The auditors, G K Kedia & Co, in their audit statement said: “Because of the significance of the matters described in the basis for disclaimer of opinion, we have not been able to obtain sufficient appropriate evidence to provide a basis for an audit opinion”.
By Sanjeev Sharma
At a time when the role of auditors is under intense scrutiny, the auditors of Fedders Electric and Engineering (formerly Fedders Lloyd Corporation) have cited disclaimer of opinion and as a result not expressed an opinion on the financial results of the company for the financial year ended March 31, 2018.
The auditors, G K Kedia & Co, in their audit statement for the financial results finalised on June 20 have said: “Because of the significance of the matters described in the basis for disclaimer of opinion, we have not been able to obtain sufficient appropriate evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the aforesaid consolidated financial statements.”
The report said the present management is not able to estimate the impact. Citing the reasons for the same, it said, “the present management has taken over the affairs of the company after the said audit period, hence it is unable to provide any estimate on impact of audit qualification”.
The financial results were approved at a meeting of the board of directors of Fedders Electric held on June 20 in Noida. The results statement was signed by Sanjiv Kavaljit Singh, wholetime director & CEO, Vansh Varshan Joshi, chairman, audit committee, and Neeraj Gupta, chief financial officer, on behalf of the board of directors of the Fedders Electric and Kanishka Aggarwal, partner on behalf of GK Kedia & Co.
Citing the basis for disclaimer of opinion, the auditors have said that the company is operating through various locations in India and has reported a total turnover of Rs 1,239.06 crore during the financial year 2017-18.
“One of the locations in Jaipur, Rajasthan has reported sales amounting to Rs 545.24 crore for which company does not have sufficient and satisfactory supporting evidence. In the above location, company has also reported purchases amounting to Rs 544.54 crore which is also not supported by sufficient documentary evidences. Further, the above mentioned sales and purchases have been transacted between identical parties,” the auditor statement said.
It added that it is unable to comment on appropriate recognition of sales and purchases. It also said that it is unable to comment on possible adjustment in cost of material consumed.
The auditor noted that it was appointed after March 31, 2018 and could not observe the counting of physical inventories at the beginning and end of the year. “The company has also not maintained proper records including reconciliation of goods purchased/sold in terms of quantity and value. We were unable to satisfy ourselves by alternative means concerning the inventory quantities held at March 31, 2018 and March 31, 2017, which are valued at Rs 82.33 crore and Rs 379.81 crore respectively,” the auditor said.
It also pointed out that the “financial statement have been prepared on a going concern basis notwithstanding the fact that the company’s net worth has been eroded and consortium lender banks have already recalled their debts from the company. This casts significant impact on the company’s ability to continue as a going concern. The appropriateness of the said basis is inter-alia, dependent on the company’s ability to reschedule its financing arrangements with banks”.
The auditor report also noted that the company had filed delayed results and violated Sebi (Securities and Exchange Board of India) listing requirements. It also noted that forensic audit of the company has been ordered by State Bank of India through a letter dated September 15, 2018. SBI has also filed a case in NCLT against the company under Section 7 and 9 of the IBC.
The company management could not be contacted for their comments by FE.