We have audited the attached Balance Sheet of CAUVERY SOFTWARE
 ENGINEERING SYSTEMS LIMITED as at 31st August, 2006 and also the
 Profit and Loss Account for the year ended on that date annexed thereto
 and the Cash Flow Statement for the year ended on that date. These
 financial statements are the responsibility of the Companys
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 We conducted our audit in accordance with the 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 disclosures in financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 We report as follows:
 
 1.  As required by the Companies (Auditors Report) Order, 2003 issued
 by the Central Government of India 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.
 
 2.  Further to our comments in the Annexure referred to in paragraph 1
 above:
 
 a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit.
 
 b) In our opinion, proper books of account as required by law have been
 kept by the Company so far as appears from our examination of the
 books.
 
 c) The Balance Sheet and Profit and Loss Account dealt with by this
 report are in agreement with the books of account.
 
 d) In our opinion, the Balance Sheet, Profit and Loss Account & Cash
 Flow Statement dealt with by this report comply with the Accounting
 Standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956.
 
 e) On the basis of written representation received from the Directors
 as on 31st August, 2006, and taken on record by the Board of Directors,
 we report that none of the directors are disqualified as on 31s1
 August, 2006 from being appointed as Directors in terms of Clause (g)
 of sub-section (1) of section 274 of the Companies Act, 1956.
 
 f) In our opinion and to the beast of our information and according to
 the explanations given to us, the said accounts read together with the
 Companys Accounting policies and notes thereto, 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;
 
 (i) In the case of the Balance Sheet, of the State of Affairs of the
 Company
 
 as on 31 August, 2006 (ii) In the case of the Profit and Loss Account,
 of the profit of the Company
 
 for the year ended on that date.
 
 Annexure to Auditors Report (Referred to in paragraph 1 of our report
 of even date)
 
 1 (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets on the basis of information available.
 
 (b) According to the information and explanation given to us, the fixed
 assets have been physically verified by the management during the year
 in a phased periodical manner, which in our opinion is reasonable,
 having regard to the size of the company and nature of the assets. No
 material discrepancies were noticed on such verification.
 
 (c) The Company has not disposed off any substantial/ major part of fixed
 assets.
 
 2 None of the Fixed Assets have revalued during the year.
 
 3 As explained to us, the stock of shares, spare parts, raw materials
 and finished goods have been physically verified by the management at
 regular intervals during the year. In pur opinion the frequency of such
 verification is reasonable having regard to the size of the company and
 nature of its business.
 
 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 As explained to us there were no material discrepancies noticed on
 physical of the stocks of raw materials, stores and spare parts and
 finished goods, having regard to the size of the operations of the
 Company.
 
 6 The valuation of stocks is fair and proper and is in accordance with
 the normally accepted accounting principles and is on the same basis as
 in the preceding year.
 
 7 The Company has neither granted nor taken any loans, secured or
 unsecured to/from companies, firms or other parties as listed in the
 register maintained under Section 301 of the Companies Act, 1956.
 
 8 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 fixed assets and for the sale of
 goods.
 
 9 In our opinion and according to the information and explanations
 given to us, there are no transactions during the year exceeding in
 value Rs. 5 lakhs in respect of any party ,which need to be entered in
 the register maintained under section 301 of the companies act,1956.
 
 10 I n our opinion and according to the information and explanations
 given to us, the company has not accepted deposits from the public and
 therefore, the provision of Section 58A of the Companies Act, 1956 and
 rules there under are not applicable to the company.
 
 11 In our opinion the company has an internal audit system commensurate
 with it size and the nature of its business.
 
 12 Maintenance of cost records under Section 209(1) (d) of the
 Companies Act, 1956 are applicable to the company.
 
 13 Provisions relating to Provident Fund and Employees State Insurance
 are not applicable to the company.
 
 14 No loans have been taken from Banks / Financial Institutions during
 the year under audit.
 
 15 The provisions of any Special Statute applicable to a chit fund,
 nidhi or Mutual fund benefit/societies are not applicable to the
 Company.
 
 16 According to the information and explanations given to us, the
 company has not granted any loans and advance on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 17 According to the information and explanations given to us, the
 company has not given any guarantee for loans taken by others from
 Banks and Financial Institutions.
 
 18 On the basis of an overall examination of the financial statements
 of the company, there are no funds raised on a short term basis which
 have been used for long term investment and vice versa.
 
 19 The company has not made any preferential allotment of shares during
 the year to any party.
 
 20 The company has not raised any money by public Issues during the
 year.
 
 21 To the best of our knowledge and belief and according to the
 information and explanation given to us, no fraud on or by the company
 has been noticed or reported during the year.
 
 
                                           For M/s S S Trimbakkar & Co.  
                                                 Chartered Accountants,
 
                                                        S S Trimbakkar 
                                                            Proprietor
 
 Place: Mumbai 
 Dated:12/12/2006