SKS Textiles Ltd Auditor Reports

To,

The Members of

S K S TEXTILES LIMITED

Report on the Audit of the Financial Statements Qualified Opinion

We have audited the accompanying financial statements of "M/s S K S TEXTILES LIMITED" which comprise the Balance Sheet as at 31^st March 2024, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and notes to financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "financial statements").

The Company is under Liquidation vide Order passed by Honble National Company Law Tribunal (NCLT"), Mumbai Bench, Court-IV dated 22.12.2023. These Standalone Financial Statements have been prepared by the management of the Company and approved by Liquidator

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph below the aforesaid financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the financial position of the Company as at 31st March 2024. its loss and cash flows for the year ended on that date.

Basis for Qualified Opinion

1. The Company has defaulted in repayment of dues to Banks and Financial institutions. The loans stated in the financials are overdue and account statements of the lenders are not available for verification. So there might be difference between actual outstanding balances and balance reported in financial statements which will affect financials of the Company and the amount of such difference is not ascertainable.

Attention is invited to Note 9 of Financial statements wherein Term Loans from Banks of Rs.9,88,43,540/-, NBFCs of Rs.l,76,11,671/- and Cash Credit Facilities of Rs.56,15,06,598/- were reported and Note 11 of financial Statements wherein Other Financial Liabilities of Rs.4.79.18.638/- were reported but due to non-availability of loan statements/confirmation letters, the balances could not be verified.

2. Attention is invited to note 10.1 of financial statements with respect to disclosures to be made relating to micro and small enterprises. The formal documentation with respect to the process followed by the Company for identification of micro and small enterprises has not been maintained and consequently we are unable to comment on the completeness and accuracy of the disclosure (including need for provision for interest on dues exceeding the credit period as prescribed under the Micro, Small and Medium enterprises Development Act 2006) so made in the financial statements.

3. Balances under Trade receivables of Rs.47,23,283/- and Trade Payables of Rs.7,35,39,563/- have not been confirmed by the respective parties.

4. Attention is invited to note 5 to financial statements with regards to Inventory amounting to Rs. 2,74,397/- which is lying since a long time and there is no operation in the business. Company is under Liquidation, hence considering the situation, we are unable to comment on the recoverability of the said asset.

5. Attention is invited to note 3 to financial statements with regards to Debtors amounting to Rs.47,23,283/- where Rs.18,18,20,179/- is considered doubtful and provision created for doubtful debts is only for Rs. 17,92,1,9,117/-. Company is under liquidation, hence considering the situation, we are unable to comment on the recoverability of the said asset.

6. Attention is invited to Note 4 of Financial Statements wherein Balance with Revenue Authorities is reported at Rs.4,17,75,163/- which includes Income Tax receivable up to AY 2023-24 of Rs.3,60,25,916/-, TDS receivable for AY 2024-25 of Rs.5,54,614/- and GST short claimed of Rs.4,73,534/-.

The Company has not provided any documentary evidence whether the Income Tax Receivable of Rs.3,60,25,916/- as stated above is still pending from the department or the same is not set off against the tax liability of respective Assessment years due to which the recoverability of the said asset cannot be commented upon.

In relation to TDS receivable for AY 2024-25 of Rs.5,54,614/-, only an amount of Rs.2,05,138/- is reflected in Form 26AS. Hence the balance amount of Rs.3,49,476/- cannot be claimed from the Income Tax Department and is not recoverable.

As informed by the company, GST short claimed amounting to Rs.4,73,534/- is not claimed in GST returns before September 2024. Hence the said asset cannot be recovered.

7. Attention is invited to Note 14 of Financial Statements wherein Provision for Tax of Rs.2,86.44,652/- pertaining to AYs 2017-18. 2018-19 and 2019-20 is recognized since long time but at the same time Income Tax Receivable of Rs.3,36,08,010/- for the same AYs is recognized under Other Current Assets. Moreover, the company has not provided any demand notice from the department for the said A.Ys. Hence the balance reported under Provisions could not be verified for its correctness.

8. Though the Company is following the Accrual system of accounting, the below stated incomes and expenses are not recognized on Accrual basis:

• Rental Income from Darshan Dresses Pvt. Ltd. of Rs. 1,48,261/- p.m is recognized only for 10 months i.e., upto Jan 2024 and not recognized for Feb and Mar 2024.

• Provision for Statutory Audit fee for FY 2023-24 is not made in the financial statements.

9. Attention is invited to Note 1 (II)(J) of Notes to Accounts wherein Income Tax Demands pertaining to various Assessment years aggregating to Rs.7,36,07,097/- are disclosed as Contingent liabilities out of which Appeal proceedings fried by assessee for AY 2012-13 for outstanding demand of Rs.85,08,577/- and for AY 2020-21 for outstanding demand of Rs.5,79,67,440/- were dismissed in favor of AO during the F.Y.2023-24 but no provision has been created for the said liability of Rs.6,64,76,017/- (Rs.85,08,577/- + Rs.5,79,67,440/-) instead shown as Contingent liability in Notes to Accounts.

Emphasis of Matter

a) The Company is under Liquidation vide Order passed by Honble National Company Law Tribunal (NCLT"). Mumbai Bench, Court-IV dated 22.12.2023.

b) Internal control system needs to be strengthened with regard to controls in connection with Operational bank accounts, regular Physical Verification of Inventory and controls with respect to fixed assets possession and record.

Information Other than the Financial Statements and Auditors Report Thereon

The Companys Board of Directors are responsible for the other information. The other information obtained at the date of this auditors report comprises of Board of Directors report but does not include the financial statements and our auditors report thereon.

Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have concluded that material misstatement with respect to matters described in the basis of qualified opinion paragraph exist in the other infonnation.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

The Companys Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance of the Company in accordance with the accounting principles generally accepted in India, Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Financial Statements

Our objectives is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (TCAT) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Qualified Opinion on the financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We have also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for an opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events of conditions that may east significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, since the company is under liquidation, the company is not considered a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statement that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of the work; and (ii) to evaluate the effect of any identified misstatement in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Report on other legal and regulatory requirements

As required by the Companies (Auditors Report) Order. 2020 (the Order) issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, 1 give in "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act. we report that:

a. Subject to what is stated in the "Basis for Qualified Opinion" paragraph above, we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. Subject to what is stated in the "Basis for Qualified Opinion" paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those except for the matters stated in the paragraph 2(j) below, on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.

c. The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d. Subject to what is stated in the "Basis for Qualified Opinion" paragraph above, in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act. read with Rule 7 of the Companies (Accounts) Rules, 2014.

e. The matters described in the Basis for Qualified Opinion, Material uncertainty related to going concern paragraph and Emphasis of Matter paragraph above, in our opinion have an adverse impact on the functioning of the Company.

f. The company is under liquidation and has not paid any managerial remuneration to its directors during the year. Therefore, reporting as required by Section 197(16) of the Act is not necessary to the Company.

g. We have not received any written representations received from the directors as on 31^st March 2024 taken on record by the Board of Directors, so we cant comment that none of the directors is disqualified as on 31^st March 2024, from being appointed as a director in terms of Section 164(2) of the Act.

h. The reporting relating to the maintenance of accounts and other matters connected therewith arc as stated in the Basis for Qualified Opinion and Emphasis of Matter paragraph above.

i. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B".

j. Based on our examination which included test checks and information given to us. the Company has used accounting software for maintaining its books of account, which did not have a feature of recording audit trail (edit log) facility throughout the year for all relevant transactions recorded in the respective software, hence we are unable to comment on audit trail feature of the said software.

k. With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended from time to time, we have not received necessary details so cant form any opinion on below points.:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements.

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There are no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. (a) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any _other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented, that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on audit procedures which we considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (a) and (b) contain any material miss- statement.

"Annexure A" to the Independent Auditors Report for the year ended 31st March, 2024

(Referred to in Other Legal and Regulatory Requirements in our report of even date

i. In respect of fixed assets:

(a) (A) The company is not maintaining proper records showing full particulars, including

quantitative details and situation of Property. Plant and Equipment.

(B) The Company is not maintaining proper records showing full particulars of Intangible assets.

(b) The above mentioned Property, Plant and Equipment have not been physically verified by the management during the year.

(c) The title deeds of all the Land and Building and Immovable properties are not provided for verification.

(d) The Company has not revalued its Property, Plant and Equipment (including Right of Use assets) or intangible assets or both during the year. Therefore, clause (iii) (d) of the Order is not applicable to the Company.

(e) No proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder. Therefore, clause (iii) (e) of the Order is not applicable to the Company.

it (a)The management has conducted physical verification of stock in hand at reasonable intervals during the year but since there are no business operations and the inventory is held since long time, the recoverability of the said asset is doubtful.

(b) The Company is having Cash Credit Facility as reported in Note 9 to Financial Statements but the same is outstanding since long and the company is under liquidation.

(c) Since the company is under liquidation, no quarterly returns or statements filed by the company with financial institutions.

a (a) According to information and explanations given to us. Company has not made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured to any companies, firms, limited liability partnership or any other parties.

(b) During the year the company has not provided unsecured loans so clause (b) to (f) is not applicable.

iv. Company has not provided any loan to directors, so this clause is not applicable.

v. In my opinion and according to the information and explanation given to me, the Company has not accepted any deposits from the public and has not received any amount which is classified as deemed deposit within the meaning of provisions of Section 73 to 76 of the Act and the rules there under. I have been informed that the Company is under Liquidation as per Order dated 22.12.2023" passed by "The National Company Law Tribunal Mumbai Bench-IV". No other order relating to Company has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

vl The Company is not required to maintain cost records pursuant to Rules made by the

Central Government for maintenance of cost records under sub-section 1 of section 148 of the Act as there are no activities carried out during the year by the Company. Therefore, clause (vi) of paragraph 3 of the Order is not applicable.

vii. In respect of statutory dues:

(a) According to the information and explanations given to me and on the basis of my examination of records of the Company, in respect of amounts deducted / accrued in the books of accounts, the Company has not been regular in depositing undisputed statutory dues including provident fund, employees state insurance, sales tax. service tax. duty of customs, duty of excise, value added tax, cess, goods and service tax and any other material statutory dues, as applicable to the Company, during the year with the appropriate authorities.

(b) There are undisputed amounts payable in respect of statutory dues outstanding as at 31st March 2024 for a period of more than six months from the date they become payable.

Particulars	Year	Amount
TCS	Previous	708
TDS	2023-24	1,36,246

Apart from the above, the company has not deducted TDS for some expenses (amounting to Rs.28,02.738/-) incurred during the year. An amount of Rs.2,80.274/- is not deducted and not paid on such expenses.

(c) The company is having disputed statutory dues in relation to Income Tax which are disclosed in Note 1(II)(J) of Notes to Accounts.

viii. According to the information and explanation given to us, there are no such transactions which are unrecorded in the books of accounts that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961). Hence, clause (viii) of paragraph 3 of the Order is not applicable.

ix. (a) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that with respect to loan from Financial Institutions DBS Bank India Ltd, Standard Chartered Bank. Ambit Finvest Private Limited. Capital First Limited. Digikredit Finance Private Limited, Federal Bank Financial Services Limited. ICICI Bank Ltd, HDFC Bank Ltd., IDFC First Bank Ltd., IIFL Finance Limited, ARC Finance Ltd., Aditya Birla Finance Limited, lnduslnd Bank Limited and Kotak Mahindra Bank, there has been delay in payment of interest and principal. According to the information and explanation given to us and on the basis of our examination of records, the Company has not borrowed any funds from government.

(b) The Company has been defaulted the loan as given by the DBS Bank Ltd. so the bank filed petition to Hon NCLT Mumbai under IBC 2016 to start CIRP process against the company and the petition was admitted on 28^th Sept 2022 by Hos. NCLT Mumbai to start the CIRP process. Later on the Honble National Company Law Tribunal (NCLT"), Mumbai Bench. Court-IV passed an order for liquidation of the company on Dt.

22.12.2023 and now the company is in the process of liquidation.

(c) The Company has not raised any fund/term loan from any person or entity during the year, hence clause ix (c) to ix (f) of paragraph 3 of the order is not applicable.

x. (a) The Company has not raised money by way of initial public offer or further public offer [including debt instruments] during the year. Hence, clause (x)(a) of paragraph 3 of the Order is not applicable.

(b) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the period. Therefore, question of my comment on compliance with provisions of Section 42 and 62 of Act does not arise.

xi. (a) According to the information and explanations given to us, no fraud have been noticed or reported during the year. We have not filed any report under sub-section (12) of Section 143 of the Companies Act has been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government.

(b) The company has not received any whistle-blower complaints during the year.

xii. In our opinion, the Company is not a Nidhi company. Therefore, clause (xii) of paragraph 3 the Order is not applicable.

xiii We have not received adequate information and explanations of transaction with related parties, wherever applicable, are in compliance with Section 188 of Act and have not been disclosed in the financial statement as required under Accounting Standard 18.

xiv. According to the information and explanations given to us and on the basis of our examination of internal financial controls of the company, there is no internal audit system commensurate with the size and nature of its business. The Company is required to appoint an internal auditor as per section 138 of the Companies Act. 2013. Hence, clause (xiv) (b) of paragraph 3 of the order is applicable to the Company.

xv. We have not received adequate information and details so we cant make any opinion that the Company has not entered into any non-cash transaction with directors or person connected with him.

xvi. (a) In our opinion and according to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

In our opinion and according to the information and explanations given to us. bpompany has not conducted any Non-Banking Financial of Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act 1934

(c) In our opinion and according to the information and explanations given to us, the company is not Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India.

(d) In our opinion and according to the information and explanations given to us, the group to which the company belongs does not have any CIC as part of it.

xvii. During the financial year 2023-24. the Company has incurred cash loss amounting to Rs.23,95,527/- and during the preceding FY 2022-23, the cash loss incurred amounts to Rs.23.90,60.540/-

xviii. During the year, the previous statutory auditors have not resigned but fresh auditors have been appointed by the liquidator and the previous auditor did not raise any objections, issues or concerns.

xix. On the basis of our audit procedures, the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, our knowledge of the ongoing process of liquidation, we are of the opinion that material uncertainty exists as on the date of the audit report that company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.

xx. Section 135 of the Companies Act, 2013 is not applicable to the Company. Hence, clause (xx) of paragraph 3 of the Order is not applicable.

xxi. Preparation of Consolidated Financial statements is not applicable to the company. Hence, reporting under clause (xxi) of paragraph 3 of the Order is not applicable.

"Annexure B" to the Independent Auditors Report for the year ended 31st March, 2024

(Referred to in Other Legal and Regulatory Requirements in our report of even date

Report on the Internal Financial Controls under section 143(3)(i) of the Companies Act, 2013 (the Act) Opinion

According to the information and explanations given to us and based on our audit, there were weaknesses in the operating effectiveness of the Companys internal financial controls over financial reporting as at 31st March 2024 over maintenance of books of accounts.

A material weakness is a deficiency or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, the Company has, in all material respects, not maintained adequate internal financial controls over financial reporting as of 31st March 2024, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Responsibilities of Management and Those Charged with Governance for Internal Financial Controls over Financial Reporting

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company- considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (TCAF). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act. 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reportiiio^feasc^Qn our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the in)inherent limitations of internal financial controls over financial reporting, including the possobility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.