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Company auditors report

CHOKSI TUBE COMPANY LIMITED ANNUAL REPORT 2001-2002 AUDITORS' REPORT REPORT OF THE AUDITORS TO THE SHAREHOLDERS 1. We have audited the attached Balance Sheet of CHOKSI TUBE COMPANY LIMITED as at 31st March, 2002 and the annexed Profit & Loss Account for the year ended on that date. 2. 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. 3. 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. 4. As required by the Manufacturing and Other Companies (Auditors' Report) Order, 1988 (MAOCARO) issued by the Company Law Board in terms of Section 227(4A) of the Companies Act, 1956 and as per the information and explanations furnished to us and the books and records examined by us in the normal course of audit, we report that: 4.1. The company is maintaining proper records showing full particulars, including quantitative details and situation of the fixed assets. We are informed that in terms of the decision taken by the management of conducting physical verification of the fixed assets in a phased manner, some of the fixed assets have been physically verified at the year end. In our opinion, having regard to the size of the company and nature of its business, the frequency of verification is reasonable. No material discrepancies have been noticed in respect of the assets physically verified. 4.2. None of the fixed assets have been revalued during the year. 4.3.1. The stocks of finished goods, stores, spare parts and raw materials have been physically verified by the management / a firm of Chartered Accountant (external agency) at the year end except for the stocks lying with the third parties at the year end, which have been confirmed by them. In our opinion, the frequency of verification is requires to be increased. 4.3.2. In our opinion, having regard to the size of the company and nature of its business, the procedures of physical verification of stocks followed by the management and the external agency requires to be strengthened. 4.3.3. The discrepancies noticed on physical verification of stocks as compared to book records were not material in relation to the operations of the company and have been properly dealt with in the books of account. 4.3.4. On the basis of our examination of stocks, we are satisfied that the valuation is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding year. 4.4. The other terms and conditions of interest free unsecured loans obtained from a company and a party listed in the register maintained under section 301 of the Companies Act, 1956, in our opinion are not prima facie prejudicial to the interest of the company. We are informed that there are no companies under the same management as defined under sub-section 370(1B) of the Companies Act, 1956. 4.5. The company has not granted loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. 4.5.1. In respect of loans and advances in the nature of loans given by the company, the parties are repaying the principal amounts as stipulated or as rescheduled and have also been regular in the payment of interest, wherever applicable. 4.6. In our opinion, and according to the information and explanations given to us, having regard to the explanation that certain grades/quality of raw materials purchased are specific to the company's technical requirements and for sale of trading goods for which suitable alternative sources are not available to obtain comparable quotations, there are adequate internal control procedures commensurate with the size of the company and nature of its business with regard to purchase of stores, raw materials, including components, plant and machinery, equipments and other assets and for the sale of goods. 4.7. There are no transactions of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956, as aggregating during the year to Rs.50,000/- or more in respect of each party. 4.8. We are informed, the company has a regular procedure for the determination of unserviceable or damaged stores, raw materials and finished goods and the stocks of stores, raw materials and finished goods held at the year end are not unserviceable or damaged. 4.9. The company has complied with the provisions of Section 58A of the Companies Act, 1956 and the rules made thereunder with regard to deposits accepted by it. 4.10. In our opinion, reasonable records have been maintained by the company for the sale and disposal of realisable scrap generated in the manufacturing process. The company's operations do not generate any by- products. 4.11. The company does not have formal internal audit system. In the opinion of the management, the existing internal control procedures are adequate and hence, separate internal audit system is not called for. 4.12. In our opinion, the company has prima facie maintained accounts and records as prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956, which have not been examined by us. 4.13. During the year, the company has been regular in depositing the Provident Fund and the Employees' State Insurance dues with the appropriate authorities except for delayed payments relating to few months. As of year end, these are arrears of Rs.8,98,185/-. 4.14. As of year end, there were no amounts outstanding in respect of undisputed income tax, wealth tax, sales tax, custom duty and excise duty, which were due for more than six months from the date they became payable, other than corporate income tax on dividend of Rs.12,23,543/-. 4.15. In the course of our examination of the books of account, carried out in accordance with the generally accepted auditing practices and as informed by the management, we have not come across any personal expenses which have been charged to revenue account, other expenses on employees, including Directors, under contractual obligations/accepted business practices. 4.16. On the basis of the accounts prepared by the management for the year pending accounting of impact on the matters as referred to in Note Nos. 8, 9 and 10 in Schedule 17-B, the Company is not a sick industrial company within the meaning of Section 3(1)(0) of the Sick Industrial Companies (Special Provisions) Act, 1985. 4.17. We are informed that the stocks of trading goods held at the year end are not damaged goods. 5. In terms of and further to above, we report that: 5.1. 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. 5.2. In our opinion, proper books of account, as required by law have been kept by the Company so far as it appears from our examination of the books. 5.3. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the book of account. 5.4. In our opinion, the Profit and Loss Account and Balance Sheet materially comply with the mandatory accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956, to the extent applicable, subject to basis of assigning value to certain inventories as referred to in Note 9 of Schedule 17-B forming part of the audited accounts. 5.5. On the basis of our review of the confirmations received from the public companies in which the Directors of the company are directors, which has been taken on record by the Board of Directors and as per the information and explanations given to us, none of the Directors of the company are disqualified from being appointed as directors of the company under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. 5.6. Attention of the members is invited specifically to the notes referred to hereunder of Schedule 17-B para (e) regarding proposed dividend on preference shares and our report on MAOCARO vide para No. 4.16. a. Note No.8 regarding classification of outstanding claims, pending acceptance, as good for recovery. b. Note No.9 regarding the opinion of the Board of Directors of the Company relating to matters referred to therein, having the impact on the affairs of the Company. c. Note No.10 (a) and (b) regarding non provision of fall in value of investment in equity shares of Rs.39,55,803 and of debts classified as doubtful of recovery Rs.9,36,323. d. Note No. 13.2 regarding provision made for proposed dividend on the part of preference capital not redeemed during the year. e. In the event finally there is short recovery / realisation against / of certain assets as referred to in Note No. 9(d) of Schedule 17-B and the aggregate of such short recovery / realisation exceeds the balance in the profit and loss account, then, the proposed dividend of Rs.70 lacs on preference shares, in our opinion, may amount as declared out of profit transferred to reserves, without compliance of rules made in this regard and or out of capital. 6. Subject to the foregoing, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read in conjunction with other notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India : (a) In the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2002; and (b) In the case of the Profit and Loss Account of the profit for the year ended on that date. For M.A. Parikh & Co., CHARTERED ACCOUNTANTS MANUBHAI A. PARIKH Mumbai, Date : 31st July, 2002 PARTNER