PENTAFOUR SOLEC TECHNOLOGY LIMITED
ANNUAL REPORT 2002-2003
1. We have audited the attached Balance Sheet of M/s. Pentafour Solec
Technology Limited as at 31st March 2003 and the profit and loss account
and the cash flow statement of the company for the period ended on that
date annexed thereto. 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.
We have 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.
2. As required by the Manufacturing and Other Companies (Auditor's Report)
Order, 1998 issued by the Company Law Board in terms of Section 227 (4A) 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 the information and
explanation given to us during the course of our audit, we give the
Annexure, a statement on matters specified in paragraphs 4 and 5 of the
said Order, to the extent applicable to the company.
3. Further to our comments in the Annexure referred to in Paragraph 2
above, we report that:
(a) The accumulated loss of the company has exceeded its net worth. The
accounts have, however, been prepared by the management on a going concern
basis as explained in Note 6 & 7 of Schedule 19. This being a technical
matter, besides in view of uncertainties, we are unable to comment on the
same. However, should the company be unable to continue as a going concern,
the extent of the effect of the resultant adjustments on the assets,
liabilities and the net worth of the company as at the year end and loss
for the year is presently not ascertainable.
(b) 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.
(c) 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 those books,
(d) The balance sheet and profit and loss account dealt with by this report
are in agreement with the books of account.
(e) In our opinion, the Balance Sheet and Profit and Loss Account have been
prepared in compliance with the Accounting Standards as prescribed under
provisions of Section 211 (3C) of the Companies Act, 1956 except accounting
standards 6,17,18,20 & 22.
(f) On the basis of legal opinion obtained by the company and written
representation received from the directors, taken on record by the Board of
Directors, we report that none of the directors is disqualified as on 31st
March 2003 from being appointed as a Director of the company in terms of
Section 274 (1)(g) of the Companies Act, 1956.
(g) In our opinion, and to the best of our information and according to the
explanations given to us, the said accounts subject to our comments in
paragraph (a) above and read together with Significant Accounting Policies,
Contingent Liabilities and other notes of Schedule 1 d particularly Note
No.6 & 7 regarding recall of facilities, judicial proceedings by the banks
& financial institutions and the accumulated loss of the company having
exceeded its entire networth, give the information required by the Act, 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 31st March 2003 and
ii) in the case of the Profit and Loss Account, of the loss of the company
for period ended on that date.
iii) in the case of Cash flow statement of the cash flows for the period
ended on that date.
for R. Swaminathan & Co.
Place : Chennai
Date : 21st August, 2003
Annexure referred to in paragraph 2 of Auditors' Report to the members of
Pentafour Solec Technology Limited on the accounts for the period ended
March 31, 2003.
I. The Company has maintained records showing quantative details and
situation of fixed assets. The assets have been physically verified by the
management during the year. There is a regular programme of verification
which in our opinion is reasonable having regard to the size of the company
and the nature of its assets.
2. None of the fixed assets have been revalued during the period
3. Physical verification was conducted by the management during the period
in respect of finished goods, stores, spare parts and raw materials. In our
opinion the frequency of verification is reasonable.
4. The procedures of physical verification of stocks followed by the
management are reasonable and adequate in relation to the size of the
company and nature of its business.
5. Having regard to the size of operations of the company, the
discrepancies noticed on verification as compared to book records were not
significant and these have been properly dealt with in the books of
6 In our opinion and on the basis of our examination of stock records the
valuation of stocks were fair and proper in accordance with normally
accepted accounting principles and is on the same basis as in the preceding
7. During the period the company has nether taken nor granted any loans,
secured or unsecured from/to companies, firms or other parties listed in
the register maintained under section 301 of Companies Act, 1956 (1 of
1956) except to employees to whom interest free loans or advances in the
nature of loans have been given by the company who are repaying the
principal amounts as stipulated.
8. The company has an adequate internal control procedure commensurate with
the size of the company and nature of its business for purchase of stores,
raw materials, including components and other assets and for sale of goods.
9. In our opinion and according to the information and explanation given to
us, the transactions of purchase of goods and materials and the sate of
goods, materials made in pursuance of contracts arrangements entered in the
Register maintained under Section 301 of Companies Act, 1956 (1 of 1956)
and aggregating to Rs.50,000 or more during the period in respect of each
party have been made at prices which are reasonable having regard to the
market prices for such goods, materials or services or the prices at which
transactions for similar goods or services have been made with other
10. The Company has not accepted fixed deposit from the public
11. As explained to us, unserviceable or damaged stores, raw materials and
finished goods were determined by the management and adequate provision for
loss has been made in the accounts.
12. No formal internal audit was carried out during the year However, as
explained, effective internal controls are being exercised.
13. The Central Government under section 209(1)(d) of the Companies Act,
1956 has not prescribed for the maintenance of cost accounts and records in
respect products manufactured by the company.
14. According to the records produced, information and explanation given to
us there has been delay and non-remittance of provident fund and employees
15. According to the information and explanation given to us, there were no
undisputed amounts payable in respect of Income tax, Wealth tax, Safes tax,
Customs duty and Excise duty which have remained outstanding as at 31st
March, 2003 for a period of more than six months from the date they became
16. During the course of our examination of books of accounts we have not
come across any personal expenses which have been charged to revenue
account other than those payable under contractual obligations or in
accordance with generally accepted business practice.
17. In respect company's service activity:
a) in our opinion and according to the information and explanation given to
us the system of recording receipts, issues and consumption of material and
stores and allocating materials consumed to relative jobs is not
b) though allocation of man hours utilized is not made to relative jobs, in
our opinion, control is exercised on total labour utilized on jobs.
c) we are informed that the company has a reasonable system of
authorization at proper levels and an internal control commensurate with
the size of the company and the nature of its business.
18. In our opinion and according to the information and explanation given
to us the damaged goods in respect of the trading activity are not
significant, having regard to size of the activity and the company has made
adequate provision for the loss.
19. The company is a Sick Industrial Company within the meaning of clause
(o) of sub section (1) of section 3 of Sick Industrial Companies (Special
Provisions) Act,1985 (1 of 1986) as the accumulated loss has exceeded the
networth of the company as indicated in para 3 (a) of the audit report.
The reference made by the company indicating sickness has been registered
for R.Swaminathan & Co.
Place : Chennai
Date : 21st August, 2003 R.Swaminathan