We have audited the annexed Balance Sheet of Suncity industries Limited
 having its registered office at S-272/A, MIA Phase II, Basni, Jodhpur
 as at 31st March, 2002 and the Profit & Loss account of the company
 annexed thereto. These financial statements are the responsibility of
 the companys management. Our responsibility is to express and opinion
 on these financial statement based on our audit.
 
 We conducted our audit in accordance with 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 from 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. We believe that our audit provides a reasonable basis for
 our opinion.
 
 Further to our comments in the annexure referred to above, we report
 that:
 
 1. We have obtained all the information and explanation which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit.
 
 2. 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
 of accounts.
 
 3. The Balance Sheet and Profit & Loss Account dealt with by this
 report are in agreement with the books of accounts.
 
 4. In our opinion and to the best of our information and according to
 the explanations given to us, the Balance Sheet and the Profit & Loss
 Accounts dealt with by this report are prepared in compliance with the
 applicable accounting standards refer to in terms of sub-section (3)(c)
 of section 211 of the Companies Act, 1956.
 
 Subject to Notes on accounts (schedule 16 annexed herewith) and further
 subject to comments given below:
 
 1. The company has not charged interest on advances given to various
 parties/companies.
 
 2. The back side idle land ad measuring 4.19 acre approx. 16760 Sq.
 meter approx. and building thereon of the company was taken over by
 RlICO Ltd., under section 29 of SFC Act to realise its loan by sale of
 said land. RIICO Ltd., has informed vide its, letter no. F&R/R-703 Dt.
 23.07.1999 that the entire land was neither sold, nor sale proceeds
 were adjusted. Therefore, the company did not pass any entry for sale
 of said land and building in its books of accounts.
 
 3. During the year the company has not undertaken any production
 activities.
 
 5. As required by the Manufacturing and Other Companies (Auditors
 Report) Order, 1988 issued by the Company Law Board in terms of Section
 227 (4A) of the Companies Act, 1956 and on the basis of such checks on
 books and records of the Company as we considered appropriate and
 according to the information and explanations given to us during the
 course of audit, we further state on the matters specified in paragraph
 4 and 5 of the said order that:
 
 (i) The Company has not maintained records of fixed assets hence we are
 unable to comments upon the material discrepancies, if any, between the
 book records and the physical verification carried out by the
 management.
 
 (ii) None of the fixed assets have been revalued during the year.
 
 (iii) As per information and explanation given to us, the Stocks of
 Finished Goods, Stores & Spare Parts and Raw Material lying with the
 company have been physically verified by the management as at the year
 end and the discrepancies are reported to be nil. The stock is laying
 untouched during the year. The opening stock has been taken as closing
 stock.
 
 (iv) On the basis of information and explanation given to us, the
 procedure of physical verification of stocks followed by the management
 is said to be reasonable and adequate considering the size of the
 company and the nature of its business, however, no such record were
 produced before us.
 
 (v) As explained to us, the discrepancies noticed on physical
 verification of the stocks as compared to the book records were not
 material and the same have been properly dealt with in the accounts,
 however, no such records were produced before us.
 
 (vi) In our opinion and on the basis of our examination of the
 valuation of stocks, such valuation is fair and proper and in
 accordance with normally accepted accounting principles and is on the
 same basis as in the preceding year.
 
 (vii) The Company has taken temporary unsecured loans from parties
 listed in the register maintained under section 301 of the Companies
 Act, 1956. The rate of interest and other terms and conditions are
 however prima facie not prejudicial to the, interest of the company.
 According to information to us there is no Company under the same
 management within the meaning of section 370(1B) of the Companies Act,
 1956.
 
 (viii) As per information and explanation given to us, the rate of
 interest and other terms and conditions of loans to companies, firms
 and parties listed in register maintained pursuant to section 301 of
 the Companies Act, 1956 and/or to the companies under the same
 management as defined under sub section (1B) of section 370 of the
 Companies Act, 1956, are not prima-facie prejudicial to the interest of
 the company.
 
 (ix) The loans or Advances in the nature of loans given by the Company,
 we are informed that there were no stipulation for repayment of
 principal amount and interest thereon. The loans given are not secured
 by any security or guarantee.
 
 (x) In our opinion and according to information and explanations given
 to us procedures adopted by the Working Directors constitute adequate
 for the internal control purpose looking to the size company and the
 nature of its business for the purchase of raw material including
 components, plant & machinery, equipments and other assets and for the
 sale of goods.
 
 (xi) In our opinion and according to the information and explanation
 given to us, the transaction of purchase of goods and material and sale
 of goods, materials and services made in pursuance of contracts or
 arrangements failing under section 301 of the Companies Act, 1956 and
 aggregating during the year to Rs. 50,000 or more in respect of each
 party have been made at prices which are seems to be reasonable looking
 to the volatile rates variation in the prices of goods used in the
 industry.
 
 (xii) According to information and explanations given to us, the
 company in our opinion is having a regular procedure for the
 determination of unserviceable or damaged stores, raw material and
 finished goods. Loss arising on the damaged or unserviceable stores
 have adequately been provided for.
 
 (xiii) According to the information and explanations given to us, the
 company has not accepted any deposits from public within the meaning of
 provisions of Sec. 58A of the Companies Act, 1956 and the rules framed
 there under.
 
 (xiv) In our opinion no records have been maintained by the company for
 the sale and disposal other than of releasable by-products.
 
 (xv) The company is not having any formal internal audit system as
 such, but its internal control procedures involve reasonable internal
 check on its activities and on its financial records.
 
 (xvi) According to the information and explanation given to us, the
 Central Government has not prescribed maintenance of cost records u/s
 209(1)(d) of the Companies Act, 1956 for any of the products of the
 company.
 
 (xvii) According to the record of the Company, old outstanding dues
 towards Provident Fund and Employees State Insurance dues have still
 not been deposited with appropriate authorities.
 
 (xviii) As explained to us and as per records checked by us there were
 various undisputed amounts payable in respect of Income Tax, Sales Tax,
 Wealth Tax, Customs Duty and Excise Duty which have remained
 outstanding as at 31st March, 2002 for a period of more than 6 months
 viz Income Tax Rs. 10,83,296.00 and TDS Rs. 91,761.65 under Income Tax
 Act 1961 and EPF payable under Provident Fund Act amounting to Rs.
 1,08,990.76 & ESIC payable under ESI Act, 16,913.33, RST Rs. 8,920.20
 under Rajasthan Sales Tax Act.
 
 (xix) On the basis of test cheek carried out during the course of audit
 and according to the information and explanations given to us no
 personal expenses (other than those payable in accordance with terms of
 service conditions of employees or in accordance with generally
 accepted business practice) appear to have been debited to Profit &
 Loss Account.
 
 (xx) The company is a Sick Industrial Company within the meaning of
 clause (o) of sub-section (1) of Sec. 3 of the Sick Industrial
 Companies (Special Provisions) Act, 1985.
 
 (xxi) In respect of the Companys trading activity there is a procedure
 for the determination of damaged goods. We are informed that the
 company does not have any damaged goods lying with it at the end of the
 year. Therefore no provision for any loss is required to be made in the
 accounts.
 
                                                For: K. D. MOONDRA & CO.
                                                   Chartered Accountants
 Date: 31.08.2002
 Place: Jodhpur                                                     Sd/-
                                                           K. D. MOONDRA
                                                              Proprietor
                                                         M/No. 400/17161