1 I have audited the attached Balance Sheet of Katare Spinning Mills
Limited, Solapur as at 31st March 2012, the statement of Profit
and Loss and Cash Flow statement of tbo Company for the year ended
on that date annexed thereto. These financial statements are the
responsibility of the company''s management. My responsibility
is to express an opinion on these financial statements based on
2. I conducted my audit in accordance with the auditing standards
generally accepted in India. Those Standards require that I 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 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 statement
presentation I believe that my audit provides a reasonable basis ijr my
3. As required by the Companies (Auditor''s Report) Order, 2003 issued
by the Central Government of India in terms of sub section (4A) of
section 227 of the Companies Act, 1956,1 enclose in the Annexure a
statement on the n, i iters specified in paragraphs 4 and 5 of the said
4 Further to my comments in the Annexure referred to above, 1 report
(i) I have obtained all the information and explanations, which to the
best of my knowledge and belief were necessary for the purposes of my
(ii) In my opinion proper books of accounts as required by law have
been kept by the company so far as appears from my examination of those
(iii) The balance sheet, statement of profit and loss and cash flow
statement dealt with by this report are in agreement with the
books of accounts; (iv) On the basis cf written representations
received from the directors, as on 31st March 2012 and taken on
record by the Board of Directors, I report that none of the
directors is disqualified as on 31 st March 2012 from being
appointed as a Director in terms of clause (g) of sub-section
(1) of section 2 74 of the Companies Act, 1956; (v) In my
opinion, the balance sheet and statement of profit and loss
and 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, 19 56 to the extent applicable,
a) The Nil balance of loan from ICICI Bank which was assigned by it to
Kotak Mahindra Bank Ltd., as referred to, in Note No. 27(c) & (d) in
notes on Accounts, at the year end is subject to confirmation in
respect of final dues including interest and therefore, the impact of
reconciliation and adjustment in respect of the loan, the profit for
the year and net assets position as at year end and also it''s impact on
concept of ongoing concern due to losses, is presently not
b) Receivables to the extent of Rs. 106,71,00 (Trade Receivables Rs.
19,58,790 & other current assets Rs.87,12,21 7) are bad for which no
provision was made in the accounts in the year ended 31st March, 2012
as referred to, in Note No.l 7 & 20 in the notes on accounts and as
such has resulted in overstatement of year end net Current Assets and
Reserves & Surplus by Rs. 1,06,71,007 each.
c) All the balances of Receivables and Payables are subject to
confirmation and reconciliation and adjustments, if any,
required on reconciliation. The consequential effect of such
possible adjustments and the extent thereof on the profit of the year,
the year end Net Current Assets and Reserve & Surplus cannot be
ascertained at this stage.
d) No provision for gratuity payment on actuarial basis as on 31st
March, 2012 was made hence it''s effect on profit could not be
ascertained as referred to in note no. 27(b) in the notes on accounts.
(vi) Subject to my comments under paras
(v) (a) to (d) above, in my opinion and to the best of my information
and according to the explanations given to me, the said accounts
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 31st March, 2012;
(b) in the case of the statement of profit and loss account, of the
Loss for the year ended on that date.
(c) in the case of the cash flow statement of the cash flows for the
year ended on that date.
ANNEXURE TO THE AUDITOR''S REPORT
(Referred to in paragraph 3 of my report of even date)
Katare Spinning Mills limited,
(i) (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of
(b) During the year, the company has not carried out physical
verification of assets. In my opinion, the frequency of verification is
not reasonable, having regard to the size and nature of its business.
(c) The company has not disposed off any substantial part of the fixed
assets of the fixed assets during the year and the going concern status
of the company is not affected.
(ii) (a) As informed the physical verification of inventories was
conducted by the management at reasonable intervals. In my opinion,
the frequency of verification is reasonable.
(b) In my opinion, the procedure of physical verification of
inventories followed by the management is reasonable and adequate in
relation to the size of the company and the nature of its business.
(c) I find from the records that no material discrepancies were noticed
on physical verification of stocks referred above as compared to the
book records and the same have been properly dealt with in the books of
a) The company h 4s not granted any loans, secured or unsecured to
companies, firms or other parties
covered in the register maintained under section 301 of the Companies
Act, 1956. Accordingly sub- clause (b) (c) and (d) are not applicable.
b) The company has not taken any loans, secured or unsecured, from
companies, firms or other parties covered in the register maintained
under section 301 of the Companies Act, 1956. Accordingly sub- clause
(f) and (g) are not applicable.
(iv) In my opinion, and according to the information and explanations
given to me, there is an adequate internal control procedure
commensurate with the size of the company and the nature of its
business for the purchase of inventory and assets for the sale
of goods. During the course of my audit, I have not observed
any continuing failure to correct major weakness in internal
(v) (a) According to the information and explanations given to me,
I am of the opinion that the transactions that need to be entered
into the register maintained under section 301 of the Companies
Act, 1956 have been so entered.
(b) In respect of the transactions made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 and exceeding Rs. 50,000/- in respect of each
party during the year I am unable to express my opinion whether the
said transactions have been m; le at prices which are reasonable or
not, having regard to the prevailing market price at the relevant time
since there are no similar transactions entered into with the other
parties and no such information about the relevant market price is
available with the Company.
(vi) The Company has not accepted any deposits from the public, hence
provisions of sections 58A and 58AA of the Companies Act, 1956 and the
Companies (Acceptance of Deposits) Rules, 1975 are notapplicable to
(vii) The company has a procedure for an internal audit system, which
is commensurate with the size and the nature of its business.
(vlii) I have broadly reviewed the records maintained by the Company
pursuant to the rules made by the Central Government for the
maintenance of cost records under section 209 (1 )(d) of the
Companies Act, 1956 and I am of the opinion that prima facie, the
prescribed records have been made and maintained. I, however, have not
made a detailed examination of the records with a view to detenriining
whether they are accurate or complete.
(ix) The company is regular in depositing statutory dues including
Provident Fund, Income Tax, Wealth Tax, Customs Duty and Value
(x) a) As on 31 st March, 2012 there were no accumulated losses.
b) During the financial year covered by my audit the company has
incurred cash loss but has not incurred cash loss in the immediately
preceding f financial year.
(xi) The company has defaulted in repayment of dues of loan from ICICI
Bank Ltd. which was subsequently assigned by ICICI to Kotak
Mahindra Bank Ltd. the details of which are covered in note no. 2 7(c),
(d) & (e) of notes on accounts.
(xii) The company has not granted any loans and advances on the basis
of security by way of pledge of shares, debentures and other
(xiii) In my opinion, the company is not a chit fund or a nidhi/murual
fund society. Therefore the provisions of the clause no. 4(xiii) of the
Companies (Auditors Report) Order, 2003 are not applicable to the
(xiv) In my opinion, the Company is not dealing or trading in shares,
securities, debentures or other investments and, hence, the
requirements of para 4(xiv) are not applicable to the company.
(xv) The company has not given any guarantee for the loans taken by
others from banks or financial institutions.
(xvi) The company has not taken any term loan during the year. (xvii)
On the basis of my overall examination of Balance Sheet, I report that
the funds raised on short-term basis have not been used for long-term
investments. The company has not raised long-term funds during the year
and, hence, the question of use of such funds for short-term
investments does not arise.
(xviii) The company has not made any preferential allotment of shares
to parties and companies covered in the register maintained under
section 301 of the Companies Act, 1956 during the year.
(xix) The company has not issued debentures during the year.
(xx) The company has not raised any monies by puolic issue during the
(xxi) On the basis of my examination and according to the information
and explanations given to me, no fraud, on or by the company, has been
noticed or reported during the course of my audit.
31 st August, 2012 Chartered Accountant
M. No. 32561