ARIHANT COTSYN LIMITED
The Members of Arihant Cotsyn Limited,
We have audited the attached Balance Sheet of Arihant Cotsyn Limited as at
31st March 1998 and Profit and Loss Account for the year ended on that date
annexed thereto both signed by us under reference to this report and report
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 accounts as required by law have been
kept by the Company so for as appears from our examination of the books of
c) The Balance Sheet and Profit and Loss Account dealt with by this report
are in agreement with the books of accounts
d) In our opinion and to the best of our information and explanation given
to us the said accounts subject to Note No. 4 regarding capitalisation of
interest on debentures to fixed assets upto 31 st March 1995 resulting in
understating the revaluation reserve and loss by Rs. 1,20,64,384/- and the
depreciation overstating by Rs. 589100/-, Note No. 6 regarding non
confirmation of balances, the effect thereof in Profit and Loss Account
cannot be reflected, Note No.7 regarding allocation of debenture issue
expenses to fixed assets upto 31 st March, 1995 resulting in understating
the revaluation reserve and deferred revenue expenditure by Rs.7137486/-
and the depreciation overstating by Rs. 334495/- and the charge of deferred
revenue expenditure understating by Rs. 869529/-, Note No. 8 regarding non
reconciliation and non confirmation of the amounts under the head cash and
bank balances and stated to be lying in Share Application Money refundable
account with Allahabad Bank, New Delhi, Note No.9 regarding treating the
plant by company as continuous process plant resulting in understating the
charge for depreciation by Rs. 28728410/- (previous year Rs. 27481819/-)
and understating the loss and overstating reserves and surplus by Rs.
28728410/- (Previous year Rs.27481819/-), Note No.10 regarding increase in
rupee liability of the Company in respect of FCL as a result the plant &
machinery has been overstated by Rs.10868267/-, and the revalution reserve
has been overstated by Rs. 9673168/-, Note No.12 regarding capitalisation
of interest for the Dyed Unit from the period 1996-97 during which assets
were used in commercial production, resulting in understating loss for the
year by Rs.33193607/- and understating the revaluation reserve by
Rs.47175369/- and overstating the gross block of fixed assets by
Rs.52012586/ and the depreciation has been overstating by Rs.2511507/-,
Note No.13 regarding revaluation of fixed assets, and read together with
other notes as per Annexure 'S', give information required by the Companies
Act, 1956, in the manner so required and give the true and fair view.
i) In the case of the Balance Sheet of the state of affairs of the company
as at 31st March,1998 and
ii) In the case of Profit and Loss Account of the Loss for the Year ended
on that date. As required by the Manufacturing and Other Companies
(Auditors' Report) Order,1988, issued by the Central Government in exercise
of the powers conferred by Section 227(4A) of the Companies Act, 1956 and
according to the information and explanation given to us and on the basis
of such check as we considered appropriate we further state that:
1. Company has maintained proper records showing full particulars including
quantitative details and situation of fixed assets. All the assets have
been physically verified by the Management during the year and there is
regular programme of verification which in our opinion is reasonable,
having regard to the size of the Company and the nature of its assets. No
material discrepancies were noticed on such verification.
2. Plant & Machinery, Land and building have been revalued during the year
at their fair rental value on the basis of the valuer's report. The
difference arising on the re-valuation have been separately disclosed in
the Balance Sheet.
3. The Stock of trading goods and raw material have been physically
verified during the year by the Management in our opinion the frequency of
verification is reasonable.
4. The procedures of physical verification of stock followed by the
Management are reasonable and adequate in relation to the size of the
company and nature of its business.
5. No discrepancies were found during the physical verification of stocks.
6. On the basis of our examination of stock records, we are of the opinion
that valuation of stocks is fair and proper in accordance with the normally
accepted accounting principles.
7. The Company has not taken any loans, secured or unsecured from
Companies, firms or other parties, listed in the register maintained under
Section 301 of the Companies Act,1956 (1 of 1956) and from Companies under
the same management as defined under Sub- Section (1 B) of Section 370 of
the Companies Act,1956 (1of 1956).
8. The Company has not granted any loans, secured or unsecured to
companies, firms or other parties listed in the register maintained under
Section 301 of the Companies Act,1956 (1 of 1956) and the Companies under
the same management as defined under sub-section (1B) of Section 370 of the
Companies Act,1956 (1 of 1956).
9. In respect of loans and advances in the nature of loans given by the
company to employees,the principal amount are recovered as stipulated but
no interest is being charged. The Company has also made advances to the
concerns which are repayable on demand. However, the company has charged
interest on these advances.
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 purchase
of stores, raw material including components, plant and machinery,equipment
and other assets,and also with regard to the sale of goods.
11. In our opinion and 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
Companies Act, 1956 as aggregating during the year amounting to Rs.50000/
or more in respect of each party,have been made at prices which are
reasonable, having regard to the 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. During the year under review, no part of the stores, raw materials and
other goods was determined as unserviceable or damaged by the Management.
13. The Company has not accepted any deposits from the public under the
Companies (Acceptance of Deposits) Rules,1975.
14. In our opinion, reasonable records have been maintained by the Company
for the sale and disposal of its realisable by-products and scraps.
15. In our opinion, the company has Internal Audit system commensurate with
its size and nature of its business.
16. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the order made by the Central Government for the
maintenance of cost records u/s209(1)(d)of the Companies Act,1956 and are
of the opinion that prima facie the prescribed accounts and records have
17. The scheme of Provident Fund has been made applicable to company during
the year. According to records of the company Provident Fund dues has been
regularly deposited during the year with the appropriate authorities.
18. According to the information and explanation given to us no undisputed
amount payable in respect of Income Tax, Wealth Tax. Sales Tax, Customs
Duty and Excise Duty was outstanding as at 31st March, 1998 for a period of
more than six months from the date it became payable.
19. According to 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 practices.
20. The Company is not 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.
21. In respect of trading activities of the Company, there are no stocks of
FOR DASS KHANNA & CO.
PLACE: Dhuri RAKESH SONI
DATED: 28.11.98 (PARTNER)