ABC Bearings Ltd

To

The Members of ABC Bearings Limited

We have audited the attached Balance Sheet of ABC Bearings Limited as at 31stMarch, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the yearended on that date annexed thereto. These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted inIndia, which requires that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, and also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for ouropinion.

As required by the Companies (Auditor’s Report) Order, 2003 issued by the CentralGovernment of India in terms of Subsection (4A) of section 227 of the Companies Act, 1956and on the basis of such checks of books and records of the Company as consideredappropriate and as per the information and explanations given to us, we enclose in theAnnexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

1. we have obtained all the information and explanations, which to the best of ourknowledge 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 theCompany so far as appears from our examination of those books;

3. the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account of the Company;

4. in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956;

5. on the basis of written representations received from the Directors and taken onrecord by the Board of Directors, we report that none of the Directors is disqualified ason 31st March, 2011 from being appointed as a Director in terms of Section 274(1)(g) ofthe Companies Act, 1956;

6. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read with the notes thereon give the information requiredby the Companies Act, 1956 in the manner so required and give a true and fair view inconformity 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 31stMarch, 2011;

b. in the case of the Profit and Loss Account, of the Profit for the year ended on thatdate; and

c. in the case of Cash Flow Statement, of the cash flows for the year ended on thatdate.

ANNEXURE TO AUDITORS’ REPORT ON THE ACCOUNTS FOR THE YEAR ENDED 31^STMARCH 2011

1. a) The Company has maintained proper records showing full particulars includingquantitative details and location of all its fixed assets.

b) We are informed that the Company has programme of physical verification of all thefixed assets over a period of two years. Accordingly, the physical verification of part ofthe fixed assets has been carried out by the Management during the year and no materialdiscrepancies have been noticed on such verification.

c) Fixed assets disposed off during the year were not substantial and therefore do notaffect the going concern status of the Company.

2 a) The inventory has been physically verified at reasonable intervals during the yearby the Management except stocks with third parties for which confirmations are obtained.

b) In our opinion the procedures of physical verification followed by the Managementare reasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

c) The Company has maintained proper records of inventory. The discrepancies noticed onphysical verification, between physical stocks and books records, were not material inrelation to the operations of the company and have been properly dealt with in the booksof account.

3 a) The Company has not granted any loans, secured or unsecured to companies, firms orother parties covered in the register maintained under Section 301 of the Companies Act,1956.

b) The Company has not taken any loans, secured or unsecured from companies, firms orother parties covered in the register maintained under Section 301 of the Companies Act,1956.

4 According to the information and explanations given to us, there are, in our opinion,adequate internal control systems commensurate with the size of the Company and nature ofthe business for the purchase of inventory, fixed assets and for sale of goods. No majorweaknesses are noticed in the course of our audit in this behalf.

5 In our opinion, and according to the information and explanations given to us, thereare no contracts and arrangements the particulars of which need to be entered into theregister maintained under Section 301 of the Companies Act, 1956.

6 The Company has not accepted any deposits from the public, consequently theprovisions of Section 58A and 58AA of the Companies Act, 1956 and the rules framed thereunder are not applicable.

7 In our opinion the Company has an internal audit system commensurate with the sizeand nature of its business.

8 We have broadly reviewed the books of Accounts maintained by the Company pursuant tothe order made by the Central Government for the maintenance of cost records under Section209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie theprescribed accounts and records have been maintained. We have not, however, made adetailed examination of the records with a view to determining whether they are accurateor complete.

9 a) On the basis of our examination of the books of account and other relevantrecords, the Company has been generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund, investor education and protectionfund, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise-duty, cess andother material statutory dues applicable to it and no such dues were outstanding as at31-03-2011 for a period of more than six months from the date they become payable.

b) According to information and explanation given to us the disputed dues in respect ofSales Tax, Excise duty and Income tax that have not been deposited by the Company are asfollows:

10. The Company does not have any accumulated losses at the end of the financial yearand has not incurred cash losses in the financial year covered by our audit and theimmediately preceding financial year.

11. According to the records of the Company examined by us and on the basis ofinformation and explanations given to us, the Company has not defaulted in repayment ofdues to banks during the year. The Company has not taken any loans from financialinstitutions and has not issued debentures during the year.

12. As the company has not granted loans and advances on the basis of security by wayof pledge of shares, debentures and other securities clause 4(xii) of the order is notapplicable.

13. The company is not a chit fund/nidhi/mutual benefit fund/society. Accordingly theprovisions of the clause 4(xiii) of the Order are not applicable.

14. As the Company is not dealing or trading in shares, securities, debentures andother investments, paragraph 4(xiv) of the Order is not applicable.

15. According to the information and explanations given to us, the Company has notgiven any guarantee for loans taken by others from banks or financial institutions.

16. The term loans have been applied for the purpose for which they were obtained.

17. On the basis of examination of the Accounts and as per information and explanationgiven in our opinion the funds raised on short term basis have prima facie not been usedfor long term investments.

18. The Company has not made any preferential allotment of shares to any parties andcompanies covered under the register maintained u/s.301 of the Companies Act, 1956 duringthe year.

19. No security or charge is required to be created since the company has not issuedany Debentures.

20. The Company has not raised any money by public issue during the year.

21. On the basis of examination of books of account and other relevant records in thecourse of our audit and information and explanation given to us no fraud on or by theCompany has been noticed or reported during the year.