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Madras Petrochem Ltd.

BSE: 500261 Sector: Industrials
NSE: N.A. ISIN Code: N.A.
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Madras Petrochem Ltd. (MADRASPETROCHEM) - Auditors Report

Company 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 year's 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 company's 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 Company's 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 Company's 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 (Auditor's 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.