As we rely quite a bit on the auditor to provide us information, one of the check as part of my due diligence is to dig into auditor’s integrity and their opinions on audit report.
Auditor Integrity
The current auditor is Ramanand & Associates, established in 1998. Was researching to see if they have some legal proceedings. Found this one where they are said to have helped a company (RKDL) siphon off IPO proceedings around 2010-11. They had been fined by SEBI for the same.
You can check Page 122 of the report starting from point 167.
This happened quite a while before and I am not sure if the same people involved in auditing permanent magnets. Am just pointing it for sake of information as we investors rely on auditor to a much greater extent for smallcaps.
Opinions on audit report
As per the opinions on audit report, there are two instances:
Pending case in Bombay High Court:
This doesn’t seem to be much of the issue as the amount in question is just 19 Lakhs.
Trade receivables:
As per this the majority of receivables are “unconfirmed” by the parties. There is no provisions for doubtful receivables (not able to find how they would classify something as doubtful either). Historically, the days receivable is trending around 90-100 which provides some relief.
Disc: Invested recently
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