Golden Carpets Ltd

To

The Members

Golden Carpets Limited

1. We have audited the attached Balance Sheet of GOLDEN CARPETS LIMITED, as at March31, 2010, the Profit and Loss account and also 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 these financialstatements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of 'The Companies Act,1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph (3) and subject toin paragraph (4) above, we report that:

(i) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our audit;

(ii) 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;

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account;

(iv) 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;

(v) On the basis of written representations received from the directors, as on March31, 2010 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31st March 2010 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

(vi) In our opinion and to the best of our information and according to theexplanations given to us, subject to the effect on the financial statements of the matterreferred to in the preceding paragraph and subject to Note 3 of Schedule 18 regardingnon-implementation of Negotiated Settlement, the said accounts together with the notesthereon give the information required by the Companies Act, 1956, in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as atMarch 31, 2010;

(b) In the case of the Profit and Loss Account, of the Loss for the year ended on thatdate; and

(c) In the case of the Cash Flow Statement, of the cash flows for the year ended onthat date.

Annexure to Auditor's Report

(Referred to in paragraph 3 of our Report of even date to the Members of GOLDEN CARPETSLIMITED for the year ended March 31, 2010)

(i) (a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All the assets have been physically verified by the management during the year andthere is regular programme of verification which, in our opinion, is reasonable havingregard to the size of the company and the nature of its assets. No material discrepancieswere noticed on such verification.

c) During the year, the company has not disposed off a major part of the plant andmachinery.

(ii) a) The inventory has been physically verified during the year by the Management.In our opinion, the frequency of verification is reasonable.

b) The procedures of physical verification of inventories followed by the Management isreasonable and adequate in relation to the size of the company and the nature of itsbusiness.

c) The company is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stocks and the book records were not material.

(iii) The company has neither taken nor granted during the year any loans to Companiescovered under section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanation given to us, thereare adequate internal control procedures commensurate with the size of the company and thenature of its business with regard to purchase of inventory, fixed assets and with regardto the sale of goods.

(v) a) According to the information and explanations given to us, we are of the opinionthat the transactions that need to be entered into the register maintained under Section301 of the Companies Act, 1956 have been so entered.

b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under section 301 of the Companies Act, 1956.

(vi) The Company has not accepted any deposits from the public.

(vii) In our opinion, the company has an internal audit system commensurate with thesize and nature of its business.

(viii) The Central Government did not prescribe maintenance of cost Records underSection 209(1) (d) of the Companies Act, 1 956(Act 1 of 1956) for product of the company.

a) The RF & E.S.I Act are not applicable for the Company.

b) According to the information and explanation given to us, there are no dues of saletax, income tax, customs duty, excise duty and cess were in arrears, as at 31.03.2010 fora period of more than six months from the date they became payable.

c) According to the information and explanation given to us, there are no dues of saletax, income tax, customs duty, excise duty and cess which have not been deposited onaccount of any disputes.

ix) In our opinion, the accumulated losses of the company are not more than fiftypercent of its net worth. The company has not incurred cash losses during the financialyear covered by our audit and the immediately preceding financial year.

x) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in payment of interest with respect to loan taken from IDBI andit is further negotiating for relief's and the matter is pending.

xi) In our opinion and according to the information and explanation given to us noloans and advances have been granted by the Company on the basis of security by way ofpledge of shares, debentures and other securities.

xii) In our opinion, the company is not a chit fund or a nidhi mutual benefitfund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor'sReport) Order, 2003 are not applicable to the company.

xiii) In our opinion, the company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of thecompanies (Auditor's Report) Order, 2003 are not applicable to the company.

xiv) The company has not given guarantees for loans taken by others from banks orfinancial institutions.

xv) The company has not raised any new term loan during the year. The term loansoutstanding at the beginning of the year were applied for the purpose for which they wereraised.

xvi) According to the information and explanations given to us and on overallexamination of the balance sheet of the company, we report that the no funds raised onshort-term basis have been used for long-term investment. No long- term funds have beenused to finance short-term assets except permanent working capital.

xvii) During the year, the Company has not made any preferential allotment of shares toparties and Companies covered in the Register maintained under section 301 of theCompanies Act, 1956.

xviii) The Company has not issued any debentures during the year.

xix) The Company has not raised any money by way of public issue during the year.

xx) According to the information and explanations given to us, no fraud on or by thecompany has been noticed or reported during the course of our audit.