1. We have audited the attached Balance Sheet of The Andhra Pradesh
Paper Mills Limited (''the Company'') as at 31st March, 2011, the Profit
and Loss Account and the Cash Flow Statement for the year ended on that
date, annexed thereto. 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.
2. We have conducted our audit in accordance with the 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.
3. As set out in Note 3 of Schedule 20(3) of the financial statements,
the Company has since the inception of Accounting Standard 22 on
Accounting for Taxes on Income, recognized the deferred tax expense,
which arises primarily from depreciation on tangible fixed assets on
the basis of the currently applicable enacted Minimum Alternate Tax
rate rather than the regular tax rates as specified by paragraph 21 of
Accounting Standard 22. The Company has challenged the provisions of
Accounting Standard 22, insofar as it relates to the above matter and
has accordingly filed a writ petition in June 2003 before the Andhra
Pradesh High Court. The case has been subsequently transferred to
Calcutta High Court. The writ petition has been admitted and is
currently pending resolution. The quantification of the deferred tax
liability, and consequential impact on the financial statement, which
may arise due to the above, has been held in abeyance pending disposal
of the writ petition.
4. As required by the Companies (Auditor''s Report) Order, 2003, as
amended (''the Order''), issued by the Central Government of India in
terms of sub-section (4A) of Section 227 of the Companies Act, 1956''
(''the Act'') we enclose in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
5. Further to our comments in the Annexure referred to above, 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 purposes 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, Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
account;
d. subject to our observation in paragraph 3 above, in our opinion,
the Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report comply with the accounting standards referred
to in sub-section (3C) of Section 211 of the Act;
e. on the basis of written representations received from the directors
as at 31st March, 2011, and taken on record by the Board of Directors,
we report that none of the directors is disqualified as at 31st March,
2011 from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Act; and
f. in our opinion and to the best of our information and according to
the explanations given to us subject to our observation in paragraph 3
above, the said accounts 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:
i. in the case of the Balance Sheet of the state of affairs of the
Company as at 31st March 2011;
ii. in the case of the Profit and Loss Account, of the profit for the
year ended on that date; and,
iii. in case of the Cash Flow Statement, of the cash flows for the year
ended on that date.
ANNEXURE TO THE AUDITORS'' REPORT
The Annexure referred to in the auditors report to the members of The
Andhra Pradesh Paper Mills Limited (''the Company'') on the financial
statements for the year ended 31st March, 2011, we report that:
i. a. The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
b. The Company has a regular programme of physical verification of its
fixed assets by which all the fixed assets are verified in a phased
manner over a period of three years. In our opinion, this periodicity
of physical verification is reasonable having regard to the size of the
Company and the nature of its assets. No material discrepancies were
noticed on such verification.
c. Fixed assets disposed of during the year were not substantial, and
therefore, do not affect the going concern assumption.
ii. a. The inventories has been physically verified by the management
during the year. In our opinion, the frequency of such verification is
reasonable.
b. The procedures of the 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 is maintaining proper records of inventory. The
discrepancies noticed on verification between physical stocks and the
book records were not material.
iii. a. The Company has not granted any loans, secured or unsecured to
Companies, firms or other parties covered in the register maintained
under Section 301 of the Companies Act, 1956. Consequently, clauses
4(iii) (a) to 4 (iii) (d) of the Order are not applicable to the
Company.
b. The Company has taken deposit from one party covered in the
register maintained under Section 301 of the Companies Act, 1956. The
maximum amount outstanding during the year was Rs.416,726 and the
year-end balance of such deposit was Rs.416,726.
c. In our opinion, the rate of interest and other terms and conditions
on which deposit have been taken from other party listed in the
register maintained under Section 301 of the Companies Act, 1956 are
not, prima facie, prejudicial to the interest of the Company.
d. In the case of deposit taken from party listed in the register
maintained under Section 301, the repayment of the principal and
interest were not due during the year as per the terms stipulated in
the agreement. Accordingly, paragraph 4(iii) (g) of the Order is not
applicable.
iv. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business with regard
to purchase of inventories and fixed assets and with regard to the sale
of goods. The activities of the Company do not involve sale of
services. We have not observed any major weakness in the internal
control system during the course of the audit.
v. a. In our opinion and according to the information and explanations
given to us, the particulars of contracts or arrangements referred to
in Section 301 of the Act have been entered in the register required to
be maintained under that section.
b. In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements referred to in (a) above and exceeding the value of Rs.5
lakh with any party during the year have been made at prices which are
reasonable having regard to prevailing market prices at the relevant
time.
vi. In our opinion and according to the information and explanations
given to us, the Company has complied with the provisions of Sections
58A and 58AA of the Act and the Companies (Acceptance of Deposits)
Rules, 1975 with regard to the deposits accepted from public.
Accordingly, there have been no proceedings before the Company Law
Board or National Company Law Tribunal or Reserve Bank of India or any
Court or any other Tribunal in this matter and no order has been passed
by any of the aforesaid authorities.
vii. In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
viii. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules prescribed by the Central Government for
maintenance of cost records under Section 209(1)(d) of the Companies
Act, 1956 in respect of products sold by the Company and are of the
opinion that prima facie, the prescribed accounts and records have been
made and maintained. However, we have not made a detailed examination
of the records.
ix. a. According to the information and explanations given to us and on
the basis of the examination of the records of the Company, amounts
deducted/ accrued in books of account in respect of undisputed
statutory dues including Provident Fund, Emplyees'' State Insurance,
Income-tax, Sales- tax, Wealth tax, Customs duty, Excise duty, Investor
Education and Protection Fund, Service tax, Cess and other material
statutory dues have been regularly deposited during the year by the
Company with the appropriate authorities.
There were no dues on account of Cess under Section 441A of the Act
since the date from which the aforesaid Section comes into force has
not yet been notified by the Central Government.
According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident Fund, Employees''
State Insurance, Income-tax, Sales-tax, Wealth tax, Customs duty,
Excise duty, Investor Education and Protection Fund, Service tax, Cess
and other material statutory dues which were in arrears as at 31st
March, 2011 for a period of more than six months from the date they
became payable.
b. According to the information and explanations given to us, the dues
set out in Appendix 1 in respect of Income tax, Sales-tax, Service tax,
Municipal tax and Excise duty have not been deposited with the
appropriate authorities on account of disputes. According to the
information and explanations given to us, there are no dues of Customs
duty and Wealth tax which have not been deposited with the appropriate
authorities on account of any dispute.
x. The Company does not have any accumulated losses at the end of the
financial year and has not incurred cash losses in the financial year
and in the immediately preceding financial year.
xi. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to any
bank or to any financial institutions. The Company did not have any
outstanding debentures during the year.
xii. The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
xiii. In our opinion and according to the information and explanations
given to us, the Company is not a chit fund or a nindhi/mutual benefit
fund/society.
xiv. According to the information and explanation given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments.
xv. According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from
banks or financial institutions.
xvi. In our opinion and according to the information and explanations
given to us, the term loans taken by the company have been applied for
the purpose for which they were raised.
xvii. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we report
that funds raised on short- term basis have not been used for long-term
investment.
xviii. The Company has not made any preferential allotment of shares to
companies/firms/parties covered in the register maintained under
Section 301 of the Act.
xix. The Company did not have outstanding debentures during the year.
xx. The Company has not raised any money by public issues during the
year.
xxi. According to the information and explanations given to us, no
material fraud on or by the Company has been noticed or reported during
the course of our audit.
For B S R & Co.
Chartered Accountants
Firm''s Registration No. 101248W
Zubin Shekary
Hyderabad Partner
4th May, 2011 Membership No. 048814
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