| We have audited the accompanying financial statements of M/s. SHARAT
INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as
at March 31, 2014, Statement of Profit and Loss and Cash Flow Statement
for the year then ended, and a summary of significant accounting
policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of section 211
of the Companies Act, 1956 ("the Act"), (which continues to be
applicable in respect of section 133 of the Companies Act, 2013 in
terms of General Circular 15/2013 dated 13th September, 2013 of the
Ministry of Corporate Affairs) and in accordance with the accounting
principles generally accepted in India. This responsibility includes
the design, implementation and maintenance of internal control relevant
to the preparation and presentation of the financial statements that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our au- dit. We conducted our audit in accordance
with Standards on Auditing issued by the Insti- tute of Chartered
Accountants of India. Those standards require that we comply with ethi-
cal requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditors' judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditors
consider internal control relevant to the Company's preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting poli- cies used
and the reasonableness of the accounting estimates made by management,
as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to pro- vide a basis for our qualified audit opinion.
IV. Basis for Qualified Opinion
In respect of Post Retirement Benefits viz. Gratuity, as per Accounting
Standard-15 issued by the Institute of Chartered Accountants of India,
the Company should make provision on actuarial basis every year towards
liability for future payment of gratuity. However the Company has been
following the policy of charging such gratuity payment to Statement of
Profit and Loss in the year in which such payments are made. Such
accounting treatment is not in accordance with the Accounting Standard
referred above. In the absence of details we are unable to comment on
the effect of such non-provision on the profits for the year and net
worth of the Company.
In respect of some creditors, trade debtors and advances recoverable,
there are neither confirmations of the year-end balances nor
reconciliation of the accounts. In the absence of such confirmations /
reconciliations, we are unable to comment on the effect of such
accounts on the profit of the Company for the year, year-end balances
of trade debtors, trade creditors and advances recoverable and on the
net worth of the Company.
In the preceding year, a claim for'. 179.56 lakhs made on the Company
by a Contractor has been upheld by the lower court and the Company has
challenged the same in A.P. High Court. In our opinion, on the
principle of prudence the liability should have been provided for in
the books. If such provision had been made the short-term liabilities
would be higher by ' 179.56 lakhs and the net worth would be lower by '
179.56 lakhs.
V. Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis for Qualified Opinion para- graph, the financial
statements 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:
a) . in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2014;
b) in the case of the Statement of Profit and Loss, of the Profit for
the year ended on that date; and
c) in the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
VI. Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2003, as
amended by the Companies (Auditor's Report) (Amendment) Order, 2004
(together "the Order"), issued by the Central Government of India in
terms of sub-section (4A) of section 227 of the Act, we give in the
Annexure a statement on the matters specified in paragraphs 4 and 5 of
the Order.
2. As required by section 227(3) of the Act, we report that:
a) 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;
b) 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;
c) The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this Report are in agreement with the Books of
Account;
d) Except for the effects / possible effects of the matter described in
the Basis for Qualified Opinion paragraph, in our opinion, the Balance
Sheet, Statement of Profit and Loss and Cash Flow Statement comply with
the Accounting Standards referred to in sub-section (3C) of section 211
of the Act read with the General Circular 15/ 2013 dated 13th
September, 2013 of the Ministry of Corporate Affairs in respect of
section 133 of the Companies Act, 2013;
e) On the basis of written representations received from the directors
as on March 31, 2014, and taken on record by the Board of Directors,
none of the directors is dis qualified as on March 31, 2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Act.
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT OF SHARAT INDUSTRIES
LIMITED
(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory
Requirements' section of our report of even date)
Based on the information and explanations furnished to us and the books
and records examined by us in the normal course of our audit, we report
that to the best of our knowl- edge and belief:
1. In respect of its fixed assets:
a) The Company has maintained proper records showing full particulars
including quantitative details and situation of all fixed assets. .
b) The fixed assets have been physically verified by the management and
no material discrepancies were noticed on such verification.
c) No substantial part of its fixed assets was disposed of during the
year so as to affect its going concern status.
2. In respect of inventories of finished goods, work in process, raw
materials, stores and spares:
a) Physical verification of inventory has been conducted by the
management at regular intervals.
b) The procedures of physical verification of inventories followed by
the management are reasonable and adequate in relation to the size of
the Company and the nature of its business.
c) The Company has maintained proper records of inventory. The
discrepancies noticed on verification between the physical stocks and
the book records are not material and the same have been properly dealt
with in the Books of Account.
3. In respect of loans, secured or unsecured, from / to companies,
firms or other parties covered in the register maintained under section
301 of the Companies Act, 1956:
a) During the year, the Company has not taken / granted any Secured /
unsecured loan from / to companies, firms or other parties covered in
the register maintained under section 301 of the Companies Act, 1956.
4. In respect of internal control procedures:
a) There are adequate internal control procedures commensurate with the
size of the Company and the nature of its business for the purchase of
fixed assets. We have not observed any major weaknesses in the internal
controls during the course of audit.
5. In respect of transactions that need to be entered into a register
in pursuance of section 301 of the Companies Act:
a) The particulars of transactions referred to in Section 301 of
Companies Act, 1956, that need to be entered in the Register maintained
under said section, have been so entered.
b) Where each of such transactions is in excess of'. 5 lakhs in respect
of any party, the transactions have been made at prices which are prima
facie reasonable, having regard to the prevailing market prices at the
relevant time.
6. In respect of public deposits:
a) The Company has not accepted any deposits from the public.
Therefore, the pro visions of section 58A and 58AA of the Companies
Act, 1956 and Companies (Acceptance of Deposits) Rules, 1975, are not
applicable to the Company.
7. In respect of internal audit system:
a) In our opinion, the Company has an internal audit system
commensurate with its size and the nature of its business.
8. In respect,of cost records:
a) The Central Government of India has prescribed for the Company the
maintenance of cost records under section 209 (1) (d) of the Companies
Act, 1956 in respect of certain manufacturing activities of the
Company. We have broadly reviewed the accounts and records of the
Company in this connection and are of the opinion, that prima facie,
the prescribed accounts and records have been made and maintained. We
have not, however, carried out a detailed examination of the same.
9. In respect of statutory dues:
a) The Company has been generally regular in depositing with
appropriate authorities, undisputed statutory dues including Provident
fund, Income Tax, Sales Tax and other statutory dues applicable. No
undisputed dues payable in respect of Income Tax and Sales Tax were in
arrears, as at March 31, 2014 for more than six months from the date
they become payable.
b) There are no dues of Sales Tax, Income Tax and other applicable
statutory dues as at March 31, 2014 which have not been deposited on
account of a dispute except the following:
Amount Forum where the Dispute is
Financial in Lakhs) pending
Name of the Statute year
In the High Court of
Judicature of
Customs Act, 1962 2004-2005 76.31 Andhra Pradesh at Hyderabad.
Service Tax Act, 1994 2006 to2010 14.04 CESTAT, Bangalore
10. In respect of its losses:
a) The Company, as adjusted after taking into account the
qualifications in the audit report to the extent the qualifications are
quantified, does not have any accumulated losses as at March 31, 2014
and has not incurred cash losses during the financial year ended on
that date and in the immediately preceding financial year.
11. In respect of repayment of dues to banks, financial institutions
and debentures holders
a) The Company has not issued any debentures nor borrowed from
financial institutions. In respect of dues to banks, the Company is
generally regular in adhering to the terms of repayment.
12. In respect of loans on the basis of security by way of pledge of
shares, debentures and other securities:
a) The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
13. In respect of applicability of any special statutes:
a) The Company is not a chit fund / nidhi / mutual benefit fund /
society.
14. In respect of dealing in shares, securities, debentures and other
investments:
a) The Company has not dealt / traded in shares, securities and
debentures during the year.
15. In respect of guarantees given for loans taken by others from banks
or financial institutions:
(a) The Company has not given guarantees for loans taken by others from
banks or financial institutions.
16. In respect of utilization of term loans:
a) The Company has not obtained any term loans during the year.
17. In respect of utilization of funds raised on short-term basis:
a) In our opinion and according to the information'and explanations
given to us, there are no funds raised on a short term basis which have
been used for long term investment.
18. In respect of preferential allotment of shares:
a) During the year, the Company has not made any preferential allotment
of shares other than the application money returned to a group of
investors.
19. In respect of security and charge created against debentures: a)
The Company has not issued any debentures during the year.
20. In respect of public issues:
a) The Company has not raised any money by way of public issues during
the year.
21. In respect of frauds:
a) In our opinion and according to the information and explanations
given to us, no fraud on or by the Company has been noticed or reported
during the period that causes the financial statements to be materially
misstated.
for P.A. REDDY & Co.,
Chartered Accountants
FRN: 007368S
{SO}
P.ASHOK REDDY
Place: Nellore Partner
Date : 05.09.2014 M. No.: 023202 |