Telephone Cables Ltd Auditor Reports

TELEPHONE CABLES LIMITED ANNUAL REPORT 2001-2002 AUDITORS REPORT To the Members of Telephone Cables Limited 1. We have audited the attached balance sheet of Telephone Cables Limited as at June 30, 2002 and also the profit and loss account of the Company for the period April 1, 2001 to June 30, 2002, annexed thereto. 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. 2. We conducted our audit in accordance with 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 misstatements. An audit includes examining, on a 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Manufacturing and Other Companies (Auditors Report) Order, 1988 issued by the Central Government in terms of section 227(4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. The accounts have been prepared on the basis that the Company is a going concern, although, the ability of the Company to continue its operations for the foreseeable future is dependent upon the outcome of the reference to be made to the Board for Industrial and Financial Reconstruction referred to in note 17. 5. Further to our comments in the annexure referred to in paragraph 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 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 appears from our examination of the books; (c) the balance sheet and profit and loss account dealt with by this report are in agreement with the books of account; (d) in our opinion, the balance sheet and profit and loss account comply with the mandatory accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (e) The nominee directors appointed by Public Financial Institutions are exempt from the provisions of section 274(1)(g) of the Companies Act, 1956. Mr. Rakesh Kumar, a director of the Company, has not produced written representation as to whether the other companies in which he is a director as on June 30, 2002, had/ had not defaulted, in terms of section 274(1)(g) of the Companies Act, 1956. In the absence of this representation, we are unable to comment whether Mr. Rakesh Kumar is disqualified from being appointed as a director under section 274(1)(g) of the Companies Act, 1956. As far as other directors are concerned, on the basis of written representations received from such directors and taken on record by the Board of Directors, we report that none of the remaining directors is disqualified as on June 30, 2002 from being appointed as a director in terms of section 274(1)(g) of the Companies Act, 1956. (f) (i) attention is invited to note 19 regarding advances made to a private limited company, in which a director is a director and member. In our opinion, these advances attract the provisions of section 295 of the Companies Act, 1956 for which appropriate approvals, as required, should have been obtained (ii) attention is invited to note 20 regarding certain outstanding balances aggregating Rs.75,530,473 included under "Sundry Debtors- unsecured and considered good - over six months". We are unable to comment on the adjustments which may be required on completion of the reconciliation referred to in the note, and the consequential effect on the loss for the period subject to the foregoing, in our opinion and to the best of our information and according to the explanations given to us, the accounts give 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 the balance sheet, of the state of affairs of the Company as at June 30, 2002, and (ii) in the case of the profit and loss account, of the loss of the Company for the period April 1, 2001 to June 30, 2002. For A.F. FERGUSON ASSOCIATES Chartered Accountants Place : New Delhi R.K. PURI Dated : 23rd September, 2002 Partner ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS REPORT TO THE MEMBERS OF TELEPHONE CABLES LIMITED ON THE ACCOUNTS FOR THE PERIOD APRIL 1, 2001 TO JUNE 30, 2002. 1. The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. As explained to us, the Company has a system of physically verifying its fixed assets once in three years and in accordance therewith, the management has physically verified the fixed assets during the period ended June 30, 2002. No material discrepancies were noticed on such verification. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and the nature of its fixed assets. 2. None of the fixed assets has been revalued during the period. 3. The stocks of finished goods, stores and spares and raw materials and packing materials have been physically verified by the management at the end of the period. In our opinion, the frequency of verification is reasonable. 4. In our opinion and according to the information and explanations given to us, the 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. 5. The discrepancies noticed on verification between the physical stocks and book records were not material and have been properly dealt with in the books of account. 6. On the basis of our examination of stock records, in our opinion, the valuation of stocks is fair and proper in accordance with normally accepted accounting principles and is on the same basis as in the preceding financial year. 7. The rate of interest and terms and conditions on which loans have been taken from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are, in our opinion, prima facie not prejudicial to the interest of the Company. We are informed that there are no companies under the same management as defined under section 370(1-B) of the Companies Act, 1956. 8. The Company has not granted any loans to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. We are informed that there are no companies under the same management as defined under section 370(1-B) of the Companies Act, 1956. 9. In respect of loans and advances in the nature of loans given by the Company to employees and others, the parties are repaying the principal amounts as stipulated and are also regular in the payment of interest, where charged. 10. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of stores, spare parts, raw materials, plant and machinery, equipment and other assets, and for the sale of goods. 11. According to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the period to Rs.50,000 or more in respect of each party have been made at prices which are reasonable having regard to prevailing market prices for such goods, materials or services or the prices at which transactions for similar goods, materials or services have been made with other parties. 12. As explained to us, the Company has a regular procedure for the determination of unserviceable or damaged stores, raw materials and finished goods. Adequate provision has been made in the accounts for the loss arising on the items so determined. 13. The Company has not accepted any deposits from the public. 14. In our opinion, subject to improvement being required in the procedures followed for disposal of scrap, the Company is maintaining reasonable records for the sale and disposal of realisable scrap. The Companys operation do not generate any realisable by-product. 15. In our opinion and according to the information and explanations given to us, the Company has an adequate internal audit system commensurate with the size and nature of its business. 16. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. 17. According to the records of the Company, provident fund dues and employees state insurance dues have generally been regularly deposited with the appropriate authorities. 18. According to the information and explanations given to us, there were no undisputed amounts payable in respect of income-tax, wealth tax, customs duty, sales tax, and excise duty outstanding as at June 30, 2002 for a period of more than six months from the date they become payable. 19. According to the information and explanations given to us, no personal expenses of employees or directors have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practice. 20. The Company is a sick industrial company within the meaning of clause (o) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. We are informed that the Company is taking steps to refer the matter to the Board for Industrial and Financial Reconstruction, under section 15 of that Act. For A.F. FERGUSON ASSOCIATES Chartered Accountants Place : New Delhi R.K. PURI Dated : 23rd September, 2002 Partner