Lunar Diamonds Ltd Auditors Report.

1997 LUNAR DIAMONDS LIMITED AUDITORS REPORT We have audited the attached Balance Sheet of Lunar Diamonds Limited as at 30th September, 1996 and the Profit and Loss Account for the period ended on that data alongwith notes and Schedules annexed thereto and report that: 1. As required by 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 enclose in the annexure a statement on the matters specified in the said order. 2. Further to our comments in annexure referred to in paragraph 1 above, we report as under: (a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. (b) In our opinion proper books of accounts as required by Law have been kept by the Company so far as appears from our examination of the said books. (c) The Balance Sheet and Profit and Loss Account are in agreement with the books of account. (d) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes, thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view: (i) in the case of Balance Sheet of the state of affairs of the Company as at 30th September, 1996. (ii) in the case of Profit and Loss Account of the profit for the period ended 30th Sept., 1996. ANNEXURE TO THE DIRECTORS REPORT 1. The Company has maintained proper record showing full particulars, including quantitative details and situation of its Fixed Assets. All the Fixed Assets have not been verified by the management during the period, but according to the information and explanations given to us, there is regular programme of verification, which in our opinion is reasonable having regard to the size of the Company and nature of its Assets. The discrepancies noticed on such verification between the physical balances and the fixed assets records, were not material and have been properly dealt with in the books of accounts. 2. None of the Fixed Assets have been re-valued during the period. 3. The stock of finished and semi-finished goods, stores, spare parts and raw materials have been physically verified by the Management at reasonable intervals. 4. In our opinion and according to the information and explanations given to us, the procedures of 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. 5. The discrepancies noticed on verification between the physical stocks and book records were not material and have been properly dealt with in the books of account. 6. In our opinion and on the basis of our examination of records, the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the previous year. 7. The rate of interest and other terms and conditions of loans taken from parties listed in the Register maintained under Section 301 and 370 (1-C) of the Companies Act, 1956 are not prejudicial to the interest of the Company. 8. The Company have not granted any loan secured or unsecured to any parties listed in the Register maintained under section 301&370 (1-C) of the Companies Act, 1956. 9. In respect of loans and advances in the nature of loans given to employees and others, the parties are repaying the principal amounts as stipulated and are also regular in the payment of interest, where charged. 10. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for purchase of stores, raw materials including components, plant and machinery, equipment and other assets and for sale of goods. 11. In our opinion and according to the information and explanations given to us, where transactions have been made with different parties, the transactions for purchase of Goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in aggregating during the period to Rs. 50,000/- or more in respect of each party have been made at prices which are reasonable, having regard to the prevailing market prices for such goods, materials or services where such market prices are available or price of each transactions for similar goods or materials which have been made with other parties. 12. As explained to us, the company has a regular procedure of determination of unserviceable or damage stores, raw materials and finished goods. Adequate provision has been made in the accounts for the loss arising on the items so determined. 13. The Company has accepted Fixed Deposits from the Public and it has complied with the provisions of Section 58A of the Companies Act, 1956 and rules framed thereunder wherever applicable. 14. In our opinion reasonable records have been maintained by the Company for the safe and disposal of waste and scrap. 15. The Company has adequate internal auditing system commensurate with its size and the nature of business. 16. The Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 in respect of manufacturing activities of the Company. 17. According to the records of the company, Provident Fund and Employee State Insurance contributions have been regularly deposited by the Company during the period with the appropriate authorities. 18. As explained to us no amount of undisputed Income Tax, Wealth Tax, Custom Duty and Excise Duty were outstanding as on 30.9.96 for a period of more than six months from the date they became payable. 19. According to the information and explanations given to us and records examined by us no personal expenses have been charged to revenue account other than payable under contractual obligation or in accordance with generally accepted business practices. 20. The Company is not a sick industrial company within the meaning of Clause (o) of Sub Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. for Rajiv Prakash & Co. Chartered Accountants Rajiv Sharma Proprietor Place : New Delhi Dated : 27th January, 1997.