1. We have audited the attached Balance Sheet of Sambandam Spinning
Mills Limited (the Company) as at March 31, 2012, the Statement of
Profit and loss and the Cash Flow Statement for the year ended on that
date, both annexed thereto, (collectively referred to as the financial
statements), - 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 ail 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 1he Company so far as appears from our examination of
5. The financial statements dealt will by this report are in agreement
with the books of account.
6. In our opinion,, the aforesaid financial statements comply 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 31,2012, and taken on record by the Board of Directors, we
report that none of the directors is prima facie disqualified as on
March 31,2012 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
1he 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, 2012;
8.2 In the ease of the Statement of Profit and loss, of the loss for
the year Wide on that date; and &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 considered
appropriate and according to the information-and explanations
furnished, it is reported that:
9.1 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. However 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.
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 its inventories and no material discrepancies were
noticed on such physical verification.
9.3 The company has neither granted nor taken any loans, secured or
unsecured, during the year, to/from companies, firms or other parties
covered In the register maintained under section 301 of the Act.
9.4 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 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
9.7 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 as per the Companies (Cost Accounting
Records) Rules,2011 prescribed by the Central Government under section
209(1 )(d) of the Companies Act, 1956 have been maintained by the
company. We have, however, not made a detailed examination of the cost
records with a view to determine whether they are accurate or complete.
9.9 (i) 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 duty, excise duty, cess and other material statutory dues,
as applicable, With the appropriate authorities during the year.
(ii) No undisputed amounts payable in respect of income tax, wealth
tax, sales tax, customs duty, excise duty and cess were in arrears, as
at the balance sheet date for a period of more than six months from the
date they became payable.
(iii) 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
Tribune; Sales tax, Rs.6,52,044, Deputy Commissioner of Commercial
9.10 The company does not haves any accumulated losses as at March
31,2011 and has inquired cash loss of Rs. 10,43,45,060 during the
financial year ended March 31, 2012 and has not incurred any cash
losses 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 The term loans availed by the company during the year, were, prima
facie, applied for the purpose for which they were obtained.
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 any money by public issues during the
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
Salem M.K. Rajan-Partner
May 30, 2012 Membership No.4059