Auditors qualify SWC accounts again

CALCUTTA, DEC 20: Liquor firm, Shaw Wallace & Co's accounts for its extended financial year ending June 30, 2000, are riddled with rem...

CALCUTTA, DEC 20: Liquor firm, Shaw Wallace & Co’s accounts for its extended financial year ending June 30, 2000, are riddled with remarks by its auditors, as in previous years. The statutory auditor, Lodha & Co, and its partner RP Singh, have avoided quantifying the impact of their remarks on the profit & loss account of the liquor major.

With production and sales showing a downward trend, the company reported a net profit of Rs 4.42 crore for the year to June 30, 2000, down sharply from the net profit of Rs 26.33 crore in the previous year.

It managed to remain in the black with the help of reserves — a transfer of Rs 22.79 crore from the special reserve and Rs 6.89 crore from general reserve.

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Lodha has made a number of qualifications, but only one — on non- provisioning of a Rs 64-crore diminution in investments — violates accounting standards.

As in previous years, the net worth continues to be a mystery for the auditors. "The impact of the aforesaid notes on the financial results for the year and the year end net worth of the Company, as mentioned herein above, cannot be ascertained and cannot be commented upon by us," the auditor notes.

The auditor opines that Shaw Wallace is not a sick company under the meaning of Clause (O) of Section 3 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

In the fiscal year to June 30, 1999, the auditor had opined that the scope and periodicity of internal audit need to strengthened. In the latest report, the auditor says that the internal audits are "generally" commensurate with the size and nature of business.

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As part of a restructuring, loans and advances of Rs 32.74 crore and diminution of Rs 12.43 crore in the value of investments in subsidiaries and other companies have not been covered. The company adjusted this by transfers from reserves.

The company has not made any provision on loans and advances adding up to Rs 127.46 crore and a Rs 63.92-crore diminution in the value of investments in its subsidiaries. The company says this is because it has taken a strategic decision to consolidate its brewery and distillery operations.

According to the notes to the accounts, the company is yet to recover loans, advances and current assets adding up to Rs 53.37 crore from subsidiaries, associates and group companies. Apart from this, it converted around Rs 53.20 crore worth of debts, loans and advances from subsidiaries into zero-interest, optionally convertible debentures.

The shortfall in quoted and unquoted investments is estimated at Rs 76.35 crore, for which the company has made a provision of Rs 12.43 crore.