1. We have audited the attached Balance Sheet of Madura Coats Limited,
as at December 31, 2002, and the Profit and Loss Account of the Company
for the year ended on that date annexed thereto. These financial
statements are the responsibility of the management of the company. Our
responsibility is to express an opinion on these financial statements
based on our audit.
2. We conducted our audit in accordance with generally accepted
auditing standards in India. These standards require that we plan and
perform the audit to obtain reasonable assurance whether the financial
statements are prepared, in all material respects, in accordance with
an identified financial reporting framework and are free of material
misstatements. 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 statements. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Manufacturing and Other Companies (Auditors
Report) Order, 1988 issued by the Company Law Board in terms of Section
227 (4A) 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, to the extent applicable to this Company.
4. Further, to our comments in the Annexure referred to above, we
(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
(ii) In our opinion proper books of accounts as required by law have
been kept by the Company, so far as appears from our examination of
(iii) The Balance Sheet and Profit and Loss Account dealt with by this
report are prepared in accordance with the Accounting Standards
referred to in Section 211(3C) of the Companies Act, 1956.
(iv) The Balance Sheet and Profit and Loss Account dealt with by this
report are in agreement with the Books of Accounts.
(v) On the basis of written representations received from the directors
of the Company, as at December 31, 2002 and taken on record by the
Board of Directors, we report that none of the directors is dis-
qualified as on December 31, 2002 from being appointed as a director in
terms of clause (g) of sub-section (1) of Section 274 of the Companies
(vi) In our opinion and to the best of our information and according to
the explanations given to us, the said Balance Sheet and the Profit and
Loss Account together with the schedules annexed thereto read with the
notes and significant accounting policies there on 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:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at December 31, 2002; and
(b) in the case of the Profit and Loss Account of the Loss for the year
ended on that date.
ANNEXURE TO THE REPORT OF THE AUDITORS9
(Referred to in paragraph 3 of our Report of even date)
1. The Company has maintained proper records showing full particulars
including quantitative details and situation of Fixed Assets. All the
assets have not been physically verified by the management during the
year, but there is a regular program of verification which in our
opinion is reasonable having regard to the size of the Company and the
nature of its business. No material discrepancies were noticed on
2. The Fixed Assets of the Company have not been revalued during the
3. The stock of raw materials, finished goods, stores and spare parts
have been physically verified during the year by the management. In our
opinion, the frequency of verification is reasonable.
4. In our opinion, and according to the information and explanations
given to us, the procedures 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.
5. The discrepancies noticed on physical verification of stocks as
compared to the book records, were not material and have been properly
dealt with in the books of accounts.
6. In our opinion, and according to the information and explanations
given to us, the valuation of stocks is fair and proper in accordance
with the normally accepted accounting principles and is on the same
basis as in the previous year.
7. The Company has taken inter corporate deposits from its subsidiary
companies, the terms of which are not prima facie prejudicial to the
interests of the Company. The Company has not taken any loans from
Companies, Firms or other parties listed in the Register maintained
under section 301 of the Companies Act 1956.
8. The Company has not granted any loans to Companies, Firms or other
parties listed in the Register maintained under section 301 of the
Companies Act 1956 and companies under the same management within the
meaning of Section 370(1B) of the Companies Act, 1956.
9. Loans and advances in the nature of loans have been given to
employees and others who are repaying the principal amount as
stipulated and are also regular in payment of interest where
10. In our opinion and according to the information and explanations
given to us, there are 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, other assets and for the sale of goods.
11. In our opinion, and according to the information and explanations
given to us, the transaction of purchase of goods and materials and
services made in pursuance of contracts or arrangements entered in the
register maintained under Section 301 of the Companies Act, 1956 and
aggregating during the year to Rs. 50,000/- or more in respect of each
party have generally been made at prices which are reasonable having
regard to the prevailing market prices as available with the Company or
prices at which transactions for similar goods or services have been
made with other parties.
12. As explained to us, the Company has a regular procedure for
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.
13. In our opinion and according to the information and explanations
given to us, the Company has complied with the provisions of Section
58A of the Companies Act, 1956 and the Companies (Acceptance of
Deposits) Rules, 1975, with regard to the deposits accepted from the
public in the earlier years.
14. In our opinion and according to the information and explanations
given to us, reasonable records have been maintained by the Company for
the sale and disposal of by-products and scrap.
15. In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
16. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the order made by the Central Government of India
for the maintenance of cost records under Section 209(1)(d) of the
Companies Act, 1956 and are of the opinion that prima facie, the
prescribed accounts and records have been made and maintained.
17. According to the records of the Company, the Company has been
regular in depositing Provident Fund and Employees State Insurance dues
with the appropriate authorities during the year.
18. According to the information and explanations given to us, no
undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales
Tax, Customs Duty and Excise Duty were outstanding as at December 31,
2002, for a period of more than 6 months from the date they became
19. According to the information and explanations given to us, no
personal expenses of employees or directors have been charged to
revenue account other than those payable under contractual obligations
or in accordance with generally accepted business practice.
20. In our opinion, the Company is not a sick industrial company within
the meaning of clause (O) of subsection (1) of Section 3 of the Sick
Industrial Companies (Special Provisions) Act 1985.
21. In respect of service activities, the nature of the Companys
service activities as such that it does not call for recording of
receipts, issues and consumption of material and stores, and the
allocation of materials and man-hours consumed to the relative jobs. As
explained to us in respect of its service activities, the Company has a
system of internal control commensurate with the size of the Company
and nature of its business.
22. In respect of trading activities, the value of the damaged goods as
determined are not significant and adequate provision has been made for
the loss in respect thereof.
For DELOITTE HASKINS & SELLS
Bangalore M. LAKSHMINARAYANAN
February 18, 2003 Partner