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SFL INDUSTRIES LIMITED
AUDITOR'S REPORT
TO,
THE SHARE HOLDERS OF
SFL INDUSTRIES LIMITED
We have audited the annexed Balance Sheet of M/s. SFL INDUSTRIES LIMITED as
at 30th June, 1999 and the Profit & Loss Account for the year ended on that
date annexed thereto, and report that:-
1. As required by the Manufacturing and other companies (Auditor's
Report) Order 1988 issed by the Company Law Board in terms of section
227(4A) of the Companies Act,1956 and on the basis of such checks and
examination of the books and records of the company as are considered
appropriate, and the information and explanations given to us during the
course of our audit, we report that:-
The company has maintained proper records showing full particulars
including quantitative details and srtuation of fixed assets. The fixed
assets of the company have been physically verfied by the management during
the year and no serious discrepencies have been noticed on such
verfication.
ii. None of the fixed assets have been revalued during the year.
iii The stocks of finished goods, stores, spare parts and raw materials
have been physically verified during the year by the management. In respect
of the stocks Iying with third parties, these have been confirmed in some
cases by them In our opinion, the frequency of verification is reasonable.
iv. In our opinion and according to the information and explanations
given to us, the procedures of physical verification of stocks followed by
the management are reasonable and adequate in relation to the size of the
company and the nature of its business.
v. (a) The opening stock included (i) sub-standard SSP 25654.60 MT
valued at Rs. 52.59 lacs which was meant for Exports to Bangladesh. (ii)
Unusable stock of Paper of Rs. 2.07 Lacs. These materials have been
destroyed/scrapped by the managefflent due to obsoience factor after
seeking legal advice and the same has been accounted for in the books
accordingly
GFL.lNDlJSTRlES LIMITED
(b) Value of Inventories (finished goods) include a sum of Rs. 34.76 lacs
on account of stocks pledged with the Bank. These stocks have not been
physically verified since long as such no assessment could be made about
its quality & quantity and as such no provision for any loss, if any on
this account has been made in the accounts.
vi. In our opinion, the valuaUon of stocks is fair and proper in accordance
with the normally accepted accounting principles and is on the same basis
as in the previous years.
vii. The company has not taken any loans, secured and unsecured from
companies, firms or other parties listed in the register maintained under
section 301 of the companies Act, 1956 or from Companies under the same
management within the meaning of subsection 370 (I-B) of the said Act,where
the rate of interest and the terms and conditions are pnma facie
prejudicial to the interest of the company.
viii. The company has not granted loans,secured or unsecured to
companies,firms or other parties listed in the register maintained under
secUon 301 of the companies Act,1956,or to the companies under the same
management within the meaning of section 370 (1-B) of the Companies Act,
1956.
ix. Loans or advances in the nature of loans are given by the Company to
employees who are repaying the principal amount as stipulated.These are
non-interest bearing. However the company has granted unsecured loans
amounUng to Rs.161.59 lacs to Companies who are neither repaying principal
nor interest and as such to that extent these are prejudicial to the
interest of the company
x. In our opinion and according to the information and explanaUons
given to us,there are adequate internal control procedures commensurate
with the size of the company and nature of its business for the purchase of
stores ,raw materials including components,plant and machinery,equipment
and other assets and for sale of goods. However,Company has not been able
to make in time recovery from its customers and/or periodically reconcile
their accounts and/or obtain confirmations.
xi. In our opinion and according to information and explanations given to
us, the compoany has not made purchases of stores, raw materials or
components and sale of goods ,material and SeNiCeS exceeding Rs.50,000 in
value for each type thereGf from firms,companies or other parties in which
Directors are interested, as listed in the register maintained under
section 301 of the Companies Act,1956.
xii. As explained to us, unserviceable or damaged stores and raw materials
are determined by the management and on such basis in our opinion, adequate
amounts have been written ofl from such stocks in the accounts.
xiii. The company has no public deposit at the end of the year.
xiv. The company has maintained reasonable records for the sale and
disposal of by- products and scrap.
xv. The company did not have Internal Audit during the year.
xvi. We have broadly reviewed the books of account maintained by the
company in respect of products where pursuant to the Rules made by the
Central Government, the maintenance of Cost records has been prescribed
under Section 209 (1) (d) of the companies Act, 1956. We are of the opinion
that prima facie the prescribed accounts and records have been maintained.
We have not, however, made a detailed examination of records with a view to
determining whether they are accurate or complete.
xvii. According to the records of the company, Employees State Insurance
dues have been regularly deposrted during the year with the appropriate
authorities. However, in case of Provident Fund there are some instances
where they have been deposited
xviii. The company is having no undisputed amounts in respect of Income
Tax, Sales Tax and Excise Duty which are outstanding as on the last date of
the hnancial year and were outstanding for a period of nlore than 6 months
from the date they became payable.
xix. According to the information and explanations given to us and the
records examined by us, no personal expenses have been charged to the
revenue account.
xx. The company is a Sick Industrial Company within tne meaning of clause
(0) of sub-section (1) of secbon 3 of the Sick Industrial Companies
(Special Provisions) Act, 1985 and a reference has been made to the BIFR.
Further to above, we 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 Audit.
b) In our opinion, proper books of accounts as required by law have
been kept by the company so far as appears from examination of those books.
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 according to
the explanations given to us, the Balance Sheet and Profit & Loss account
subject to: (i) Note No. 4 regarding advances amounting to Rs. 357.91 Iacs
for which no provision has been made, (ii) Note No. 5 regarding non-
provision of interest amounting to Rs. 315.92 lacs, (iii) Note No. 10
regarding the wrrte off of deteriorated finished goods valued Rs. 54.66
lacs during the year which have been considered adequate by the management
and relied upon by us, (iv) Note No. 11 regarding non-provision of loss, if
any, in the value of stocks of Rs. 34.76 lacs pledged with the bank, (v)
Note No. 16 regarding non-provision of compound and penal interest of Rs.
98 lacs to the financial institutions/mutual funds and of Rs. 0.84 lacs on
unsecured loans and Note No. 19 regarding non-provision of loss of building
of Paper Plant Rs. 132.52 lacs (WDV), which non-provisions, have resulted
in understatement of loss during the year to that extent and also subject
to other notes on Accounts as per schedule xii, 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 state of affairs of the
Company as at 30th June, 1999;
ii) In the case of Profit & Loss account of the loss of the Company for
the year ended on that date.
For RAJENDRAK.GOEL&CO.
CHARTERED ACCOUNTANTS,
R K OOFI
PARTNER
PALACE: CAMP: RAILMAJRA
DATED: 12.02 2000 ,
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