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Graham Firth Steel Products (India) Ltd.

BSE: 504707 Sector: Metals & Mining
NSE: N.A. ISIN Code: INE921A01019
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Graham Firth Steel Products (India) Ltd. (GRAHAMFIRTHSTL) - Auditors Report

Company auditors report

GRAHAM FIRTH STEEL PRODUCTS (INDIA) LIMITED ANNUAL REPORT 2007-2008 AUDITORS' REPORT TO THE MEMBERS OF GRAHAM FIRTH STEEL PRODUCTS (I) LIMITED 1. We have audited the attached Balance Sheet of Graham Firth Steel Produces (India) Limited as at 31st March 200$6, the Profit and Loss Account of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company's 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 misstatement. 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 Companies (Auditor's Report) Order, 2003 as amended by the Companies, (Auditor's Report) (Amendment) Order 2004 issued by the Government of India in terms of sub-section (4A) of section 227 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 according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. 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 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 appears from our examination of the books; c. The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books ofaccount; d. The Balance Sheet and the Profit and Loss Account comply with the applicable Accounting standards referred to under sub-section (3C) of the section 211 of the Companies Act, 1956 except for Accounting Standard (AS) - 14 issued by the ICAI on 'Accounting for Amalgamation'. AS- 15 on 'Accounting for Retirement Benefits in the Financial Statement of Employers, AS -22 on 'Accounting for Taxes on Income' and AS- 28 'Impairment of Assets' as stated in Notes No. 3 to 7 in Schedule-'T' respectively. e. On the basis of written representations received from the directors, as on 31st March 2008, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2008 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. f. In our opinion and to the best of our knowledge and according to the explanations given to us, the accounts subject to Note No.2 regarding pending formalities of the rehabilitation scheme and Note No. 32 to 09 of Schedule- 'T'S regarding preparation of accounts on a going concerns basis, non amortization of goodwill amounting for Rs. 2,77,05,807/- in accordance with the AS- 14, non provision for leave encashment and gratuity in accordance with the AS 15, non creation of deferred tax liability in accordance with AS- 22, non provision for impairment of assets if any, in lineaccordance with the AS-28, nonprovision of debtors amounting to Rs.1,85,67,342 non confirmation and reconciliation of balances of sundry debtors, creditors, certain deposits, advances, bank balances and other liabilities, respectively and read with other notes thereon give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2008; ii. in the case of Profit and Loss Account, of the Loss of the Company for the year ended 31st March, 20087; and iii. In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date. For and on behalf of BORKAR & MUZUMDAR Chartered Accountants Dilip Muzumdar Place: Mumbai Partner (M. No. 8707) Date: 22nd August, 2008 Annexure to the Auditors' Report referred to in paragraph 3 of our report of even date 1. FIXED ASSETS The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Further, a. The management has not conducted any physical verification of fixed assets. Therefore, we are not able to comment on the reasonableness of the frequency of the physical verification of fixed assets not on the discrepancies between the book records and actuals, if any. b. As per records made available to us, during the year, the Company has not disposed off any of the fixed assets. 2. INVENTORIES a. The inventory has been physically verified at the end of the year by the management. In our opinion, the frequency of verification is reasonable having regard to the nature of business of the Company. b. The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. c. The Company is maintaining proper records of inventory. As explained to us, the discrepancies noticed on verification between the physical stocks and book records were not material. 3. LOANS & ADVANCES a. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, clauses (iiib), (iiic) ,and (iiid) of para 4 of the Order are not applicable to the Company. b. The Company has taken interest free loan from one of the director and a Company in which one of the directors is having substantial interest, who is covered under section 301 of the Companies Act, 1956. The out standing balance at the end of the year was Rs. 1,75,80,262 (P.Y. Rs. 2,70,59,837 and maximum outstanding during the year is of Rs. 2,70,59,837 (P.Y. Rs.2,70,59,837. c. In our opinion and according to the information and explanations given to us, the term and conditions on which loans have been taken from parties listed in the register maintained under section 301 of the Companies Act, 1956 are prima facie not prejudicial to the interest of the Company. d. No repayment terms have been specified in respect of the loans taken from the parties listed in the register maintained under section 301 of the Companies Act, 1956. e. There is no overdue amount in respect of the loan taken from party listed in the register maintained under section 301 of the Companies Act, 1956. 4. INTERNAL CONTROLS In ouropinion and based on the information and explanations given to us, the internal control procedures need to be strengthened to be commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and sale of goods. However, during the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal controls. 5. RELATED PARTIES In respect of the contract or arrangements referred to in Section 301 of the Companies Act, 1956. a. In our opinion and according to the information and explanations given to us and based on the disclosure of interest made by the directors of the Company, the transactions made in pursuance of contract or arrangements, that needed to be entered in the register maintained u/sec. 301 of the Companies Act, 1956 have been so entered. b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in to the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. 6. FIXED DEPOSITS In our opinion and according to the information and explanations given to us, during the year the Company has not accepted any deposits from the public as per the directives issued by the Reserve Bank of India and the provisions of Sections 58A and 58AA and any other relevant provisions of the of the Companies Act, 1956 and the rules framed there under. 7. INTERNAL AUDIT No internal audit of the Company was carried out during the year. 8. COST RECORDS To the best of our knowledge and as explained to us that the Company is required to maintain Accounts & records as prescribed by the Central Government under section 209(1) (d) of the Companies Act, 1956, but the same have not been maintained. 9. STATUTORY DUES a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including income-tax, sales-tax, wealth-tax, custom duty, excise-duty, cess and other material statutory dues applicable to it. b) According to the information and explanations given to us, no undisputed amounts are payable in respect of income tax, sales tax, wealth tax, service tax, customs duty, excise duty and other statutory dues were outstanding, as at 31st March, 2008 for a period of more than six months from the date they became payable except for an amount of Rs.82,688/- in respect of Fringe benefit tax under Income tax Act, 1961. Further, since the Central Govt. has till date not prescribed the amount of cess payable u/ sec. 441 A of the Companies Act 1956. c) According to the information and explanation given to us and based on records produced before us, there are no dues outstanding of income-tax, sales-tax, wealth-tax, custom duty, excise-duty, cess and other statutory dues applicable to it, except for the dues mentioned below which have not been deposited on account dispute. Nature of Amount Period to which Forum where dispute is dues (Rs. In Lacs) it relates pending Maharashtra 186.27 1998-99, 1999-00, Appellate Tribunal/ sales tax 2000-2001,2001-02 Appellate Commissioner Central sales tax 63.00 1999-00, 2000-01 Appellate Tribunal/ Appellate Commissioner Other Matters 10. The accumulated losses of the Company as on 31st March 2008 are more than 50% of its networth; The Company has incurred cash losses during the financial year covered by audit and also in the immediately preceding financial year. 11. Since there are no dues payable to financial institution during the year under audit. Therefore, the provisions of clause 4(xi) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. 12. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. 14. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. 15. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not given any guarantee for loans taken from banks or financial institutions by others. 16. No term loans have been taken during the year under audit. Therefore, the provisions of clause 4 (xvi) of the Companies (Auditors' Report) Order, 2003 are not applicable to the Company. 17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment during the year. 18. In terms of the Scheme of rehabilitation of the Company sanctioned by Board for Industrial and Financial Reconstruction (BIFR), during the year the Company has made a preferential allotment of 10,00,000 equity shares of the face value of Rs. 10/- each at par to one of its promoters. As per the information and explanations given to us, the said scheme did not specify any pricing methodology and the Company is a Sick Company; hence the shares have been issued at its face value. However, in the absence of the information regarding valuation of shares of the Company we are unable to express our opinion on the reasonableness of the same. 19. The Company has not issued any debentures. Therefore, the provisions of clause 4 (xix) of the Companies (Auditors' Report) Order, 2003 are not applicable to the Company for the year under reference. 20. The Company has not raised any money through a public issue during the year. Therefore the provisions of clause 4 (xx) of the Companies (Auditors' Report) Order, 2003 are not applicable to the Company. 21. 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 any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the management. For and on behalf of BORKAR & MUZUMDAR Chartered Accountants Dilip Muzumdar Place: Mumbai Partner (M. No. 8707) Date: 22nd August, 2008