adjustments that are likely to arise from the said
reconciliation. (vi) confirmation of balances in the accounts of debtors
and creditors have not been obtained in most of the cases. (vii) the
amounts stated in the Balance Sheet and Profit and Loss Account referred to
above are based on "going concern" concept which in the instant case is
mainly dependent upon the companys ability to (a) improve its plant
capacity utilisation / implementation of diversification plans, (b) realise
its receivables including the dues from M/s.Sikri & Grover and (c)
implementation of the Rehabilitation schedule approved by the Board for
Industrial and Financial Reconstruction (BIFR), which we are informed, is
in progress, and hence the said amounts are subject to such adjustments as
may be required had the outcome of the uncertain factors mentioned in (a),
(b) and (c) above been known, 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 Companys state of affairs at
the end of the financial year, and
(ii) In the case of Profit and Loss Account, of the loss for the financial
year.
1.2 We have obtained all the information and explanations which, to the
best of our knowledge and belief, were necessary for the purpose of the
audit.
1.3 In our opinion, subject to the remark in 1.1 (iii) above, proper books
of account as required by the law, have been kept by the company so far as
appears from our examination of those books.
1.4 The Companys Balance Sheet and Profit and Loss Account dealt with by
this report are in agreement with the books of account.
2.0 As required by the Manufacturing and other Companies (Auditors Report)
Order, 1988, issued by the Central Government under Section 227 (4A) of the
Companies Act, 1956, we further report that.
2.1 The Company has maintained records showing full particulars including
quantitative details and situation of fixed assets but the same need
updation. As per the information given to us these assets have not been
physically verified by the management during the year and the same would be
done once the updation of records is completed.
2.2 None of the fixed assets of the Company have been revalued during the
year.
2.3 Physical verification has been conducted by the Management at year end
in respect of raw materials, process chemicals, finished goods and packing
materials. No such verification was conducted in respect of stores and
spares parts.
2.4 The results of the verification have been compared with book records,
and in our opinion, (i) the discrepancies noticed between the physical
stock and book records have been properly dealt with in the books of
account, (ii) the procedures of physical verification of the aforesaid
stocks followed by the management require further improvement, and (iii)
the valuation of the stocks is fair and proper in accordance with the
normally accepted accounting principles and is on the same basis as in the
preceding year.
2.4 In respect of loan taken by the Company from a company under the same
management, no interest has been stipulated and other terms and conditions
are not prima facie prejudicial to the interests of the company. The
company has not granted any loan secured or unsecured, to companies, firms
or other parties listed in the register maintained under section 301 of the
Act and/or firms or companies under the same management as defined under
Section 370 (1B) of the Act.
2.5 Loans or advances in the nature of loans have been given to the
employees of the Company and they are repaying the principal amounts as
stipulated and are also regular in payment of interest wherever applicable.
2.6 In our opinion and according to the information and explanations given
to us, there exists, commensurate with the size of the company and the
nature of its business (i) adequate internal control procedures for the
purchase of stores, raw materials including components, plant and
machinery, equipment and other assets, and for the sale of goods (ii) a
reasonable system of recording receipts, issues and consumption of
materials and stores in respect of the service activity, and (iii) a
reasonable system of internal control including authorisation at proper
levels with necessary control on the issue of stores in respect of the
service activity.
2.7 There were no transactions of purchase of goods and materials of sale
of goods, materials and services made in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of the
Act and aggregating, during the year to Rs.50,000 or more in respect of
each party.
2.8 The Company has a system of determining unserviceable or damaged
stores, raw materials or finished goods and provision as considered
appropriate by the Management has been made in the valuation of the said
goods.
2.9 The company has not accepted any deposits to which provisions of
Section 58A of the Companies Act, 1956 are applicable.
2.10. In our opinion, the Company is maintaining reasonable records for the
sale and disposals of significant scrap/by-products.
2.11 The company has introduced an internal audit system in August 1997
which, in our opinion is not complete in all respects including operations
audit.
2.12 The company has maintained cost records to give the information
required under Section 209(i)(d) of the Companies Act, 1956 for the
manufacture of Sulphuric Acid.
2.13 The Company has not been regular in depositing the Provident Fund and
Employees State Insurance dues with the appropriate authorities and the
arrears of such dues as at the end of the year was Rs.8,19,447/-
2.14 There were no material amounts outstanding as at the last day of the
financial year in respect of undisputed income tax, wealth tax, sales tax,
customs duty and excise duty, which were due for more than six months from
the date they became payable except for income tax deducted and payable
amounting to Rs.4,05,843/-
2.15 During the course of 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 which have been charged to profit and
loss account.
2.16 The company is a sick industrial company within the meaning of
Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act,
1985. The implementation of the rehabilitation scheme sanctioned by the
Board for Industrial and Financial Reconstruction on a reference to it by
the company is in progress.
For M.S.KRISHNASWAMI & RAJAN
Chartered Accountants
M.K.RAJAN
Partner
Place : Chennai,
Date : 29th June, 1998.