South Asian Financial Exchange Limited
To the Members of South Asian Financial Exchange Limited
1. We report that we have audited the attached balance Sheet of South Asian
Financial Exchange Limited as at March 31, 1998 and the relative Profit and
Loss Account for the year ended that date, both of which we have signed
under reference to this report.
2. Attention is drawn to the following:
2.1 Note 3 on Schedule 16 regarding the change in the depreciation policy
of the Company resulting in a lower depreciation charge to the extent
2.2 Note 4 on Schedule 16 regarding allowability of provision made in
respect of non performing assets as a deductible expenditure and the
consequential shortfall in tax provision estimated at Rs.42.14 lakhs
relating to the financial year 1996-97.
2.3 Note 5 on Schedule 16 regarding non provision for diminution in the
value of certain investments to the extent indicated therein.
2.4 No provision has been made in respect of Income tax liability and
interest thereon related to the assessment year 1995-96 aggregating
Rs.71.89 lakhs included in the amount disclosed under Note 7(c) on Schedule
16, on account of disallowance of depreciation by the concerned authorities
in respect of sale and leaseback transactions for which an appeal has been
preferred to the Commissioner of Income tax. Further the effect of similar
disallowances for the subsequent assessment years cannot be estimated with
any degree of accuracy, pending disposal of the appeals.
2.5 Sundry debtors include Rs.60.26 lakhs representing debts assigned in
favour of certain parties for which no agreements / documentation etc., are
available. In the absence of relevant information we are unable to
ascertain the extent to which these balances will be ultimately recovered.
2.6 Current assets and loans and advances include Rs.402.78 lakhs
representing amounts receivable on account of sale of investment,
consultancy charges, overdue charges, bills purchased etc., against which a
provision of Rs.40.28 lakhs exists in the books. From the available
information we are unable to ascertain the extent to which these balances
will be ultimately realised.
3. In our opinion and to the best of our information and according to the
explanations given to us, the Balance Sheet and Profit and Loss Account
together with the notes thereon and attached thereto give in the prescribed
manner the information required by the Companies Act, 1956 and also subject
to the observations set out in paragraphs 2.1 to 2.6 above and paragraph
5.8 below give respectively a true and fair view of the state of the
Company's affairs as at March 31, 1998 and its loss for the year ended on
4. Subject to the observations in paragraphs 2.4 to 2.6 above we have
obtained all the information and explanations which to the best of our
knowledge and belief, were necessary for our audit. In our opinion, proper
books of account have been kept as required by law so far as appears from
our examination of the books and the abovementioned accounts are in
5.- As required by the Manufacturing and Other Companies (Auditor's Report)
Order, 1988, issued by the Central Government and on the basis of such
checks, as we considered appropriate and according to the information and
explanations given to us, we further report that:
5.1 The Company has maintained proper records to show full particulars
including quantitative details and situation of its fixed assets. The fixed
assets of the Company have been physically verified by the management
pursuant to a phased programme and no material discrepancies have been
noticed on such verification.
5.2 The fixed assets of the Company have not been revalued during the year.
5.3 Except for Stocks on Hire, the legal ownership of which will be
transferred to the Hirers on receipt of the final instalment from them, the
Company does not have any stocks of raw materials, stores and spares and
finished goods and therefore clauses (iii), (iv), (v) and (vi) of paragraph
4(A) of the Manufacturing and Other Companies (Auditor's Report) Order,1988
are not applicable.
5.4 The Company has not taken any loans, secured or unsecured from
companies, firms or other parties listed in the register maintained under
Section 301 of the Companies Act, 1956 and/ or from the companies under the
same management as defined under sub section (1-B) of Section 370 of the
Companies Act, 1956.
5.5 In our opinion, the rates of interest and other terms and conditions of
unsecured loans granted by the Company to companies listed in the register
maintained under Section 301 of the Companies Act, 1956 are not prima facie
prejudicial to the interests of the Company. The Company has not granted
any loans, secured or unsecured, to companies, under the same management as
defined under sub section (1-B) of Section 370 of the Companies Act, 1956.
5.6 Subject to the remarks in paragraph 2.6 above, the parties to whom
loans or advances in the nature of loans have been given by the Company are
repaying the principal amounts where stipulated and are also regular in
payment of interest where applicable in most cases. In those cases where
principal amounts and / or interests are not being repaid, reasonable steps
are being taken by the Company for recovery of the principal and/ or
5.7 In our opinion, the internal control procedures of the Company relating
to purchase of asset is commensurate with the size of the Company and the
nature of in business.
5.8 In the case of public deposits received by the Company the directives
issued by Reserve Bank of India and the provisions of Section 58A of the
Companies Act, 1956 and the rules framed thereunder have been complied with
except in respect of the following:
a) non-maintenance of liquid assets.
b) non-repayment of principal amounts to the depositors on their due dates.
5.9 In our opinion, the Company's present internal audit system is
commensurate with its size and nature of its business.
5.10 The Company has generally been regular in depositing during the year,
the Provident Fund and Employees' State Insurance dues with the appropriate
authorities. At the year end an amount of Rs.149,894 was in arrears in
respect of Provident Fund dues which was subsequently remitted on April 17,
5.11 At the last day of the financial year, there were no amounts
outstanding 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.
5.12 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, other than those payable under contractual obligations or in
accordance with generally accepted business practice.
5.13 The other provisions of the Manufacturing and Other Companies
(Auditor's Report) Order, 1988, are not applicable to the Company, being a
For and on behalf of
Chennai PRICE WATERHOUSE
November 30, 1998 Chartered Accountants