The Institute of Chartered Accountants of India (ICAI)

Guidance Note on the Companies (Auditor’s Report) Order, 2016 issued by Auditing and Assurance Standards Board

The Ministry of Corporate Affairs has issued the Companies (Auditor’s Report) Order, 2016 (CARO 2016) vide Order dated 29th March 2016. The Order would be applicable for audit of the financial statements for the period beginning on or after April 1, 2015. As such it is applicable for the audits of financial year 2015-16 also. The Order contains several changes and new reporting requirements which were not covered in earlier CARO. These substantial changes made by the CARO 2016 necessitated the revision of the Statement on CARO 2003 earlier issued by ICAI.

An urgent need was felt by ICAI for providing appropriate guidance on CARO 2016 to the members so that the requirements and expectations of the Order can be fulfilled in letter and spirit by the auditors.

As compared to the Companies (Auditor’s Report) Order, 2015, the CARO 2016 has introduced a number of new or modified reporting requirements for the auditors.  These cover important aspects including:

  • Title deeds being held in the name of the company
  • Loans, secured or unsecured to parties covered under section 189 of the Companies Act 2013 – terms and conditions, repayment schedule and terms, regularity in repayment, etc
  • Compliance with provisions of sections 185 and 186 of the Companies Act 2013
  • Payment of managerial remuneration in accordance with section 197 of the Companies Act 2013
  • Compliance with Net Owned Funds to Deposits ratio of 1:20 by Nidhi companies
  • Compliance with section 177 and 188 of the Companies Act 2013 in case of transactions with related parties
  • Compliance with section 42 of the Companies Act, 2013 in case of private placement and preferential allotment of shares/FCDs/PCDs and end use of the funds so raised
  • Compliance with section 192 of the Companies Act 2013 in case of non-cash transactions with directors or persons connected therewith
  • Registration under section 45-IA of the RBI Act 1934

These would have wide implications for all audits wherever these reporting requirements apply.

The Auditing and Assurance Standards Board of ICAI has brought out Guidance Note on the Companies (Auditor’s Report) Order, 2016 for the benefit of the members. The Guidance Note was initially developed by three expert groups constituted by the Board for this purpose and thereafter finalised with the contribution of all the members of the Board and the Council. The Guidance Note has been written in an easy to understand language and contains detailed guidance on the various Clauses of CARO 2016 and the various issues and intricacies involved therein.

Direct Link :- Download Guidance Note on Companies (Auditor’s Report) Order, 2016 issued by ICAI

(Republished with Amendments)

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