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Morgan Industries Ltd Auditor Reports

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Morgan Industries Ltd Share Price Auditors Report

To,

The Members of,

Morgan Industries Limited

Report on the Financial Statements

We have audited the accompanying financial statements of MORGAN INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2015, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managements Responsibility for the Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards referred specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters, which are required to be included in the audit report under the provisions of the Act, and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

Attention is invited to the following:

1) Note No: 6 Regarding non-receipt of confirmation of the closing balances/not reconciling balances as on 31.3.2015 in respect of debit and credit balances including ‘Net balances subsequent to adjustments of various debit and credit balances in different accounts relating to trade payables, trade receivables, loans and advances, unsecured loans, creditors, other liabilities and group company accounts. The adjustment if any which may be required consequent to receipt of confirmation/completion of reconciliation is unascertainable at this stage and not provided for as the quantum is not ascertainable at this stage.

2) a) Regarding non capitalization/non adjustment of amount of Rs. 17.91 crores kept under capital work in progress (CWIP) suitably for more than 3 years and consequently non provision of depreciation on the assets which would have otherwise suffered depreciation in the normal course had the same been capitalized or the impact thereof had the same been written off either fully or partly.

b) No impairment test has been done in respect of this capital work in progress and in respect of other fixed assets. The impact on account of depreciation/impairment loss is unascertainable and has not been provided for as per Accounting Standard 28.

3) Regarding Non Compliance of Accounting Standard - 2 with regard to valuation of inventories and nonreconciliation of physical inventory with financial records. The closing stock have not been valued at cost or Net Realisable value whichever is lower. As per Accounting Standard 2 (Inventory Valuation) no provision has been considered in the accounts towards obsolescence on account of non/slow moving items of stock.

The impact on account of the above qualification on the Statement of Profit and Loss and Balance Sheet is not ascertainable and hence not quantified.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in the Order.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes 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 those books

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid financial.statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 except Accounting Standard - 28 (Impairment of Assets) and Accounting Standard - 2 (Inventory Valuation).

(e) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Company does nothave any pending litigations which would impact its financial position

ii. the Company did nothave any long-term contracts including derivative contracts for which there were anymaterial foreseeable losses.

iii. there were no amounts which were required to be transferred to thelnvestor Education and Protection Fund*by the Company

R.SUBRAMANIAN AND COMPANY
CHARTERED ACCOUNTANTS
(Firm No. 004137S)
Place: Chennai K. JAYASANKAR
Date: 14.12.2015 PARTNER
M.No.014156

ANNEXURE TO THE AUDITORS REPORT

Annexure referred to in paragraph 3 of our report of even date

1. a) The Company has not maintained proper records showing full particulars, including quantitative details and situation, of fixed assets.

b) Fixed assets of the Company have been partly physically verified by the Management during the year. We were informed that no material discrepancies were noticed on such physical verification. However, in the absence of updated fixed assets records, we are unable to comment on the discrepancies that may arise consequent to updation and reconciliation of the Fixed Asset records.

2. a) The inventory of different stocks held by the company have not been physically verified by the Management during the year.

b) As the company has not physically verified inventory during the year, we are not in a position to offer our comments on the procedures of physical verification followed by the company.

c) In our opinion, the company is maintaining proper records of inventory.

3. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Act. Therefore, the provisions of Clause 3(iii), (iii) (a) and (iii) (b) of the said Order are not applicable to the Company.

4. In our opinion, and according to the information and explanations given to us, The company has an internal control system for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and as per information and explanations furnished to us, We are of the opinion that the internal control system needs to be adequately strengthened commensurate with the size of the company and nature of its business.

5. In our opinion, and according to the information and explanations given to us, The Company has not accepted any deposits from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the rules framed there under to the extent notified.

6. According to information and explanations given to us, the Central Government has prescribed maintenance of Cost Records under section 148 (1) of the Act, in respect of the products of the Company. The company is in the process of preparing the cost records.

7. a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is not regular in depositing the undisputed statutory dues, including provident fund, employees state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, with the appropriate authorities. The details of the same are given below:

Nature of Dues Amount (Rs. In lakhs)
ESI 3.61
PF 25.76
TDS 25.44
Service Tax 9.27
Sales Tax (CST/VAT) 6.53
Income Tax 6.25
Fringe Benefit Tax 12.64
Excise Duty 0.29

b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income-tax, sales-tax, wealth-tax, service-tax, duty of customs, and duty of excise or value added tax or cess which have not been deposited on account of any dispute.

c) There are no amounts required to be transferred by the Company to the Investor Education and Protection Fund in accordance with the provisions of the Companies Act, 1956 and the rules made thereunder.

8. Without considering the possible impact which may arise out of matters stated in the qualified opinion paragraph which is not ascertainable at this stage, the company has accumulated losses as at the end of the financial year which has not exceeded 50% of the net worth. The company has incurred cash losses in the financial year under review and has not incurred any cash loss in the immediately preceding financial year.

9. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank.

10. In our opinion, and 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 during the year. Accordingly, the provisions of Clause 3(x) of the Order are not applicable to the Company

11. The Company has not raised any term loans. Accordingly, the provisions of Clause 3(xi) of the Order are not applicable to the Company.

12. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across anyinstance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

R.SUBRAMANIAN AND COMPANY
CHARTERED ACCOUNTANTS
(Firm No. 004137S)
Place: Chennai K. JAYASANKAR
Date: 14.12.2015 PARTNER
M.No.014156

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