1994 MAZDA INDUSTRIES & LEASING LTD. AUDITOR'S REPORT To the Members of Mazda Industries And Leasing Limited We have audited the attached Balance Sheet of Mazda Industries and Leasing Limited as at September 30, 1994 and the Profit and Loss Account for the period ended on that date annexed thereto and report that: 1. We have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of our audit except as stated in paragraph 4 below. 2. 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 the books except as stated in paragraphs 4 below. 3. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account. 4(i) As stated in note no.2 of Schedule 17, investments in shares of the aggregate book value of Rs.971.15 lakhs included under Stock-in-Trade and Rs.541.51 lakhs included under Investments and bank drafts of the aggregate value of Rs.4 lakhs included under Cash on Hand which were seized by the investigating agency were not available for our verification. ii) Attention is invited to note no.3 of Schedule 17 regarding shares of the book value of Rs.898.55 lakhs released by the Central Bureau of Investigation pursuant to an Order of the Special Court and application of the sale proceeds from these shares. iii) Attention is invited to note no.4 of Schedule 17 regarding investments of Rs.132.04 lakhs not delivered to the Company. These investments included under Stock-in-Trade were not available for our verification. iv) As stated in note no.5 of Schedule 17 no provision has been made in the accounts for dimunition of Rs.666.65 lakhs in the market value of the Company's quoted Stock-in-Trade. The Company has valued the Stock-in- Trade-lnvestments at cost instead of lower of the cost or market value as recommended by the Institute of Chartered Accountants of India. v) Attention is invited to note no.6 of Schedule 17 regarding the sum of Rs.20.58 lakhs included in Sundry Debtors being amounts due from certain Companies in which some of the directors of the Company are interested. We are unable to express an opinion on the recoverability or otherwise of the amount stated above. vi) Attention is invited to note no.7(i) and (ii) of Schedule 17 regarding accusations made in the First Information Reports/chargesheets filed by the Central Bureau of Investigation (CBI). As the impact on the Company's accounts and its net assets of any claims/liabilities that may eventually arise out of the investigations carried out by the CBI cannot be presently ascertained, we are unable to express any opinion thereon. vii) Attention is invited to note no.9(ii) of Schedule 17 regarding dimunition of assets cover for Debentures, the amount whereof is unascertainable. viii)As stated in note no.10 of Schedule 17, Fixed Deposits, Interest on Fixed Deposits and Debenture Interest in respect of earlier periods are yet to be reconciled with the respective balances in the general ledger and are subject to consequential adjustments. ix) Attention is invited to note no.11 of Schedule 17 regarding non provision of interest for the year ended September 30, 1994 and earlier period on intercorporate deposits. The effect thereof on the profits for the year, Reserves and Surplus and ent assets have not been determined as the interest liability is presently indeterminate for the reasons stated in the said note. x) As stated in note no.13 of Schedule 17, no provision has been made in the accounts in respect of Rs.117.05 lakhs demanded by a bank in pursuance of the guarantee given by the Company against loans made by the said bank to Mazda Deuspa Engineering Limited. xi) As stated in note no.14(i) of Schedule 17, the terminal loss/depreciation on the expiry of primary lease period in respect of leased assets remaining unsold is not charged to revenue. The written down value of such assets as at September 30, 1994 amounted to Rs.234.73 lakhs and the Reserves and Surplus are overstated by the said amount. xii) Attention is invited to note no.15 of Schedule 17 regarding dividends aggregating to Rs.16.03 lakhs and 6880 bonus shares of Associated Cement Companies Limited not received by the Company. xiii)As stated in note no.17 of Schedule 17, the Company has not received confirmation of balances from Real Estate Debtors, Lease Debtors, Brokers, Sundry Creditors and for Advances made by the Company. The above balances, therefore remain unverified and are subject to adjustments, if any. xiv) As stated in note no.18 of Schedule 17 unclaimed dividend of Rs.1.09 lakhs has not been transferred to General Revenue Account of Central Government as required by Section 205A(5) of the Companies Act, 1956. xv) As stated in note no.19 of Schedule 17 the Company has not paid dividend of Rs.60.73 lakhs (net) within the time specified under Section 205A(1) of the Companies Act, 1956. xvi) Confirmations were not available in respect of an aggregate balance of Rs.0.24 lakhs in current accounts with certain banks included under Current Assets. These balances therefore remain unverified. xvii)Attention is invited to internal control weaknesses referred to in paragraph 5(x). xviii)The Company has passed accounting entries for an aggregate of Rs.261.84 lakhs by debiting and crediting certain brokers accounts during the year. In the absence of confirmations these accounting entries remain unverified. xix) The Company has passed entries for purchase and sale of shares of a Company. In the absence of information to the extent to which such shares are paid up, the profit amounting to Rs.7.61 lakhs and loss amounting to Rs.16.12 lakhs included under Income from Investment Operations remain unverified. xx) Subject to the reservations contained in the foregoing paragraphs, in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view: a) in the case of the Balance Sheet, of the state of affairs of the Company as at September 30, 1994: and b) in the case of the Profit and Loss Account, of the profit for the period ended on that date. For and on behalf of CHANDABHOY & JASSOOBHOY Chartered Accountants Place : Bombay (N. RAMACHANDRAN) Date : March 2, 1995 Partner