1997 CUTFAST ABRASIVE TOOLS LIMITED AUDITORS' REPORT We have audited the attached Balance Sheet of M/s. CUTFAST ABRASIVE TOOLS LIMITED, as on 31st March, 1997 and the Profit and Loss Account for the year ended on that date annexed thereto and report as follows: In terms of 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, we give below a statement of the manners specified in paragraphs 4 and 5 of the aforesaid order. i. The Company has maintained proper records to show full particulars including quantitative details and situation of Fixed Assets. Most of the Assets have been physically verified by the management during the year and there is regular programme of verification which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No serious discrepancies have been noticed on verification. ii. None of the Fixed Assets has been revalued during the year. iii. Physical verification of finished goods, stores, spare parts and raw materials have been conducted at reasonable intervals during the year. iv. The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. v. The discrepancies noticed on verification between the physical stocks and the books records were not significant and the same have been properly dealt with in the books of accounts. vi. The valuation of the stocks is fair and proper in accordance with the normally accepted accounting principles and the basis of valuation is the same as in earlier years. vii. In our opinion the rate of interest and the other terms and conditions on which unsecured loans have been obtained from the persons listed in the Register maintained under Section 301 of the Companies Act, 1956, are not prima facie prejudicial to the interest of the Company. There are no loans obtained from Companies under the same management. viii. The Company has not granted any loans, secured on unsecured, to Companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956 and to Companies under the same management. ix. In respect of loans and advances in the nature of loans given by the Company, the parties have been repaying principal amounts and interest thereon as stipulated. x. There are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of stores, raw materials including components, plant and machinery, equipment and other machinery, equipment and other assets and for the sale of goods. xi. In our opinion and according to information and explanations given to us, the purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the Register maintained 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 reasonable, having regard to prevailing market prices or prices at which contracts for similar goods have been made with other parties and also taking into account the nature of such materials and the terms and availability of suppliers manufacturing the materials required by the company. xii. As explained ot us, the Company has a regular procedure for the determination of unservicable. damaged stores and raw materials. Adequate provision has been made in the accounts for the loss arising on the items so determined. xiii. In respect of deposits accepted from the public the Company has complied with the provisions of Section 58A of the Companies Act, 1956 and the /rules made thereunder. xiv. The Company has maintained reasonable records for the sale and disposal of scrap. The Company has no by products. xv. The Company has an internal audit system commensurate with the size and the nature of its business. xvi. Cost records have not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956, in respect of items manufactured by the Company. xvii. The Company is regular in depositing Provident Fund and Employees State Insurance dues with the appropriate authorities. xviii. There are no undisputed amounts payable in respect of Income tax, Wealth tax, Sales tax, Customs Duty & Excise Duty outstanding as at the last day of financial year for a period of more than six months from the date they become payable. xix. We have not come across any personal expenses charged to revenue account nor have we been informed of such cases by the management. xx. The provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, are not applicable to the Company. Further to the foregoing we report that: i) We have obtained all the information and explanations which to the best of our knowledge and belief are necessary for the purpose of our audit; ii) In our opinion, proper books of accounts as required by law have been kept by the Company in so far as it appears from our examination of such book; iii) The Balance sheet and the Profit and Loss Account dealt with by this Report are in agreement with the books of accounts. iv) In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the Notes attached thereto give the information required by the Companies, Act, 1956 in the manner so required and give a true and fair view:- a) in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 1997 and b) in the case of the Profit and Loss Account of the Profit of the Company for the year ended on that date. for VIJAYARAGHAVAN & ASSOCIATES Chartered Accountants P.B. VIJAYARAGHAVAN Partner Place : Chennai Dated : 18th June, 1997.