UNITED WIRE ROPES LIMITED REPORT OF THE AUDITORS TO THE MEMBERS OF UNITED WIRE ROPES LIMITED We have audited the attached Balance Sheet of United Wire Ropes Limited as at 31st March, 1998 and also the annexed Profit and Loss Account of the Company for the year ended on that date, and report that: 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. 2. In our opinion, proper books of accounts as required by the law have been kept by the Company so far as appears from our examinations of the books. 3. The Balance Sheet and Profit & Loss Account dealt with by the Report are in agreement with the Books of accounts. 4. In our opinion and best of our information and according to the explanation given to us, the said accounts, subject to Note No. 2 (i), in respect of non provision of accrued Gratuity Liabilities of Rs. 56,57,697/- , Note No. 2 (ii) in respect of non provision of accrued leave salary amounting to Rs. 7,17,463/- . The resultant effect of which would have been there would have been a Loss of Rs. 16,84,549/- instead of profit of Rs. 46,90,611/- for the year and the amount carried forward to Balance Sheet been higher by Rs. 63,75,160/- and further to Note No. 3 (i) regarding recoverability of the Sundry Debtors, read together with the other Notes thereon give the information as required by the Companies Act, 1956 in the manner required and give a true and fair view: (a) in the case of the Balance Sheet of the state of affairs of the Company as at 31 st March, 1998. (b) in the case of the Profit & Loss Account of the Profit of the Company for the year ended on that date. 5. As required by the manufacturing and other companies (Auditors Report) order 1988, issued by the Central Government and on the basis of such checks we considered appropriate, we further report that: (i) The Company has maintained proper records showing quantitative details and situations of its Fixed Assets. The Fixed Assets have been physically verified by the Management during the year. We are informed that no material discrepancies were noticed on such verification as compared with the book records. (ii) None of the Fixed Assets have been revalued during the year. (iii) The Stock of Finished Goods, Stores, Spares Parts and Raw Material have been physically verified by the Management at reasonable interval during the year. We are informed that no material discrepancies were noticed on such verification as compared with book records. (iv) The procedure 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) The discrepancies noticed on such physical verification of stocks as compared to book records were not material. (vi) In our opinion, the valuation of these stocks is fair and proper and in accordance with the normally accepted accounting principles, and is on the same basis as in earlier year. (vii) The company had obtained interest free loans from Directors. The terms and conditions on which these loans are obtained are not prima facie prejudicial to the interest of the company. (viii) The company has not granted any loans to Companies Firms or other parties as listed in the register maintained under Section 301, or to the Companies under the same management as defined under subsection (1B) of Section 370. (ix) The company has not advanced any other loans during the year. (x) In our opinion and according to the information and explanation given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purpose of stores, raw materials, plant and machinery, equipment and other assets and for sale of goods. (xi) According to the information and explanation given to us the Company has not purchased any stores, raw materials or components in excess of Rs. 50,000/- in value for each type from Firms or Companies or other parties in which the Directors are interested as listed in the Register maintained under Section 301. (xii) According to the information given to us, the Company has a procedure for determination of unservicable or damaged stores and raw materials. Provision for the loss in respect thereof has been made in accounts. (xiii) The Company has not accepted any deposits from the Public. (xvi) In our opinion, reasonable records have been maintained by the Company for the sale and disposal of scrap. The Company has no by product. (xv) The Company did not have any Internal Audit System during the year. (xvi) The Central Government has not prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, for the Company's product. (xvii) According to the records of the company the Provident Fund dues and E.S.I.C. dues have not been regularly deposited with the appropriate authorities and there have been serious delay in depositing the same. Overdue amount as at end of 31 st March, 1998 amounts to Rs. 3,30,034/- for P.F. and Rs. 3,41,333/- for E.S.I.C. (xviii) According to the information and explanation given to us, no undisputed amount payable in respect of Income Tax, Customs Duty were outstanding as at the last day of the financial year, for a period of more than six months, from the date they became payable. As regards Sales Tax the undisputed amount of Rs. 52,47,179/- is outstanding as at the last date of the financial year for a period of more than six months from the date they became payable. An amount of Rs. 5,42,289/- being undisputed Central Excise duty is also outstanding as at last date of financial year for a period of more than six months from the date they became payable. (xix) During the course of our examination of Books of accounts carried out in accordance with the generally accepted practices, we have not come across any personal expenses other than expenses under contractual obligations with the Company's employees and / or generally accepted business practices, which have been charged to Revenue Account. (xx) The company is a Sick Industrial Company within the meaning of Clause (O) of the Sub-section 1 of Section 3 of the Sick Industrial Companies (Special provision) Act, 1985. We are informed that the reference has been made under Section 15 (1) of the Sick Industrial Companies (special provision) Act 1985. For GONDALIA & MANDIVIWALLA Chartered Accountants Mumbai, DILIP G. GONDALIA Dated : 17th October, 1998. Partner