CA Shishir Agrawal

The ministry of corporate affairs, vide notification dated 29 March 2016, has issued the Companies (Auditor’s Report) Order, 2016 which will be applicable from financial years commencing on or after 1 April 2015.  The new Order introduced few new reporting requirement by curtailing few in comparison of Companies (Auditor’s Report) Order, 2015. Following is the comparison between CARO 2015 and 2016:

Sr.  No.Companies (Auditors’ Report) Order, 2015 Companies (Auditors’ Report) Order, 2016 Remarks
Applicability

 

 

 

 

 

 

 

 

Applicable on all companies other than:Applicable on all companies other than:Changes in respect of applicability of CARO on Private limited company
-Banking Company-Banking Company
-Insurance Company-Insurance Company
-Sec 8 Company-Sec 8 Company
-One Person Company-One Person Company
– Private Limited company not having– Private Limited company (not being holding/subsidiary of public company) not having
:Paid up Capital and reserves>50 Lacs  during the year:Paid up Capital+ reserves>1 crores as on balance sheet date
:loans outstanding> 25 Lacs during the year:loans outstanding> 1 crores during the year
:Turnover > 5 crores during the year:Total revenue as per schedule II>10 crores
1

 

 

-Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.-Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.New CARO demands additional reporting for such immovable assets whose title are not owned by the company.
-whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;-whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;
-Whether the company holds title of immovable property held by the company, If not provides the details thereof
2-whether physical verification of inventory has been conducted at reasonable intervals by the management-whether physical verification of inventory has been conducted at reasonable intervals by the management and if any discrepancies has been notices are properly dealt with or not.The requirement has been curtailed to physical verification and treatment of discrepancies noticed. The auditor no need to report for records maintained by the company for inventories.
-Are the procedures of physical verification of inventory followed by the management reasonable and adequate in relation to the size of the company and the nature of its business. If not, the inadequacies in such procedures should be reported
-Whether the company is maintaining proper records of inventory and whether any material discrepancies were noticed on physical verification and if so, whether the same have been properly dealt with in the books of account;
3-Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act. If so,-Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act. If so,– The new CARO provides for the term and conditions of loan provided.
-whether receipt of the principal amount and interest are also regular; and-Whether the schedule of repayment is stipulated, whether the repayment is regular or not.– The new carob provides for overdue payment for more than 90 days instead outstanding of amount above the threshold limit of 1 lac
-if overdue amount is more than rupees one lakh, whether reasonable steps have been taken by the company for recovery of the principal and interest;-Whether the term and conditions of the grant of such  loan are prejudicial to the interest of the company
-If the amount is over due , then state the amount over due for more than 90 days and what steps company has followed.
4-Is there an adequate internal control system 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 and services. Whether there is a continuing failure to correct major weaknesses in internal control system.-In respect of loans, investments, guarantees, and security whether provisions of section 185 and I86 of the Companies Act, 2013 have been complied with. If not, provide the detail thereof.The new CARO instead of internal control provides for the loans and investments and other which are covered under sec 185 and 186 of the 2013 Act.
5-In case the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed thereunder, where applicable, have been complied with? If not, the nature of contraventions should be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?-In case the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed thereunder, where applicable, have been complied with? If not, the nature of contraventions should be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?No Change
6where maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, whether such accounts and records have been made and maintained;where maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, whether such accounts and records have been made and maintained;No Change
7-Is the company regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated by the auditor.-Is the company regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated by the auditor.In new CARO the auditor need not provide for third limb of old CARO requirement
-In case dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not constitute a dispute).-In case dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not constitute a dispute).
whether the amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.
8-Whether in case of a company which has been registered for a period not less than five years, its accumulated losses at the end of the financial year are not less than fifty per cent of its net worth and whether it has incurred cash losses in such financial year and in the immediately preceding financial year;-Whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders? If yes, the period and amount of default to be reportedThe auditor need not report on point 8 of old CARO instead point 9 of Old CARO has been shifted to Point 8 of new CARO.
9whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders? If yes, the period and amount of default to be reportedwhether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported;Point 9 of old CARO has been shifted to point 8 of new CARO.  Point 9 of new CARO asks for utilization of end use of money raised through IPO and debt instruments
10whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company;whether any fraud by the company or officers or employees has been noticed the nature and the amount involved is any fraud on the Company by its or reported during the year; If yes, to be indicated;-Point no 12 of Old CARO has been shifted to point 10 of New CARO.
– Point 10 is no more in existence
11whether term loans were applied for the purpose for which the loans were obtained;whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same;-Point 11 of old CARO is covered in point 9 of new CARO.

– Point 11 of New CARO is new insertion.

12whether any fraud by the company or officers or employees has been noticed the nature and the amount involved is any fraud on the Company by its or reported during the year; If yes, to be indicated;Whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining ten percent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liabilities:-Point no 12 of Old CARO has been shifted to point 10 of New CARO.

– Point 12 of new CARO is new insertion.

13whether all transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc.. as required by the applicable accounting standards:New insertion
14whether the company has made any preferential allotment or private placement of shares or fully or partly convertibles debentures during the year under review and if so, as to whether the requirement of section 42 of the Companies Act,2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non- compliance:New insertion
15Whether the company has entered into any non-cash transactions with directors or persons connected with him and iI so, whether the provisions of section 192 of Companies Act, 2013 have been complied with;New insertion
16Whether the company is required to be registered under section 45 IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained.New insertion
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