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Electrosteel Steels | Auditor's Report > Steel - Medium / Small > Auditor's Report from Electrosteel Steels - BSE: 533264, NSE: ESL
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Electrosteel Steels
BSE: 533264|NSE: ESL|ISIN: INE481K01013|SECTOR: Steel - Medium / Small
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« Mar 12
Auditor's Report (Electrosteel Steels) Year End : Mar '13
1.  Report on the Financial Statements

We have audited the accompanying financial statements of ELECTROSTEEL STEELS LIMITED ('the Company'), which comprises the Balance Sheet as at March 31, 2013, the Statement of Profit & Loss and the Cash Flow Statement for the year then ended (in which are incorporated the accounts of the representative office at China), and a summary of significant accounting policies and other explanatory information.

2. 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) oi section 211 of the Companies Act, 1956 ('the Act'). 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.

3. Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical 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 auditor's 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 auditor considers 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 policies 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 provide a basis for our audit opinion.

4. Opinion

In our opinion, and to the best of our information and according to the explanations given to us, 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 31,2013;

(b) in the case of the Statement of Profit & Loss, of the loss for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

5. Report on Other Legal and Regulatory Requirements

5.1 As required by the Companies (Auditors' Report) Order, 2003 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.

5.2 As required by section 227(3) of the Act, we reportthat:

(i) 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;

(ii) 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 and proper returns adequate for the purposes of our audit have been received from the representative office;

(iii) The Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow Statement comply with the Accounting Standards referred to in Sub-Section (3C) of section 211 of the Act;

(v) On the basis of written representations received from the Directors as on March 31, 2013, and taken on record by the Board of-Directors, none of the Directors is disqualified as on March 31, 2013, from being appointed as a Director in terms of clause (g) of Sub-Section (1) of Section 274 of the Act;

(vi) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under 441A of the Act nor has it issued any rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

(vii) We have relied upon the management's representation relating to the disclosures in the financial statements regarding (a) segment reporting (Note 27); (b) related party disclosures (Note 28); (c) dues to Micro, Small & Medium Enterprises (Note 33) and (d) reconciliation and confirmation of balance of trade payables and loans and advances (Note 37).

ANNEXURETOTHE AUDITORS'REPORT

Referred to in paragraph 5 of our report of even date

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) As explained to us, all the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

(c) As per the information and explanations given to us, the Company has not disposed off a substantial part of fixed assets duringthe period so as to affect its going concern status.

(ii) (a) As informed to us,'a part of the inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventories followed by the management, in our opinion, 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. As explained to us, the discrepancies noticed on verification between the physical stocks and the book records were not material and the same have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, the Company has neither granted nor taken any loan secured or unsecured to/from companies, firms or parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraph 4(iii) of the Companies (Auditors' Report) Order, 2003 is not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for'the purchase of inventory, fixed assets and with regard to sale of goods. During the course of our audit, we have neither observed nor have been informed of any major weaknesses in the said internal control system.

(v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered in the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lacs in respect of any party during the period under audit, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) No deposits within the meaning of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under have been accepted by the Company.

(vii) The Company has an internal audit system commensurate with the size and nature of the Company.

(viii) As informed to us, the Company has made and maintained cost records as prescribed by the Central Government under Section 209(1 )(d) of the Act. We have not made a detailed examination of such records. However, we have broadly reviewed the records maintained and are of the opinion, that prima facie, the prescribed accounts and records have been maintained. The Cost Auditor has yet to complete the audit as prescribed & submit his report.

(ix) (a) According to the records of the Company examined by us, in our opinion, the Company is regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it.

According to the information and explanations given to us, no undisputed amounts payable in respect of statutory dues as aforesaid were outstanding, as at 31 st March 2013 for a period of more than six months from the date they became payable.

(x) In our opinion, the accumulated losses of the Company are not more than fifty percent of its net worth. The Company has incurred cash loss during the financial year covered by our audit and also in the immediately preceding financial year.

(xi) As per our audit procedures and according to the information and explanations given to us, the Company has defaulted in repayment of dues to financial institutions and banks during the year and the defaults existing at the Balance Sheet date are as below:

Nature of Dues Period of default Amount (Rs in Lacs)

Senior Debt March 2013 Installment 13,353.42

Sub-Debt March 2013 Installment 1,919.67

External Commercial Borrowings March 2013 Installment 2,119.24

Interest on Term Loans (*) JanuarytoMarch2013 15,159.04

(*) Rs 5,008.09 lacs since repaid.

(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi/mutual benefit fund/society.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader 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 orfinancial institutions during the period under audit.

(xvi) According to the information and explanations given to us, in our opinion, the term loans raised were, prima facie, either utilized for the purposes for which they were obtained and repayment of such loans or pending utilization, been temporarily invested in Mutual Funds and Term Deposits with Banks. However, repayment of installments of term loan aggregating to Rs 15,273.09 lacs as per the terms and conditions of the Securitization Loan availed by the Company, is yet to be made.

(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 short term funds amounting to Rs 9,561.72 lacs consisting of short-term borrowings and increase in current liabilities have been used for long-term investment - project implementation.

(xviii) The Company has made preferential allotment of shares for Rs 15,200.00 lacs during the year to a company covered in the Register maintained under Section 301 of the Act. In our opinion and according to the information and explanations given to us, the price at which such shares have been issued are prima facie not prejudicial to the interest of the Company.

(xix) TheCompanyhasnotissuedanydebenturesduringtheperiod underaudit.

(xx) The Company has not raised any money by public issue during the period underaudit.

(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 year.

B Chhawchharia & Co.

Firm Registration No.: 305123E

Chartered Accountants

Vikram Dhanania

Place : Kolkata Partner

Date : May 6, 2013 Membership No. 060568

Source : Dion Global Solutions Limited
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