1. We have audited the attached Balance Sheet of Konar Organics Limited
as on 31st March 2003 and also the profit and loss Account for the year
ended as on that date annexure 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 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 disclosure 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
3. As required by the manufacturing and other companies (Auditor's
Report) Order, 1988 issued by the Central Government of India in terms
of sub-section (4A) of section 227 of the Companies Act, 1956. We
enclose in the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the said order.
Further to our comments in the Annexure referred to above, we report
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 accounts as required by law have
been kept by the company so far as it appears from our examination of
III) The Balance Sheet and the profit and loss account dealt with by
this report are in agreement with the books of accounts.
IV) In our opinion, the Balance Sheet and profit and loss Account dealt
with by this report comply with the accounting standards referred to in
sub-section (3C) of section 211 of the Companies Act, 1956.
V) On the basis of written representations received from the directors,
as on 31st March, 2003 and taken on record by the Board of Directors,
we report that none of the directors is disqualified as on 31st March,
2003 from being appointed as a director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956.
VI) In our opinion and to the best of our information and according to
the explanations given to us and subject to note No. B-11 regarding non
disclosure of particulars in respect of amounts due to Small Scale
Industrial undertakings as per the requirements of the schedule VI of
the companies act, 1956 and subject to note no B13D regarding Gratuity
the said accounts give the information required by the Companies Act,
1956 in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India.
1. In the case of Balance Sheet, of the state of affairs of the company
as at 31st March, 2003 and
2. In the case of profit and loss account, of the loss for the year
ended on that date.
For VENKAT MALLI AND ASSOCIATES
Y. Mallikarjuna Reddy
ANNEXURE TO THE AUDITORS REPORT TO THE MEMBERS OF KONAR ORGANICS LTD.
Annexure referred to in paragraph 3 of the report of the auditors to
the members of Konar Organics Limited for the year ended 31st, March
i) The Company is in the process of updating the records showing full
particulars including quantitative details and situation of all the
fixed assets. As explained and informed to us, the Fixed Assets of the
Company were physically verified by the management during the financial
year and no material discrepancies were noticed on physical
ii) None of the Fixed Assets have been revalued during the Financial
iii) We were informed that the stock of finished goods, stores
Raw-materials and goods in process have been physically verified by the
management during the financial year.
In our opinion, the frequency of verification is reasonable.
iv) The procedures of physical verification of Stock followed by the
management are reasonable and adequate in relation to the size of the
company and the nature of its business.
v) According to the information and explanation given to us the
discrepancies in stocks have been properly dealt with in the books of
vi) In our opinion and on the basis of our examination, the valuation
of stock is fair and proper in accordance with normally accepted
vii) 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.
viii) The rate of interest and other terms and conditions of the loans
given by the company to the parties listed in the register maintained
under section 301 of the companies Act 1956.
ix) As per information and explanations given to us, the company has
not granted any loans or advances in the nature of loans to any party
except salary advance.
x) 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 with regard to purchase of stores, Raw materials including
components, plant and machinery, equipment and other assets and with
regard to the sale of goods.
xi) According to the information and explanations given to us, there
are no transactions of Purchase/Sale of goods and materials made in
pursuance of contracts or agreements entered in the register maintained
under Section 301 of the Companies Act 1956.
xii) As explained to us, the company has regular procedure for the
determination of unserviceable or damaged stores, raw materials and
finished goods. Adequate provision has been made in the accounts for
the loss arising on the items so determined.
xiii) As the company has not accepted the deposits from the public the
question of complying with provision of Section 58A of the Companies
Act, 1956 and the companies (Acceptance of Deposit) 1975 does not
xiv) In our opinion and according to the information given to us
reasonable records have been maintained by the company for the sale and
disposal of scrap. As per the information given to us Company has no
xv) In our opinion and as explained to us the company is having
adequate internal audit system commensurate with its size and nature of
xvi) We have broadly reviewed without making a detailed examination,
the books of accounts and records maintained by the Company pursuant to
the rules made by the Central Government for maintenance of cost
records under section 209(1)(d) of Companies Act, 1956 and are of the
opinion that prima facie the prescribed accounts and records have been
xvii) There were some delay in payments of P.F. and E.S.I, to Central
xviii) According to the information and explanations given to us there
are no undisputed amounts payable in respect of Income Tax, Wealth Tax.
Sales Tax and Excise Duty as at the last day of the financial year
which are outstanding for a period of more than six months from the
date they became payable except Income tax of Rs. 3.49.846/-, Excise
duty Rs. 5,80,240/- and sales tax Rs. 1,68,260/-.
xix) According to the information and explanations given to us, no
personal expenses of employees or Directors have been charged to
revenue accounts, other than those payable under contracted obligations
or in accordance with generally accepted business practice.
xx) The company is a sick industrial company within the meaning of
clause of (O) of Sub-section (1) of Section (3) of the Sick Industrial
Companies (Special Provision) Act, 1985. As per information given to us
so far the reference was made to the board for industrial and financial
For VENKAT MALLI AND ASSOCIATES
Y. MALLIKARJUNA REDDY
Date : 25-11-2003