ACA Alka Bhardwaj

Article contains Checklist for Matters to be included in auditor’s report under Companies (Auditor’s Report) Order (CARO) as applicable for financial statement of Financial year 2021-22.

PARA PARTICULARS Ascertain/verify/ check/ obtain reports / data as under: YES/NO
3 CONTD. Matters to be included in auditor’s report.
The auditor’s report on the accounts of a company to which this Order applies shall include a statement  a statement on the following matters, namely:-
1(a) (A)    whether company is maintaining proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment; Whether Property, plant and equipment register is maintained;
If yes, whether it includes the details of the situation of fixed assets (Location) / and quantitative details?
(a)    WEATHER Fixed Assets has been physically verified by the management at reasonable intervals and no discrepancies were noticed during the year.
(b)    WEATHER  the title deeds of immovable properties are held in the name of the company.
 (B)  whether the company is maintaining proper records showing full particulars of intangible assets; Whether records for intangible assets maintained.
 If yes, full particulars maintained?
(b) whether these Property, Plant and Equipment 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 physical verification made? If yes, take the copy of the physical verification report for record purpose. Compare the physical records with book records.
Whether any discrepancy on physical verification noticed as compared to the book records?
Whether discrepancies adjusted?
( c) whether the title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company, if not, provide the details thereof. Obtain a list of all immovable properties (other than taken on lease, for which lease deed in the favour in the company) as per the Note of Property, Plant and Equipment. (The total should match with the Gross Block)
Whether all these immovable properties are in the name of the company?
If the immovable properties taken on lease? If yes, whether lease agreement made in the name of the company? Provide the details in the following format:
(d) whether the company has revalued its Property, Plant and Equipment (including Right of Use assets) or intangible assets or both during the year and, if so, whether the revaluation is based on the valuation by a Registered Valuer; specify the amount of change, if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment or intangible assets; Whether the property, plant and equipment is revalued during the year?
If, yes, whether the valuation is done by a registered valuer? Obtain a copy of the valuation report.
If the valuation of the property, plant and equipment is more than 10% of net carrying value. If yes, then report with the amount.
( c ) whether any proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder if so, whether the company has appropriately disclosed the details in its financial statements;
II (a) whether physical verification of inventory has been conducted at reasonable intervals by the management and whether, in the opinion of the auditor, the coverage and procedure of such verification by the management is appropriate; whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed and if so, whether they have been properly dealt with in the books of account; Check the procedure of verification Obtain the details of how the physical verification is carried out, with the note on the procedure followed. Is it proper?
Obtain the copies of the reports of physical verification carried out during the year.
Check the coverage of the items verified.
Whether any discrepancies of 10% or more in each class of inventory noticed? Each class of inventories may be as under: Raw materials Work in progress Finished goods Stores and spares Loose tools Any other items
(b) whether during any point of time of the year, the company has been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets; whether the quarterly returns or statements filed by the company with such banks or financial institutions are in agreement with the books of account of the Company, if not, give details; Obtain a list of working capital loans sanctioned during the year, where the securities offered is current assets i.e Debtors, Inventories, fixed deposits, bills receivables etc. If yes, check:
Whether quarterly returns or statements filed as per the terms of sanction letter. If yes, report that these are filed. If not, report the period for which such statements are not filed.
If the figures submitted match with the books of account on that date. If match, then report that these figures match with the accounts. If not, report the discrepancies with quantification.
III whether during the year the company has made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties, if so, indicate- Obtain an entity wise list of: (i) investments made (ii) Guarantees provided (iii) Securities provided (iv) Loans granted (v) Advances in the nature of loans during the year. Obtain copies of the Board minutes approving such investments, guarantees or securities for such loans and advances.
(a) whether during the year the company has provided loans or provided advances in the nature of loans, or stood guarantee, or provided security to any other entity [not applicable to companies whose principal business is to give loans], if so, indicate-
(A)  the aggregate amount during the year, and balance outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to subsidiaries, joint ventures and associates; Obtain a list of loans and advances and  guarantees given or securities provided for: (i) Subsidiaries (ii) Joint ventures (iii) Associates Check if any loans and advances and guarantees are given, securities provided for them and report the aggregate amount of loans and guarantees given/securities provided and the balances at the year end.
( B) the aggregate amount during the year, and balance outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to parties other than subsidiaries, joint ventures and associates; Obtain a list of loans and advances and  guarantees given or securities provided to parties other than Subsidiaries, Joint ventures and Associates Check if any loans and advances and guarantees are given, securities provided for them and report the aggregate amount of loans and guarantees given / securities provided and the balances at the year end.
(b) whether the investments made, guarantees provided, security given and the terms and conditions of the grant of all loans and advances in the nature of loans and guarantees provided are not prejudicial to the company’s interest; Check if the terms and conditions of the loans and advances, guarantees provided are prejudicial to the interest of the company. (These can be prejudicial to the interest of the company is the terms and conditions are not beneficial to the company. i.e interest rate is very low, the guarantees or securities given by the company is very high compared to its financial position etc)
( c ) in respect of loans and advances in the nature of loans, whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayments or receipts are regular; Check  if the repayment of interest and principal is stipulated. And if so, whether it is recovered as per the stipulation.
  If the amount is overdue, state the total amount overdue for more than ninety days, and whether reasonable steps have been taken by the company for recovery of the principal and interest.
(d) In case any loan or advance in the nature of a loan is given which was due for repayment during the year and has been renewed or extended or fresh loans granted to settle the overdue of existing loans given to the same parties.  If yes, specify the total amount of such dues renewed or extended or settled by fresh loans and the percentage (proportion) of the total to the total loans or advances granted during the year (other than companies whose principal business is to grant loans).
(e )  In case the company has given any loans or advances in the nature of loans either repayable on demand or without specification of any terms or period of repayment.  If so, to specify the total amount, percentage thereof to the total loans granted, the total amount of loans granted to promoters, related parties as defined section 2(76) of the Companies Act, 2013.
IV If the company has given any loans to directors or any other person in whom the director is interested, or made any investments, whether the company has made compliance with the provisions governing such loans, investments and guarantees
V In case the company has accepted deposits or deemed deposits whether the company has followed the directives of the RBI as under: – Compliance with the provisions prescribed for accepting deposits under section 73 to 76 of the Companies Act, 2013. – The nature of contraventions, if the above provisions are not followed. – Compliance with any order passed by any court or tribunal. – Reporting of any non-compliance with the provisions of Companies Act, 2013.
VI In case the company is required to maintain cost records, If yes, obtain a  list of Cost accounts and records maintained. Check if these are updated on the date of audit.
VII (a) Whether the company has: – Regularly deposited statutory dues. Like income tax, GST, service tax  etc. Obtain a list of outstanding statutory dues with the due date for payment. Compare the period of due amount is more tha 6 months or not i.e. outstanding since 1st October onwards upto March. If there is any amount due for more than 6 months, report the same.
the forum before whom the dues are litigated.
(b) where statutory dues referred to in sub-clause (a) 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 be treated as a dispute); Obtain copies of assessment orders. Check if any amount is surrendered / disclosed as income as per the assessment orders? If so, whether the same is properly recorded in the books of account as income during the year. If not, report the amount not so recorded.
VIII Whether any transactions which are not recorded in the accounts have been disclosed or surrendered before the tax authorities as income during the year The details of such income tax assessments should be disclosed.
Whether such undisclosed income has been recorded in the accounts during the year
IX In case the company has made any default in the repayment of loans to banks, government, debenture-holders, etc. then the amount and period of default. Obtain a loan wise list with due dates and the installments amount due Check if the installments have been paid on due dates. If there is a default, then it should be reported.
Has the company been declared a wilful defaulter by any bank or financial institution or any other lender.
Have term loans been used for the object for which they were obtained; in case they have not been, the loan funds diverted and disclosure of the end use of such loans.
Has the company used funds raised for a short term basis for long term purposes. The nature and the amount of such funds.
Has the company raised any money from any person or entity for the account of or to pay the obligations of its associates, subsidiaries or joint ventures. The details of the money raised with the description of the transactions and the amounts in each case.
Has the company raised any loans during the year by pledging securities held in their subsidiaries, joint ventures or associate companies. The details of such loans and also the default in the repayment of the loans
the details of default or delays and rectification measures taken.
Has the company made any private placement or preferential allotment of shares or convertible debentures (fully, partially or optionally convertible) during the year, whether the same is in accordance with section 42 and section 62 of the Companies Act, 2013.
Whether the funds raised, have been used for the purposes they were raised and the non-compliance, if any.
XI Has there been any fraud by the company or any fraud done on the company. If any such fraud has been noticed or reported any time of the year If yes, nature and amount involved have to be reported
Whether the auditors of the company have filed a report in Form ADT-4 with the Central Government as prescribed under the Companies (Audit and Auditors) Rules, 2014
In case of receipt of whistle-blower complaints, whether the complaints have been considered.
XII Compliance with provisions applicable to a Nidhi company Maintaining of net owned funds to deposit ratio of 1:20 for meeting liabilities.
Maintaining 10% term deposits (which are unencumbered) for meeting liabilities
Details of any default in payment of interest on deposits or repayment of for any period.
XIII Whether the company has complied with the provisions of section 188 of the Companies Act, 2013 in respect of transactions with related parties whether appropriate disclosures are made in the financial statements.
XIV Does the company have an internal audit system in accordance with its size and business activities. Have the reports of the internal auditors been considered

PARA PARTICULARS Ascertain/verify/ check/ obtain reports / data as under: YES/NO
3 CONTD. Matters to be included in auditor’s report.
XV In case the company has undertaken non-cash transactions with their directors or other persons connected to the directors Obtain a list of non cash transactions by the company with the directors or the persons connected with them. Obtain a confirmation for compliance of  sections 192 by the management. If not complied, Then report.
XVII (a) Is the company required to be registered under the RBI under Section 45-IA of RBI Act, 193 and whether the company has obtained registration. Check the financials for the year under consideration. Check if the: (i) income from financial asset is 50% or more of its total income and (ii) financial assets are 50% or more of its total assets
(b) whether the company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934; If  both the above conditions are fulfilled, or  if the company is engaged in housing finance activities: If yes, check if it is registered as an NBFC. If not applicable, report that it is not required to be registered
( C) whether the company is a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India, if so, whether it continues to fulfil the criteria of a CIC, and in case the company is an exempted or unregistered CIC, whether it continues to fulfil such criteria; Obtain compliance with CIC norms by the company if applicable. Check if the criteria as a CIC is fulfilled. If yes, report that it continues to fulfill the criteria. If not, report accordingly
(d) Does the group to which the company belongs have more than one CIC as part of it,  then indicate the number of CICs which are in the group.
XVIII Has the company incurred any cash losses in the financial year and the immediately preceding financial year, the amount of cash losses incurred. Check if there is cash losses in the year under audit and the preceding year. Compute the amount of cash loss for the year and for the earlier years. If  there are cash losses, then report the amount of the cash losses during the preceding year as well as the current year.
XIX Whether during the year, has there been any resignation of statutory auditors if yes, has the auditor considered the objections, issues or concerns raised by the outgoing auditors.
XX (a) whether, in respect of other than ongoing projects, the company has transferred unspent amount to a Fund specified in Schedule VII to the Companies Act within a period of six months of the expiry of the financial year in compliance with second proviso to sub-section (5) of section 135 of the said Act; Obtain the list of the CSR projects which are not on going projects. Check if there is any unspent amount on such projects. Check if such unspent amount has been transferred to the specified fund as per Schedule VII.
(b) whether any amount remaining unspent under sub-section (5) of section 135 of the Companies Act, pursuant to any ongoing project, has been transferred to special account in compliance with the provision of subsection (6) of section 135 of the said Act; Obtain a list of ongoing projects Check if there is any unspent amount on ongoing projects. If yes, check if the same is transferred to specific bank account before 30th April of the succeeding year.
With respect to obligations under Corporate Social Responsibility, whether the company has transferred the unspent amount to a Fund specified in Schedule VII to the Companies Act within a period of 6 months from the expiry of the financial year Whether any amount which remains unspent has been transferred to a special account in accordance with provisions of section 135 of the Companies Act, 2013
NOTE:-Applicable only in case of Consolidated Accounts
XXI In case there have been any qualifications or adverse remarks in the audit reports issued by the respective auditors in case of companies included in the consolidated financial statements. Obtain audited accounts and check the auditors’ report if it has any qualifications. If there is qualifications in the component auditor’s report, reproduce the same with para no. of CARO., the name of the company, details of qualifications and adverse remarks

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