|1. Report on the Financial Statements
I have audited the accompanying financial statements of Katare Spinning
Mills Limited Company Limited ("the Company"), which comprise the
Balance Sheet as at March 31, 2013, and the Statement of Profit and
Loss and Cash Flow Statement for the year then ended, and a summary of
significant accounting policies and other explanatory information.
2. Management's responsibility for the financial statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of section 211
of the Companies Act, 1956 ("the Act"). This responsibility includes
the design, implementation and maintenance of internal control relevant
to the preparation and presentation of the financial statements that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
3. Auditor's Responsibility
My responsibility is to express an opinion on these financial
statements based on my audit. I conducted my audit in accordance with
the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that I comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to frayed or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and
the reasonableness of the accounting estimates made by management, as
well as evaluating the overall presentation of the financial
I believe that the audit evidence I have obtained is sufficient and
appropriate to provide a basis for my audit opinion.
Attention is drawn to the following:
a. As stated in Note No. 15 to the accounts, the company has included
in other non-current assets a sum of Rs. 514.00 lacs as deferred
interest expenditure. In the past the company had availed a term loan
ICICI Bank Ltd (which was under OTS with them) which was subsequently
assigned by ICICI to Kotak Mahindra Bank Ltd. Consequent upon
assignment The KotakMahindra Bank Ltd. had filed suit against the
company in DRAT for recovery. The company has settled the said loan
with Kotak Mahindra Bank Ltd for an agreed amount of Rs. 750 lacs of
which Rs. 325 lacs was deposited before DRAT and Rs. 425 lacs is paid
on or before 31/05/2013 and accordingly no balance is now outstanding.
b. The company had a transferred balance in Capital Reserve of Rs. 150
lacs when the loan was settled with ICICI Bank Ltd. The said balance is
row reversed from Capital Reserve and balance Rs. 600 lacs represent
the amount of interest from the year 2002 to the date of settlement.
The company has deferred this interest amount of Rs. 600 lacs to be
written off over a period of 7 years and have accordingly charged Rs.
86 lacs to the statement of profit and loss for the year under audit
and balance Rs. 514 lacs is carried as deferred revenue expenditure.
c. Trade Receivables to the extent of Rs. 19.51 lacs and other current
assets/advances of Rs. 87.12 lacs aggregating to Rs. 106.63 lacs are
bad for which no provision is made in the accounts as referred to in
Note No. 17 and Note No.20 in the notes on accounts.
d. Had the items reported in para 4 (b) and (c) above been charged to
the statement of profit and loss, the profit for the year of Rs. 19.97
lacs would have been resulted into loss of Rs. 602.66 lacs.
To that extent it has resulted into overstatement of year end net
Current Assets and Reserves and Surplus by Rs. 602.66 lacs.
e. No provision is made for payment for gratuity on actuarial basis as
on 31 st March 2013 hence its impact on the net profit could not be
ascertained as referred to Note. No. 27(b) in the notes on accounts.
In my opinion and to the best of my information and according to the
explanations given to me, except as reported in para 4(a) to (e) above,
the financial statements give the information required by the Act in
the manner so required and except as reported in para 4(a) to (e)
above, give a true and Fairview in conformity 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 March 31,2013.
b) in the case of the statement of Profit and Loss, of the profit for
the year ended on that date and
c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2003
("theOrder") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, I give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, I reportthat:
a. I have obtained all the information and explanations which to the
best of my knowledge and belief were necessary forthe purpose of my
b. in my opinion proper books of account as required by law have been
kept by the Company so far as appears from my examination of those
c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
d. In my opinion, except as reported in para 4(a) to (e) above the
Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement
comply with the Accounting Standards referred to in subsection (3C) of
section 211 of the Companies Act, 1956. .
e. On the basis of written representations received from the directors
as on March 31, 2013, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2013, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
f. Since the, Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441A of the
Companies Act, 1956 nor has it issued any Rules under the said section,
prescribing the manner in which such cess is to be paid, no cess is due
and payable by the Company.
On the basis of such checks as I considered appropriate and according
to the information and explanation given to me during the course of my
audit, I report that:
1. (a) The company has maintained proper records showing full
particulars including quantitative details and situation of its fixed
(b) As explained to me, fixed assets have been physically verified by
the management at reasonable intervals; no material discrepancies Ire
noticed on such verification.
(c) In my opinion and according to the information and explanations
given to me, no fixed asset has been disposed during the year and
therefore does not affect the going concern assumption.
2. (a) As explained to me, inventories have been physically verified
during the year by the management at reasonable intervals.
(b) In my opinion and according to the information and explanations
given to me, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and the nature of its business.
(c) In my opinion and on the basis of my examination of the records,
the Company is generally maintaining proper records of its inventories.
No material discrepancy was noticed on physical verification of stocks
by the management as compared to book records.
3. (a) According to the information and explanations given to me and
on the basis of my examination of the books of account, the Company has
not granted any loans, secured or unsecured, to companies, firms or
other parties listed in the register maintained under Section 301 of
the Companies Act, 1956. Consequently, the provisions of clauses iii
(b), iii(c) and iii (d) of the order are not applicable to the Company.
(e) According to the information and explanations given to me and on
the basis of my examination of the books of account, the Company has
not taken loans from companies, firms or other parties listed in the
register maintained under Section 301 of the Companies Act, 1 956. Thus
sub clauses (f) & (g) are not applicable to the company.
4. In my opinion and according to the information and explanations
given to me, there is generally an adequate internal control procedure
commensurate with the size of the company and the nature of its
business, for the purchase of inventories & fixed assets and payment
for expenses & for sale of goods. During the course of my audit, no
major instance of continuing failure to correct any weaknesses in the
internal controls has been noticed.
5. a) Based on the audit procedures applied by me and according to the
information and explanations provided by the management, the
particulars of contracts or arrangements referred to in section 301 of
the Act have been entered in the register required to be maintained
under that section.
b) As per information & explanations given to me and in my opinion, the
transaction entered into by the company with parties covered u/s 301 of
the Act does not exceeds five lacs rupees in a financial year therefore
requirement of reasonableness of transactions does notarises.
6. The Company has not accepted any deposits from the public covered
under section 58A and 58AA of the Companies Act, 1956.
7. As per information & explanations given by the management, the
Company has an internal audit system commensurate with its size and the
nature of its business.
8. As per information & explanation given by the management,
maintenance of cost records has been prescribed by the Central
Government under clause (d) of sub-section (1) of section 209 of the
Act and I are of the opinion that prima facie the prescribed accounts
and records have been made and maintained.
9. (a) According to the records of the company, undisputed statutory
dues including Provident Fund, Investor Education and Protection Fund,
Employees' State Insurance, Income-tax, Sales-tax, wealth Tax, Service
Tax, Custom Duty, Excise Duty, cess to the extent applicable and any
other statutory dues have generally been regularly deposited with the
appropriate authorities. According to the information and explanations
given to me there are no outstanding statutory dues as on 31 st of
March, 2013 for a period of more than six months from the date they
(b) According to the information and explanations given to me, there is
no amounts payable in respect of income tax, wealth tax, service tax,
sales tax, customs duty and excise duty which have not been deposited
on account of any disputes.
10. During the financial year covered by my audit the company has
incurred cash loss but has not incurred cash loss in the immediately
preceding financial year.
11. Based on my audit procedures and on the information and
explanations given by the management, I am of the opinion that, the
Company has not defaulted in repayment of dues to a financial
institution, bank or debenture holders.
12. According to the information and explanations given to me, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
13. The Company is not a chit fund or a nidhi /mutual benefit
fund/society. Therefore, the provision of this clause of the Companies
(Auditor's Report) Order, 2003 (as amended) is not applicable to the
14. In my opinion, the Company is not dealing or trading in shares,
securities debentures or other investment and, hence the requirements
of para 4 (xiv) are not applicable to the company.
15. According to the information and explanations given to me, the
Company has not given any guarantees for loan taken by others from a
bank or financial institution.
16. Based on my audit procedures and on the information given by the
management, I report that the company has not raised any term loans
during the year.
1 7. Based on the information and explanations given to me and on an
overall examination of the Balance Sheet of the Company as at 31st
March, 2013,1 have to report that no funds raised on short-term basis
have been used for long-term investment by the Company.
1 8. Based on the audit procedures performed and the information and
explanations given to me by the management, I have to report that the
Company has not made any preferential allotment of shares during the
19. The Company has no outstanding debentures during the period under
20. The Company has not raised any money by public issue during the
21. Based on the audit procedures performed and the information and
explanations given to me, no fraud on or by the Company has been
noticed or reported during the year, nor have I been informed of such
case by the management.
Place : Solapur G.M.PAWALE
Place : 31 st May 2013 Membership No. : 032561