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Morgan Industries Ltd.

BSE: 523564 Sector: Industrials
NSE: N.A. ISIN Code: INE701E01017
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Morgan Industries Ltd. (MORGANINDS) - Auditors Report

Company 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 theStatement of Profit and Loss and Cash Flow Statement for the year then ended and asummary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards referredspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under. We conducted our audit inaccordance 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 theaudit to obtain reasonable assurance about whether the financial statements are free frommaterial misstatement. An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. In making thoserisk assessments the auditor considers internal control relevant to the Company'spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on whether the Company has in place an adequate internal financialcontrol system over financial reporting and the operating effectiveness of such controls.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.

Basis for Qualified Opinion

Attention is invited to the following:

1) Note No: 6 Regarding non-receipt of confirmation of the closing balances/notreconciling 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 indifferent accounts relating to trade payables trade receivables loans and advancesunsecured loans creditors other liabilities and group company accounts. The adjustmentif any which may be required consequent to receipt of confirmation/completion ofreconciliation is unascertainable at this stage and not provided for as the quantum is notascertainable at this stage.

2) a) Regarding non capitalization/non adjustment of amount of Rs. 17.91 croreskept under capital work in progress (CWIP) suitably for more than 3 years andconsequently non provision of depreciation on the assets which would have otherwisesuffered depreciation in the normal course had the same been capitalized or the impactthereof 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 inrespect of other fixed assets. The impact on account of depreciation/impairment loss isunascertainable and has not been provided for as per Accounting Standard 28.

3) Regarding Non Compliance of Accounting Standard - 2 with regard to valuation ofinventories and nonreconciliation of physical inventory with financial records. Theclosing stock have not been valued at cost or Net Realisable value whichever is lower. Asper Accounting Standard 2 (Inventory Valuation) no provision has been considered in theaccounts 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 Lossand 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 explanationsgiven to us except for the effects of the matters described in the Basis for QualifiedOpinion paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

a) in the case of the Balance Sheet of the state of affairs of the Company as at March31 2015;

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2015 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe 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 bestof 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 theCompany 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 Statementdealt with by this Report are in agreement with the books of account.

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

(e) On the basis of the written representations received from the directors as on 31stMarch 2015 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2015 from being appointed as a director in terms of Section164 (2) of the Act.

(f) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition

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

iii. there were no amounts which were required to be transferred to thelnvestorEducation 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 AUDITOR'S 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 includingquantitative details and situation of fixed assets.

b) Fixed assets of the Company have been partly physically verified by the Managementduring the year. We were informed that no material discrepancies were noticed on suchphysical verification. However in the absence of updated fixed assets records we areunable to comment on the discrepancies that may arise consequent to updation andreconciliation of the Fixed Asset records.

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

b) As the company has not physically verified inventory during the year we are not ina position to offer our comments on the procedures of physical verification followed bythe 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 orother parties covered in the register maintained under Section 189 of the Act. Thereforethe provisions of Clause 3(iii) (iii) (a) and (iii) (b) of the said Order are notapplicable to the Company.

4. In our opinion and according to the information and explanations given to us Thecompany has an internal control system for the purchase of inventory and fixed assets andfor the sale of goods and services. Further on the basis of our examination of the booksand records of the Company and as per information and explanations furnished to us Weare of the opinion that the internal control system needs to be adequately strengthenedcommensurate 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 TheCompany has not accepted any deposits from the public within the meaning of Sections 7374 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 hasprescribed maintenance of Cost Records under section 148 (1) of the Act in respect of theproducts 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 theCompany examined by us in our opinion the Company is not regular in depositing theundisputed statutory dues including provident fund employees' state insurance incometax sales tax wealth tax service tax duty of customs duty of excise value added taxcess 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 theCompany examined by us there are no dues of income-tax sales-tax wealth-taxservice-tax duty of customs and duty of excise or value added tax or cess which have notbeen deposited on account of any dispute.

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

8. Without considering the possible impact which may arise out of matters stated in thequalified opinion paragraph which is not ascertainable at this stage the company hasaccumulated losses as at the end of the financial year which has not exceeded 50% of thenet worth. The company has incurred cash losses in the financial year under reviewand 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 andexplanation given to us the Company has not defaulted in repayment of dues to anyfinancial institution or bank.

10. In our opinion and according to the information and explanations given to us theCompany has not given any guarantee for loans taken by others from banks or financialinstitutions during the year. Accordingly the provisions of Clause 3(x) of the Order arenot applicable to the Company

11. The Company has not raised any term loans. Accordingly the provisions of Clause3(xi) of the Order are not applicable to the Company.

12. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come acrossanyinstance of material fraud on or by the Company noticed or reported during the yearnor 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