Private & Confidential Lovelock & LewesWALTER & ASSOCIATES Price WaterhouseChecklist - Companies (Auditor's Report) Order, 2004Client: Cmax Infocom Ltd. No Reportable IssuesAudit Period: 31st March,2005. Refer Issue Sheet

N/AClause No. Area/Requirement Guidance and Audit PrConclusion

4(i) (a) Fixed Assets No Reportable Issues4(i) (b) Fixed Assets No Reportable Issues4(i)( c) Fixed Assets No Reportable Issues4(ii) (a) Inventories No Reportable Issues4(ii) (b) Inventories No Reportable Issues4(ii) ( c) Inventories No Reportable Issues4(iii) (a) Loans granted No Reportable Issues

Loans taken No Reportable Issues4(iii)(b) Loans granted No Reportable Issues

Loans taken No Reportable Issues4(iii)( c) Loans granted or taken Refer Issue Sheet4(iii) (d) Loans granted or taken No Reportable Issues

4(iv) Internal Controls No Reportable Issues4(v)(a) & (b) Register under Section 301etc., No Reportable Issues

4(vi) Fixed Deposits No Reportable Issues4(vii) Internal Audit No Reportable Issues4(viii) Cost Records No Reportable Issues

4(xi) (a) & (b)Statutory dues No Reportable Issues4(x) Accumulated losses etc., No Reportable Issues4(xi) Dues to Banks & Fis etc., No Reportable Issues4(xii) Loans and Advances granted No Reportable Issues

4(xiii)(a) Chit Fund company No Reportable Issues4(xiii)(a) to (d)Nidhi/mutual benefit fund/society No Reportable Issues

4(xiv) Dealing or Trading in Securities No Reportable Issues4(xv) Guarantees No Reportable Issues4(xvi) Term Loans No Reportable Issues4(xvii) Funds raised No Reportable Issues4(xviii) Allotment of shares No Reportable Issues4(xix) Debentures No Reportable Issues4(xx) Money raised on public issue No Reportable Issues4(xxi) Fraud No Reportable Issues

Completed by: Date:

Reviewed by: Date:

Proper recordsPhysical verification-FADisposal of Fixed AssetsPhysical verification- Inv.Procedures of VerificationProper records of InventoryLoans granted Loans grantedLoans takenRepaymentOverdue amountsInternal controls on purchases,sales etc.,301 Register and transactionsPublic depositsInternal AuditMaintenance of Cost RecordsStatutory duesLosses etc.,Default in repayment of duesLoans and Advances granted Chit fund companyNidhi/mutual benefit fund etc.,Dealing etc.,in SecuritiesGuarantees givenUtlisation of Term LoansUtlisation of fundsPreferential allotmentSecurities on DebenturesEnd use of moniesFraud

Issue Sheet

I have staisfied myself that the above checklist has been properly completed ( refered Statement on CARO whereever relevant) and all matters requiring the attention of the Audit Partner are set forth in the Issue sheet.(Refer the No. of the issue sheet).

I have reviewed the work done by the assistant-in charge and have satisfied myself that the above checklist has been satisfactorily completed in line with the Statement on CARO issued by ICAI. Working papers were reviewed and agree with the conclusions above.

whether the funds raised on short-term basis have been used for long term investment and vice versa; If yes, the nature and amount is to be indicated

whether the company has made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act and if so whether the price at which shares

whether securities have been created in respect of debentures issued?

whether the management has disclosed on the end use of money raised by public issues and the same has been verified;

whether any fraud on or by the company has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated.

General Instructions

1 The home page contains the detailed description of the requirements of CARO under the respective clauses.

2. Please select the name of the audit firm from the dropdown menu on the home page.Please fill in other details

like name of the client, audit period etc., The home page also contains affirmations as to work done, review made

etc., Please fill in necessary details on completion and review of the checklist.

3. Critical matters and matters for reporting to management and other exceptions should be summarised in the

Issue sheet' (last work sheet in the workbook). Issue sheet can also be accessed through the link on home page.

4. Please click on the respective clause under the 'Guidance and Audit Procedures' column on the home page

for the detailed checklist containing audit steps to be performed, notes, responses and space for comments, if any,

for the respective clauses.The conclusion column on the home page has a drop down menu for choosing the appropriate

option.

5. Please complete the details as to prepared/reviewed by etc., on the individual checklist sheets. You can get back to

home page from the individual checklist sheet.

6. The Responses column contains a drop down menu with possible responses. Please select the appropriate response

from the options as applicable. Create a Working paper for work done under individual clauses or link to working papers,

if any, created in MYClient in this regard. Specific representations, where required, should be obtained as a part of

firm's standard representation letter.

7. This checklist cannot be construed as a substitute for the Statement on CARO issued by ICAI. Reference should

be made to the Statement for guidance and help in specific cases.

8. The words 'Act' as used in the checklist refer to the Companies Act,1956 unless otherwise stated.

Introduction

Applicability of the Order

1.This order applies to all the companies including-

a. Companies incorporated outside India, which established a place of business in India;

b. All the Branches of Companies (section 228 (3) (a) of the Act).

2. This order does not apply to Banking Companies, Insurance Companies,

Companies licensed to operate under section 25 of the Act and Private companies

fulfilling the following criteria-

a. having paid up capital and reserves less than Rs 50 lakhs;

(beginning of the year or at anytime during the year);and

b. no deposits are accepted from the public; and

c. no outstanding loans in excess of Rs25 lakhs from banks and financial

institutions; (at anytime during the year); and

d. turnover less than Rs 5 crores ( not to exceed the limit either in the year or in the

immediately preceding year).

WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Fixed Assets

Audit Procedures Response Remarks

1. Whether records of fixed assets are

maintained showing the following

particulars:-

a).Year of acquisition Yes

b).Sufficient description of the assets

to make identification possible. Yes

c).Classificaton, that is, the head under

which it is shown in accounts eg. Land,

Building, Plant and Machinery etc. Yes

d).Location Yes

e).Quantity,i.e number in units. Yes

f).Original cost Yes

g).Adjustment for revaluation or for Yes

increase or decrease in cost consequent

on revaluation of Foreign currency Liabilities

if any.

h).Depreciation written off to date. Yes

i).Written down value. Yes

Yes

Yes

Yes

m). Whether fixed assets as per Register/Records

agree with General Ledger balances. If not, note

the disagreements in respect of each class

of assets e.g.

N/A

N/A

N/A

N/A

Yes

N/A

N/A

N/A

j)Rate of depreciation and particulars regarding amortisation and impairment

k) Particulars regarding sale, discarding, demolition, destruction etc.

l) Particulars of fixed assets that have been retired from active use and held for disposal.

-       Land freehold

-       Land leasehold

-       Building

-       Land

-       Plant and Machinery

-       Vehicles

-       Furniture and Fixtures

-      Office Equipment etc.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005. Yes

Reviewed by: No

Date: N/A

Done

Fixed Assets Price Waterhouse & Co

Audit Procedures Response Remarks Choksey Bhargava & Co

1. Has the management carried out a physical Lovelock & Lewes

verification of fixed assets during the year according

to the policy of the company? (eg. phased manner,

all assets every year etc.,) No

2. Obtain the instructions issued to by the management to the staff for the physical veri Yes

3.Obtain the working papers of physical verification

done by the management during the year according

to the policy of the company.Confirm and evidence

adherance to the instructions issued. Yes

4. Is the frequency of verification reasonable Yes

5. Ensure whether assets physically verified agreed/

reconciled to book figures? Yes

6. Obtain a statement of descrepancies obtained

and consider if they are material, whether the same

have been properly adjusted in the books of

account. Yes

Since company has been taken over by Bharti this February, Bharti's management want to carry the Fixed assets valuation & verification in near future, hence same as not been conducted during the year.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Fixed Assets

Audit Procedures Response Remarks

judged in the backgorund of factors such as

terms. No

of the company. Done

the same in the main report. Done

1. Has a substantial portion of fixed assets been

disposed off during the year? "Substantial" has to be

proportion of assets disposed off to that category of

assets and also total assets of the company in value terms

2. Determine whether such disposal affected the going concern status of company or not by carrying out

procedures such as- analysis and discussion with the

management of the significance of such assets to the

company as a whole, reading the minutes of the

meetings of the Board of directors and others to

understand the entity's future business plans, review

of the post balance sheet events to analyse the

affect of such disposal on the going concern status

3. Consider any adverse implications on account of

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Inventories

Audit Procedures Response Remarks

i)Finished Goods Yes

ii) Raw Materials and Components N/A

iii) Stores & Spares Yes

iv) Work-in-Progress N/A

v) Maintenance Supplies Yes

vi) Consumables and Loose Tools N/A

vii) Packing Materials

No

reasonable. Done

1. Has the management physically verified the

following items of inventory during the year ?

Considering Cost Benefit physical verification has not been carried out, secondly packing material is procured as & when required, which result to very less stock.- Impact on profit is immaterial

2. Review firm's completed stock take questionnaire and conclude on the effectiveness of the process and whether the frequency of such verification is

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Inventories

Audit Procedures Response Remarks

Yes

2. If so, have we completed the check list for attendance at

physical stock taking? Yes

3. Are we satisfied that stock taking procedures were

reasonable and adequate in relation to the size of the

Company, nature of its business and volume of stock? If not,

list out the inadequacies/weaknesses observed by us. Yes

4. In case we have not observed the physical verification, have

we studied the stock taking instructions issued by the clie N/A

(Attach a copy where available)

control points-

-The independence of persons taking stock Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

-Checking of the serviceability and adequacy of the

measuring instruments Yes

6. Is there any report/certificate from the client’s

official-in-charge of stock taking evidencing that the stock

taking instructions were followed? (Attach a copy) No

7. In case the client does not have any instructions in writing,

is there any report from the client’s official-in-charge of stock

taking outlining the procedures followed during the course of

stock taking? (Attach a copy) No

8. On the basis of our findings, are we satisfied that stock taking

procedures were reasonable and adequate in relation to the size

of the Company and nature of its business? If not, list out the

inadequacies/weaknesses. Yes

1   Have we observed the physical verification?

5.Do these instructions cover, inter alia, the following key

- Proper stacking/arrangement of stocks to facilitate identification and counting?

-Usage of counting tags or identification marks etc in order to prevent double counting?

-Control of stock taking sheets/tags (e.g. numerical sequencing) and reconciliation of the sheets/tags at the conclusion of stock taking

-Control over movement of stocks during the course of stock taking (Stoppage of movements during stock taking is highly desirable).

-Collection of cut-off details viz. last challan No., GRN No., Excise Gate Pass No. etc.

-Comparison of rough stock sheets with bin cards and preparation of shortage/excess list

- Signing of stock sheets by the client’s staff (both by the counter and by the supervisor)

-Identification of damages, obsoletes and slow moving stocks

- Proper segregation of goods invoiced and sold but yet to be despatched and other stocks of third parties

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Inventories

Audit Procedures Response Remarks

1.Whether the records of the Inventory show the following

particulars:

(i) details regarding dates of transactions; Yes

(ii) relevant document number and department identification, Yes

(iii) identification code of the item; Yes

(iv) quantity of the receipts and issues and balances; Yes

(v) physical verification quantities; Yes

(vi) location; Yes

(vii) particulars of the item, like nomenclature, nature, etc. Yes

(vii) valuation details; etc. Yes

2. Are the stock registers are updated as and when the

transactions occur? Yes

3. Verify that the transactions entered in stock registers are duly

supported by relevant documents. Yes

4. Verify whether inventories as per Register/Records

agree with General Ledger balances. No

5. Obtain a statement of descrepancies obtained

and consider if they are material, whether the same

have been properly adjusted in the books of

account. Done

Descrepancies where adjusted during the year. (Ref.":- Stock Folder / Inventory final (jan&feb) (7-3-05).xls )

Descrepancies where adjusted during the year. (Ref.":- Stock Folder / Inventory final (jan&feb) (7-3-05).xls )

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Loans granted

Audit Procedures Response Remarks

No

N/A

N/A

N/A

purpose of the loan, prevailing market rates of

interest etc., N/A

Number of Parties

2. Loan transactions that have been squared up during the year also would get covered under the requirement.

1.Has the company granted any loans to companies,firms and other parties covered in the Register maintained under Section 301 of the Act?

2. Obtain a statement containing the name of the company, firm or other Party, nature of relationship, amounts and dates of loans granted, amounts and dates of loans refunded amounts and dates of interest received, closing balance at year end, particulars of instalments (amount and period outstanding for) of overdue principal and interest together with the details regarding the rate of interest, if any, and brief terms and conditions like security, repayment particulars (principal and interest) etc.,

3. Examine the above statement with necessary

documents and records on a reasonable test check basis.

4. Report information as per the table below in the case of all loans granted.

5. Check and conclude that the rate of interest and other terms and conditions are not prima facie

prejudicial to the interest of the company or otherwise by consideration of factors such as- loan agreements, borrower's financial standing, its ability to lend,

nature of security, the availability of alternative sources of finance, the urgency of borrowing,

Amount involved (In Rupees)

Year end balance (In

Rupees)

Notes : 1. The requirement of this clause also covers advances which are in the nature of loans.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Loans taken

Audit Procedures Response Remarks

No

No

3. Examine the above statement with necessary

N/A

all loans taken. N/A

to the interest of the company or otherwise by

nature of security, the availability of alternative sources

of finance, the urgency of borrowing, purpose of the

loan, prevailing market rate of interest etc., N/A

Number of Parties

2. Loan transactions that have been squared up during the year also would get covered under the requirement.

1.Has the company taken any loans from companies,firms and other parties covered in the Register maintained under Section 301 of the Act?

2. Obtain a statement containing the name of the company, firm or other Party, nature of relationship, amounts and dates of loans taken, amounts and dates of loans repaid, amounts and dates of interest paid, closing balance at year end, particulars of instalments (amount and period outstanding for) of overdue principal and interest together with the details regarding the rate of interest, if any, and brief terms and conditions like security, repayment particulars (principal and interest) etc.,

Register was not ready at the time of audit

documents and records on a reasonable test check basis.

4. Report information as per the table below in the case of loans

5. Check and conclude that the rate of interest and other

terms and conditions are not prima facie prejudicial

consideration of factors such as- loan agreements,

company's financial standing, its ability to borrow,

Amount involved

(In Rupees)

Year end balance (In Rupees)

Notes:1. The requirement of this clause also covers advances which are in the nature of loans.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Repayment of Loans

Audit Procedures Response Remarks

Done

Done (In Rupees)

Name of the Party Year end Balance

on each anniversary of the loan.

2. Where no stipulations have been made for repayment of the loan, the auditor should state his inability to make

comments in the absence of terms of repayment.

1. The regularity of payment of principal

amount and interest should be considered

in the light of procedures such as-review of repayment schedule,loan agreements and other relevant documents, actual dates of payment of principal and interest.

2. The following particulars should considered in reporting the irregularity of principal and interest-

Overdue Principal

Overdue Interest

Notes: 1. If a due date for payment of interest is not specified, it would be reasonable to assume that it falls due

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Loans overdue

Audit Procedures Response Remarks

Done

2. The reasonableness of steps taken by the company for

recovery and payment should be judged in the light of

factors such as issue of reminders, sending advocate's

notice, management's representations, follow up with the

borrowers, arrangement for raising finances, restructuring

proposals, arrangement with lenders for compromise

proposals etc., as the case may be. Done

3. If not satisfied about the reasonability of steps taken,

consider the name of the party, overdue amount of

principal and interest for reporting. Done

1. Obtain a statement with the names of the companies, firms or other parties, amount of loan granted or taken, outstanding amount at the year end and steps taken for the recovery or payment thereof.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Internal controls procedures

Audit Procedures Response Remarks

1. On the basis of our understanding,

documentation and validation thereof in the

Myclient file-control activities in the areas of

Inventory cycle,property, plant and equipment

cycle,revenue and receivables cycle, review of

internal audit reports are we satisfied that there

are adequate internal control procedures

commensurate with the size of the company

and the nature of its business for the purchase

of inventory and fixed assets and for the sale of

goods? If not document the inadequacies and

weaknesses thereof and consider implications

for reporting. Yes

2. Review the reports of internal audit, minutes

of the Board, Audit committee, management

committee, if any and anyother relevant internal

reports to identify major weaknesses in internal

controls and whether there is any continuing

faliure to correct such weaknesses. Done

3. In the case of continuing failure to correct

any major weakness identified, report the

weakness and steps taken by the management to

correct such weakness or the failure to correct

as the case may be. No

4. Consider the implications of such control

weaknesses on the nature, extent and timing of

audit procedures in those areas and implications

if any on the adequacy or reliability of the books

of accounts and the overall report. Done

company or may result in a material misstatement in the financial statements is considered a major

weakness.

2. Continuing failure should be judged with reference to the weakness that existed at the time of

previous year's audit.

3. If any major weakness is corrected by the date on which the audit report is issued the fact of such

Only Board minutes were available for review which does not refer to any major weakness in interal control.

Notes: 1. Ordinarily, any weakness in internal controls that may result into a significant loss to the

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correction subsequently must also be reported.

WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Completeness of Register maintained under Section 301 of the Act and transactions thereof

Audit Procedures Response Remarks

N/A

N/A

No

parties at the relevant time. N/A

N/A

party etc., N/A

directors of the company are interested in the subsidiary.

1.Has the company entered into transactions that need to be entered into the register maintained under Section 301 of the Act?

2.Obtain a list containing the name of the party, nature of relationship, description of transaction and amount and date of each such transaction individually for all the transactions during the year.

3. Check the list for completeness of information with

reference to- knowledge from previous year's audit, review of

entity's procedures for identification of entries to be made in

301 register, inquiries as to the affiliation of directors and key

management personnel, officers with other entities, review of

shareholders records to identify the principal shareholders,

review of entity's income tax returns, review of joint venture

and other relevant agreements, minutes of board meetings, Form 24AAs submitted etc.,

4. In the case of transactions exceeding the value of Rs. five

lakhs in respect of any party and in any one financial year

examine information such as price lists, quotations and records relating to prices for similar transactions with other

5.In cases where transactions are entered with sole suppliers examine the reasonableness of prices paid with reference to list prices of the supplier concerned, other trade terms of the supplier, etc. and where required consider the same appropiately in the report.

6. The reasonableness of the prices should be determined

taking into account factors such as delivery period, quality

of the product, quantity, credit terms, past performance of the

Notes: 1. The requirement of this clause does not cover transactions with subsidiaries perse unless one or more of the

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Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Public Deposits

Audit Procedures Response Remarks

the rules framed thereunder? No

system and procedures in place to ensure

and the rules made thereunder. N/A

N/A

or any interest thereupon. Based on the

N/A

58AA and the rules. N/A

comply with the order. N/A

1. Has the Company accepted any deposits from

public within the meaning of Section 58A, 58AA and

2. Obtain a general understanding of Section 58A,

58AA and the relevant rules and ascertain the

compliance with the provisions of the said sections

3.Check the compliance with the requirements of the

Act and the rules framed thereunder by completing

the firm's checklist on Acceptance of deposit rules and Companies Act 1956.

4. Examine the internal controls in place for intimating

the Tribunal (Company Law Board) any default in

repayment of deposit made by small investors or part

understanding so gained, perform a reasonable test

check of the deposits received from small investors.

5. Enquire of the management possible instances of

non-compliances with Section 58A, 58AA and

relevant rules and about any order passed by the

Company Law Board for contravention of Section 58A,

6. Examine the correspondence and documents filed

with the Registrar of companies to ascertain whether

there is any contravention or whether the Company

Law Board has passed and order. If an order has been

passed, examine the steps taken by the company to

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Internal Audit

Audit Procedures Response Remarks

financial year? No

and the nature of its business-

-Size of the internal audit department; N/A

- Qualifications of the internal audit staff; N/A

-Reporting levels of internal audit; N/A

- Areas of coverage; N/A

audit department; N/A

procedures thereof. N/A

2. While evaluating the adequacy of internal audit system, existence or otherwise of other forms of internal controls must also

be taken into account.

1. Is the company a listed company or having paid up capital

and reserves exceeding Rs. 50 lakhs as at the commencement

of the financial concerned or having an average annual

turnover exceeding five crores rupees for a period of three

consecutive financial years immediately preceding the

2.Consider the following factors to determine whether the

internal audit system is commensurate with the size of the

-Adequacy of technical assitance available to the internal

-Reports submitted by the internal audit and follow up

Notes: 1. The date of the balance sheet must be considered in reckoning the listing status of the company.

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Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Maintenance of Cost Records

Audit Procedures Response Remarks

1. Has maintenance of cost records prescribed

by central government under Section 209(1)(d)

to the company? N/A

2. Obtain a list of books and records made

and maintained by the company under Section

209(1)(d) of the Companies Act,1956. N/A

3. Conduct a general review of the cost records

to ensure that the records as prescribed are

made and maintained. N/A

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Statutory Dues

Audit Procedures Response Remarks

Yes

policies and procedures in place for

identifying and payment of such dues. Yes

-Name of the statute Yes

- Nature of the dues Yes

- Amount Yes

- Due date Yes

-Date of payment Yes

Yes

the following details- Yes

- Name of the Statute Yes

- Nature of the dues Yes

- Amount Yes

- Forum where dispute is pending Yes

required to be paid regularly to a body.

2. Reporting under this clause is required irrespective of the fact whether or not there are any

arrears as at the balance sheet date.

3. For a matter to be considered as "disputed" there must be a positive evidence or action

on the part of the company to show that it has not accepted the demand for payment of

duty or tax. Auditor need not make a judgement about the sustainability or otherwise of the

claim. A mere representation to the department shall not constitute a dispute.

4. Penalites or interest would be covered under "amounts payable".

1. Obtain a statement containing the list of various statutes under which the company is required to make payments to appropriate authorities, the nature and amounts of payments under each statute, the due dates for making such payments, the dates on which the payments were made by the Company, the arrears due for more than six months as at the Balance Sheet date and the date and amount of subsequent payments, if any made out of such arrears.

2. Obtain a general understanding of various

statutes governing the entities and dues payable

under those statutes. Make enquiries of the

management about the statutes under which

the company is required to pay dues and the

3. Verify the statement under 1 above, with the

general understanding obtained and gained,

underlying documents and records.Compile the

the following details in the case of arrears of statutory dues-

4.Whether the Company has been generally regular in depositing statutory dues or otherwise, report the same appropriately.

5. In the case of disputed statutory dues, compile

Information under this clause should be given

separately for each period eventhough the

dispute relates to the same nature of statutory dues, like income taxes etc.,

Notes: 1. The scope under this clause is restricted to only those statutory dues which are

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Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Accumulated Losses etc.,

Audit Procedures Response

more years as at the balance sheet date? No

than 50% of company's net worth. N/A

immediately preceding financial year. N/A

net worth, as at the balance sheet date and in arriving at the cash losses. The fact of such adjustment must be indicated

in reporting under this clause.Where the qualifications are not quantifiable, the report should state the fact that the

effect of such unquantified qualifications has not been taken into consideration in computing the above amounts.

2. Net worth is the sum total of paid up capital and free reserves after deducting the provisions or expenses as may be

prescribed. Free reserves means all reserves created out of profits and share premium account but does not include

revaluation reserve, write back of depreciation provisions and amalgamation.

3. Loss shown by the profit and loss account is adjusted for the effects of transactions of a non-cash nature such as

Depreciation, amoritisation, any deferrals or accruals of past or future cash receipts or payments in determining the cash losses.

1.Has the company been registered for a period of five or

2.Compute the accumulated losses and net worth of the company as at the end of the financial year. Verify

whether the accumulated losses as at that date are more

3. Compute and check whether the company has incurred

cash losses for the period under review and in the

Notes: 1.The impact of qualifications which can be quantified must be adjusted in computing the accumulated losses and

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Default in repayment of dues to Banks,Financial Institutions or debentureholders

Audit Procedures Response Remarks

N/A

N/A

defaults have occurred.

2. Dues cover all amounts including interest and principal.

3. Applications for reschedulement/resturcturing will not be binding unless approved.

4. Dues not paid by the company on account of unilateral disputes tantamount to default.

1. Obtain a statement containing the names of the

institution/bank/debenture holder, the period

and amounts of default, due dates thereof and

dates and amounts of subsequent payments, if any.

2. Verify the statement in 1 above, with documents such as agreements, other terms and conditions, debenture trust deed as the case may be. Identify the period and amount of default for reporting.

Notes: 1. The requirement covers all the defaults exisiting on the balance sheet date, irrespective of when the

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Maintenace of documents and records for loans and advances granted

Audit Procedures Response Remarks

1. Whether the company has granted any

loans and advances on the basis of security

by way of pledge of shares, debentures and

other securities? No

2. If yes, examine whether documents and

records include details such as- name and

address of the borrower, amount, terms and

conditions such as period, rate of interest,

security etc.,; disbursements, repayments,

recovery of interest; full particulars of

security- names of the companies, number and

class of shares, distinctive numbers, particulars

as to title etc; documents needed for transfer,

details as to periodical ackowledgements of the

parties, proof to establish the power of the

party to borrow- e.g. board resolution etc N/A

3. Obtain a statement containing the details of

such loans granted-name of the party, amount

of loan/advance granted, amount outstanding

as the balance sheet date and type and nature of

security and verify the same on a reasonable

test check basis with documents and records

mentioned in 2 above. N/A

4. Verify the securities pledged by reference to

physical securities or statements from

depository participants.In the case of

dematerialized form of securities confirm that

the company has a valid right to sell the

shares in the event of default. N/A

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N/A

6. List the deficiencies for reporting. N/A

hypothecation, guarantee etc.,

2. Other securities may be construed to mean bonds or promissory notes issued by a government

or semi-government authority.

5.Whether security is in the custody of company and market value of security is adequate to cover the outstanding amount of loan and interest?

Notes: 1. The requirement of this clause does not extend to other forms of security like

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Chit Fund Company

Audit Procedures Response Remarks

1. Is the Company a chit fund company? No

2. Gain an understanding of the relevant Acts and the

rules applicable to the company situated in a particular

state/union territory. N/A

3. Test check compliance with the requirements under

the Act and the rules as applicable. N/A

3. Ensure that the requirements of the rules regarding

the records to be maintained, returns to be filed etc.,

are complied with, where applicable. N/A

as they have application to the accounts of the chit fund company.

2. If the company's branches are situated in more than one state, legal opinion may be sought regarding the

applicability and compliance with the relevant provisions of the Acts/Rules.

Notes: 1. The requirement only applies to checking compliance with the provisions of special statutes in so far

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Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Nidhi/mutual benefit fund/societies

Audit Procedures Response Remarks

1. Is the Company a nidhi/mutual benefit fund/

society? No

2. Check complaince with the following-

a) whether the net ownedfunds to deposit

liability ratio is more than 1:20 as on the

date of balance sheet; N/A

b) whether the company has complied with

the prudential norms on income recognition

and provisioning against sub-standard /

default / loss assets; N/A

c) Whether the company has adequate

procedures for appraisal of credit proposals

/ requests, assessment of credit needs and

repayment capacity of the borrowers by examination

of the policies and procedures a reasonable test

check of the transactions effected during the year

with relevant documents such as individual borrower

files, loan application forms,supporting

documentation, sanctions, security documents N/A

d) Whether the repayment schedule of

various loans granted by the nidhi is based

on the repayment capacity of the borrower

and would be conducive to recovery of the

loan amount by examination of the system of

granting of loans and making a reasonable test

check of transactions. N/A

3. Ensure that the requirements of the rules regarding

the records to be maintained, returns to be filed etc.,

are complied with, where applicable. N/A

4. Consider the implications of non-compliances

under 2 a) and b) above also in the auditors' report

on the financial statements. N/A

by accumulated losses and intangible assets appearing in the last audited balance sheet of the company

i.e. balance sheet of the current year.

2. Deposit liability would mean aggregate of deposits accepted by the company.

Notes: 1. Net owned funds means the aggregate of paid up equity capital and free reserves as reduced

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Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Dealing or Trading in Securities

Audit Procedures Response Remarks

1.Is the company dealing or trading in shares, securities,

debentures and other investments? No

2.Whether the records of the Investments show the following

particulars:

(i) details regarding dates of transactions-purchases and sales. N/A

(ii) classes of investments N/A

(iii) distinctive numbers and the face value ; N/A

(iv) quantity of the receipts and issues and balances; N/A

(v) physical verification quantities; N/A

(vi) cost, valuation details; N/A

(vii) profit/loss arising on sale N/A

(viii) amounts receivable/payable. N/A

3. Examine the timeliness of updation of the records by adpoting

procedures such as surprise inspection of the records, system of

internal controls over updation, review of internal audit and other

reports for exceptions, if any, in this regard. N/A

4. Verify that the transactions entered in the registers are duly

supported by relevant documents. N/A

5. Verify whether the aggregate of balance as per the Registers/Records

agrees with General Ledger balances. N/A

6. Obtain a statement containing details of investments not held in the

name of the company and those where exemption under Section 49 is

available. Check the statement with necessary supporting documents

as in 4 above and with the requirements of Section 49 of the A N/A

N/A

investments with a view to hold such investments and earn income from dividend or interest.Factors to consider to decide

in this regard include-objects of the company, period for which investments are normally held, reasons for purchase/sale,

internal approvals covering such purchase and sale, method of valuation-cost or lower of cost or market value, treatment

of profits/gains in the tax assessments etc.,

7.In case investments which are intended to be sold immediately may not have been transferred in the name of the company, whether, in the circumstances of each case, the failure to transfer the investments to the company’s name is understandable.

Notes:1. The requirement does not apply to companies which are not dealing or trading in investments but purchase

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Guarantees given

Audit Procedures Response Remarks

Yes

2. Obtain a list containing the name of the party, nature

of relationship, if any, amount of loans taken, closing

terms and conditions like description of security given,

estimated amount of such security, default action

conditions, if any. Yes

management letter. Yes

amounts, the parties in respect of whom and the types

1. Has the company given any guarantees for loans taken by others from bank or financial institutions?

balance as at the balance sheet date together with brief

3. Understand and document the internal controls over

issue of guarantees and confirm its operation during the

year. Consider implications, if any, on reporting or in

4. Verify the above statement with documents such as

memorandum of association- to confirm whether the

company can issue guarantees, maximum permissable

of guarantees that can be given; minutes of the board of

directors, compliance with the requirements of Section 372A of the Companies Act, letters of borrowing parties requesting the

295/372A of the Companies Act, letters of borrowing

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Comsat:Confirmation for this to be obtian form the BOD

guarantee documents etc., Yes

of the clauses of the memorandum of association, consider

the same appropriately in reporting. Yes

Yes

7. If in judgement and conclusion it was established that

the terms are prejudicial to the interest of the company,

obtain an explanation from the company why the company

considers the same as not prejudicial. Yes

8. If not convinced by management's explanation, consider

appropriately in reporting disclosing the amount of such

guarantee. Yes

financial institutions and not from other sources.

2. The requirement only relates to guarantees given during the year.

3. In determining whether the any guarantees given are prejudicial to the interest of the company,

factors such as financial standing of the party, its ability to borrow, nature of security offered,

availability of alternate sources of finance, urgency of the borrowing for which the guarantee was given etc.,

parties requesting the guarantee, company's letters,

5. If the company has issued a guarantee in contravention

6.Whether the tangible/ intangible benefits flowing to the company due to furnishing of guarantee are commensurate with risk undertaken by the company in doing so?

Notes:1. The requirement only applies to guarantees given for loans taken by others from banks or

WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Utlisation of Term Loans

Audit Procedures Response Remarks

No

2.Obtain a statement containing the specific terms of

loans and the details of application-amounts, dates and

the purpose. N/A

3.Verify the statement with documents such as sanction

letters and other documents containing the terms and

conditions and those relating to actual utilisation. N/A

4. If term loans were not applied for the purpose for

which they were obtained, indicate the amount and the

purpose for which it was ultimately utilised. N/A

5. In the case of temporary application of funds for other

purposes before they were utilised for the stated purpose,

mention such fact in the report. N/A

N/A

2. The reporting requirement under this clause also covers temporary use of surplus funds.

3. It is not necessary to establish a one to one relationship with the amount of term loan and its utilisation.

1. Has the company obtained any term loans or made any utilisation during the year?

6.Whether the funds flow statement has been reviewed where one to one correlation is not possible?

Notes: 1. Working capital term loans are not within the scope of this clause.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Utlisation of Funds

Audit Procedures Response Remarks

1.Obtain a statement containing the specific

terms of funds and details of use-amounts and

nature. N/A

2. Compare the quantum of long term funds

with the long term application of funds. N/A

3. Compare the quantum of short term funds

with the short term application of funds. N/A

4. If the differences point towards use of short

term funds for long term investment and vice

versa , consider appropriately in reporting. N/A

for depreciation, long term debt securities, long term loans. Long term application of funds would

include investment in fixed assets, long term investments and other assets of similar nature,

repayment of long term loans and advances or redemption of debt securities, use for core working

capital etc., Short term sources of funds include temporary credit facilities like cash credits,

overdraft, reduction in current assets or increase in current liabilities etc., Short term application of

funds includes all application otherwise than for long term use, increase in current assets or

decrease in current liabilities etc.,

2. The requirement has to be determined on the basis of the overall picture of the sources and

application of funds based on the balance sheet of the company unless a one to one direct

relationship can be established between a particluar source and application.

Notes: 1. Long-term sources of funds would include share capital, reserves and surplus, provision

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Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Preferential allotment of shares

Audit Procedures Response Remarks

1. Has the company made any preferential allotment of shares to

parties and companies covered in the Register maintained under

Section 301 of the Companies Act,1956? No

N/A

3. In the case of listed companies check whether the price

for shares issued on a preferential basis is not less than

higher of the following--the average of the weekly high and low of the closing prices

of the related shares quoted on the stock exchange during the

six months preceding the relevant date. N/A

- the average of the weekly high and low of the closing prices

of the related shares quoted on the stock exchange during the

two weeks preceding the relevant date. N/A

4. In the case of listed companies, confirm and verify that the

company has complied with the requirements of guidelines

laid down in this regard by SEBI. N/A

5. In the case of private company and an unlisted public company ,

examine the method used for valuation of the shares and also

ascertain the reasonableness of the assumptions underlying the

calculation. N/A

6.If in the judgement and conclusion it was eastablished that the price

charged is not fair, obtain a representation from the management as to

why such price charged is not prejuducial to the interest of the

company and consider appropriately in reporting. N/A

7. Consider compliance with the requirements of AAS-9 "Using the

work of an Expert" if the valuation report of an expert is used as the

basis. N/A

8. If the company has made preferential issue by passing an ordinary

resolution, also examine the relevant order of the Government passed

in this regard. If on the basis of order it is concluded that the price

charged is not prejudicial, state the fact of reliance on such order

for the purpose of reporting. N/A

2. In the case of a listed company allotment of shares under Section 81(1A) of the Companies Act,1956 is known as

preferential allotment of shares.

2. Obtain a statement containing the names of the parties and companies, nature of relationship, description of allotments made-equity/preference, number of shares, price and terms and conditions of the allotments made during the year.

Notes: 1.The term "shares" includes both preference as well as Equity.

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Securites for Debentures

Audit Procedures Response Remarks

No

2. Verify the debenture trust deed executed under Section

117A of the Act in respect of debentures issued during the

year with particular reference to security require N/A

3. Verify whether such security is created as required under

section 125 and 130 of the Act by examining the N/A

evidencing the charge-forms filed with ROC etc.,

1. Has the company issued any debentures and the same outstanding at the end of the year?

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

End use of Public issue Monies

Audit Procedures Response Remarks

No

2. Obtain a statement containing the quantum of money

raised on public issue of any security made by the company

during the year and details of end use of money so raised. N/A

3. Verify such statement with reference to end use as set

out in the Prospectus. Where the issue exceeds Rs. 500

Crores, refer the half yearly reports of the monitoring agency

as submitted to SEBI. N/A

4. Verify the disclosure made by the company in the

financial statements in this regard. N/A

5. If we are not satisfied with the disclosures made in the

financial statements, consider the matter for reporting

setting out clearly the information which should have

been dislosed. N/A

6. Whether the cash flow statement has been reviewed where

one to one correlation is not possible? N/A

7. If we are unable to determine the end use of money

raised from public issues state the fact together with the

reasons thereof in our report. N/A

1. Has the company made any public issue or made utilisation during the year?

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WALTER & ASSOCIATES

Completed by:

Date: 7th April, 2005.

Reviewed by:

Date:

Fraud

Audit Procedures Response Remarks

fraud considerations as per steps given under

"Fraud Risk" in MYClient file. Done

we satisfied that there are no indications

during the year? Yes

Done

our reporting. Done

1. Complete our understanding and assessment of

2. On the basis of work carried out as above, are

of fraud on or by the company noticed or reported

3. If any fraud is noticed or if there is a doubt about the existence of fraud, carry out procedures as mentioned in AAS-4 "The Auditor's Responsibility to consider fraud and error in an audit of Financial Statements"

4. If the response to 2 above is "No" determine the . nature and extent of such frauds and implications on

Note: The following are the indicative sources relating to identification of Fraud- i. the reports of internal reviews conducted, if any.ii.Inquiries of the management about any frauds on or by the company that its has noticed or that have been reported to it. iii. discussions with other employees of the company. iv. Examination of the minutes book of the meetings of Board, audit committee etc.,

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WALTER & ASSOCIATES

Clause No. Area/Requirement Brief Description of the Issue How addressed in the Audit

4(i) (a) Fixed Assets

4(i) (b) Fixed Assets

4(i)( c) Fixed Assets

4(ii) (a) Inventories

4(ii) (b) Inventories

4(ii) ( c) Inventories

4(iii) (a) Loans granted

Loans taken

4(iii)(b) Loans granted

Loans taken

4(iii)( c) Loans granted or taken

4(iii) (d) Loans granted or taken

4(iv) Internal Controls

4(v)(a) & (b)

4(vi) Fixed Deposits

4(vii) Internal Audit

4(viii) Cost Records

Statutory dues

4(x) Accumulated losses etc.,

4(xi) Dues to Banks & Fis etc.,

4(xii) Loans and Advances granted

4(xiii)(a) Chit Fund company

4(xiv)

4(xv) Guarantees

4(xvi) Term Loans

4(xvii) Funds raised

4(xviii) Allotment of shares

4(xix) Debentures

4(xx) Money raised on public issue4(xxi) Fraud

Register under Section 301etc.,

4(xi) (a) & (b)

4(xiii)(a) to (d)

Nidhi/mutual benefit fund/society

Dealing or Trading in Securities

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whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;