1. We have audited the attached Balance Sheet of Sambandam Spinning
Mills Limited as at March 31,2011 and the Profit and loss Account and
the Cash flow statement (financial statements) for the year ended on
that date (the year), annexed thereto, signed by us under reference to
this report. These financial statements are the responsibility of the
Company''s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We have conducted our audit in accordance with auditing and
assurance standards generally accepted in India. The said 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 the 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.
3. 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.
4. 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
5. The financial statements dealt with by this report are in agreement
with the books of account.
6. In our opinion, the aforesaid financial statements pomply in all
material respects with the applicable Accounting Standards referred to
in section 211(3C) of the Companies Act,1956 (the Act).
7. On the basis of written representation received from the directors
as on March 31, 2011, and taken on record by the Board of Directors, we
report that none of the directors is prima facie disqualified as on
March 31, 2011 from being appointed as a director in terms of section
274(1 )(g) of the Act.
8. In our opinion and to the best of our information and according to
the explanations given to us, the aforesaid financial statements read
with the Statement on Significant Accounting Policies and Notes to the
Accounts, give the information required by the Act, in the manner so
required and also give a true and fair view, in conformity with the
accounting principles generally accepted in India:
8.1 in the case of the Balance sheet, of the state of affairs of the
Company as at March 31, 2011;
8.2 in the case of the Profit and loss account, of the profit for the
year ended on that date; and
8.3 in the case of the Cash flow statement, of the cash flows for the
year ended on that date.
9. As required by the Companies (Auditor''s Report) Order, 2003 (CARO)
issued by the Government of India in terms of section 227(4A) of the
Companies Act, 1956, and on the basis of such checks as we considered
appropriate and according to the information and explanations given to
us, we report that:
9.1 In our opinion, the Company is maintaining proper records showing
full particulars including quantitative details and situation of fixed
assets. These fixed assets are being physically verified by the
management under a phased programme of verification, which in our
opinion, is reasonable having regard to the nature and value of its
fixed assets, and no material discrepancies have been noticed on such
verification. The Company has not disposed off substantial part of its
fixed assets during the year,
9.2 Physical verification of inventory has been conducted at reasonable
intervals by the management. In our opinion, the procedures of
physical verification of inventory followed by the management are
reasonable and adequate in relation to the size of the Company and the
nature of its business. The Company is maintaining proper records of
inventory and no material discrepancies were noticed on such
verification as compared to the book records.
9.3 The Company has neither granted nor taken any loans, secured or
unsecured, during the year to/from parties and companies listed in the
register maintained under section 301 of the Act.
9.4 In our opinion, there is an adequate internal control system
commensurate with the size of the Company and the nature of its
business for the purchase of inventory and fixed assets and for the
sale of goods and services. Further, on the basis of our examination of
the books and records of the company, we have neither come across nor
have been informed of any continuing failure to correct major
weaknesses in the aforesaid internal control system.
9.5 (i) The particulars of contracts or arrangements that need to be
entered into a register under section 301 of the Act have been entered.
(ii) In our opinion, each of the transactions exceeding the value of
Rs.5,00,000 pursuant to the aforesaid contracts/arrangement have been
made at prices which are reasonable having regard to the prevailing
market prices at the relevant time.
9.6 In our opinion, the Company has complied with the provisions of
sections 58A and 58AA or any other relevant provisions of the Act and
the Companies (Acceptance of Deposit) Rules, 1975 with regard to
deposits accepted from public.
9.7 In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
9.8 On the basis of the records produced, we are of the opinion that
prima facie, the cost records and related accounts prescribed by the
Central Government under section 209( 1 )(d) of the Act have been made
and maintained by the Company. However, we are not required to carry
out and have not carried out any detailed examination of such records
9.9 (i) In our opinion, the Company is regular in depositing undisputed
statutory dues including provident fund, investor education and
protection fund, employees'' state insurance, income tax, sales tax,
wealth tax, service tax, customs duly, excise duty, cess and other
material statutory dues, as applicable, with the appropriate
(ii) There are no dues of Income tax/wealth tax, customs duty which
have not been deposited on account of any dispute. Details of dues
towards excise duty, service tax and sales tax that have not been
deposited on account of any dispute, for which stay has been obtained,
are (Nature of dues, dues, forum where dispute is pending) - Excise
duty, Rs.84,65,342, Customs, Excise and Service tax Appellate Tribunal;
Service tax, Rs.8,05,696, Customs, Excise and Service tax Appellate
Tribunal; Sales tax, Rs.6,52,044, Deputy Commissioner of Commercial
9.10 The Company does not have any accumulated losses as at March 31,
2011 and has not incurred any cash losses in the financial year ended
on that date or in the immediately preceding financial year.
9.11 The Company has not defaulted in repayment of dues to any
financial institution, bank or debenture holders during the year.
9.12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities
during the year.
9.13 The provisions of any special statute applicable to a chit fund,
nidhi, mutual benefit fund/societies are not applicable to the Company.
9.14 The Company is not dealing or trading in shares, securities,
debentures and other investments. Accordingly the provisions of clause
4(xiv) of the CARO are not applicable to the company.
9.15 The Company has not given any guarantees for loans taken by others
from banks or financial institutions.
9.16 In our opinion, the term loans availed by the Company during the
year, were, prima facie, applied for the purpose for which they were
9.17 Based on an overall examination of the financial statements of the
Company, funds raised on short-term basis have, prima facie, not been
used for long term investment.
9.18 The Company has not made any preferential allotment of shares
during the year to any party.
9.19 The Company has not issued any debentures during the year.
9.20 The Company has not raised money by public issues during the year.
9.21 Considering the size and nature of the Company''s operations, no
fraud of material significance on or by the Company has been noticed or
reported during the year.
For M.S. Krishnaswami & Rajan
May 23, 2011