COMPANIES (AUDITOR’S REPORT) ORDER, 2015 I.E. CARO 2015



  • “CARO 2015 Replaced With the CARO 2003” with Following Major Changes under New Companies Act 2013;
  • Applicable for financial year commencing on or after April 1, 2014;
  • CARO 2015 have been reduced considerably clause 21 to 12 clauses;
  • CARO 2015 shall apply to all companies including a foreign co. defend under section 2(42) of the companies act 2013;
  • Following company “excluded”:
  • A banking company;
  • An insurance company;
  • Section 8 company;
  • OPC & small company
  • Private company which:
  • Paid-up & reserve not more than 50 Lakh
  • Outstanding loan not exceeding 25 Lakh from any bank or financial institutions
  • Turnover not exceeding 5 Crore at any time during the F.Y
  • Matters to be included in auditor’s report relating to CARO 2015:

Whether company had:-

  1. Maintained Proper records of fixed assets;
  2. Proper records of inventories, procedure of physical verifications etc.;
  • Granted any loan to certain parties covered under section 189 of 2013 Act and whether principal and interest amount regular, steps taken if overdue amount more than Rs. 1 lac;
  1. Internal control system commensurate with size and the nature of the company for the purpose of inventory and fixed assets;
  2. Accepted any of public deposits;
  3. Maintained cost records;
  • Deposited Statutory dues regularly, if not then arrears outstanding;
  • Accumulated losses and incurred cash losses;
  1. Defaulted in repayment of dues to a financial institution, bank or debenture holders;
  2. Given any Guarantee for loan taken by others from banks or financial institutions;
  3. Applied for term loan;
  • Fraud reporting
  • New Reporting Requirements Under CARO 2015:
  • Separate clause regarding amount required to be transferred to Investors Educations and Protection Fund (IEPF).
  • CARO 2003 provisions excluded from CARO 2015:

Auditor is not required to report on following under CARO 2015.  Whether the Company had-

  • Disposed off substantial part of fixed assets during the year;
  • Granted any loan to certain parties covered under section 301 of 1956 Act;
  • Contract/arrangements with certain parties;
  • Internal audit system commensurate with size and nature of the business;
  • Maintained documents and records for grant of loans and advances;
  • Complied with the provisions of any to a chit fund/nidhi/mutual benefit fund/societies
  • Maintained proper records if dealing/ trading in securities, etc.
  • Raised Short terms funds used for long term investments
  • Made Preferential allotments of share to parties covered in 301 register of 1956 Act
  • Created securities or charge on the issue of debentures;
  • Disclosed on the end use of money raised by public issues

CARO 2015(new) & CARO 2003(old)

Para wise Changes Comparison Chart Table

Top of Form

Bottom of Form

 

“CARO 2003”

“CARO 2015”

Change

Companies Excluded:

(a)      Banking company,

(b)     Insurance company,

(c)      Section 25 Company (1956 Act)

(d)     Private Limited Company which fulfils the following conditions

(i)      Paid up capital + reserves not more than 50 lakh

(ii)     Not accepted public deposit

(iii)   No outstanding loan of 10 lakh or more from any bank or financial institution and

(iv)   Turnover not more than 5 crore

Companies Excluded:

(e)      Banking company,

(f)      Insurance company,

(g)     Section 8 Company (2013 Act)

(h)      One Person and Small Company

(i)       Private Limited Company which fulfils the following conditions

(v)     Paid up capital + Reserves not more than 50 lakh

(vi)   Not accepted public deposit

(vii)    No outstanding loan of 25 lakh or more from any bank or financial institution and

(viii)   Turnover not more than 5 crore at any point of time

 

 

Turnoverclause applies for any point of time

Applicable to every financial year ending on any day on or after 01-07-2013

Applicable to the financial year commencing on or after 1st April, 2014

Applicable for FY 2014-15

Matters to be included in the Auditor's Report

 

 

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

No Change

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; whet her any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account

No Change

if a substantial part of fixed assets have been disposed off during the year, whether it has affected the going concern

Omitted

Omitted

whether physical verification of inventory has been conducted at reasonable intervals by the management

whether physical verification or inventory has been conducted at reasonable intervals by the management

No Change

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

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

No Change

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

whether the company is maintaining proper record s 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

No Change

(a) has the company either granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under section 301 of the Act. If so, give the number of parties and amount involved in the transactions.

(b)   whether the rate of interest and other terms and conditions of loans given or taken by the company, secured or unsecured, are prima facie prejudicial to the interest of the company;  

(c) whether payment of the principal amount and interest are also regular;  

(d) if overdue amount is more than one lakh, whether reasonable steps have been taken by the company for recovery/payment of the principal and interest

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,

(a)    whether receipt or the principal amount and interest are also regular; and

(b)    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

Clause not applicable to Loans taken.

 

Reporting on prejudicial rate of interest and other terms omitted

is there an adequate internal control procedure 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. Whether there is a continuing failure to correct major weaknesses in internal control

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

No Change

(a) whether transactions that need to be entered into a register in pursuance of section 301 of the Act have been so entered;

(b) whether each of these transactions have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time;

(This information is required only in case of transactions exceeding the value of five lakh rupees in respect of any party and in any one financial year).

Omitted

 

in case the company has accepted deposits from the public, whether the directives issued by the Reserve Bank of India and the provisions of sections 58A and 58AA of the Act and the rules framed there under, 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 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 there under, 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?

Apart from orders of CLB, orders of National Company Law Tribunal, Reserve Bank of India or any court have been included.

in the case of listed companies and/or other companies having a paid-up capital and reserves exceeding Rs.50 lakhs as at the commencement of the financial year concerned, or having an average annual turnover exceeding five crore rupees for a period of three consecutive financial years immediately preceding the financial year concerned, whether the company has an internal audit system commensurate with its size and nature of its business

Omitted

 

where maintenance of cost records has been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the 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 except changes in section consequent to Cos Act, 2013

(a) is the company regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Custom Duty, Excise Duty, 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.

(b) in case dues of sales tax/income tax/custom tax/wealth tax/excise duty/cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending may please be mentioned.

 

(A mere representation to the Department shall not constitute the dispute)

(a)     is the company regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax,  sales-Lax,  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.

(b)  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).

(c)   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.

 

Service tax Specifically included

 

Reporting on transfer to  investor education and protection fund included

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 financial year immediately preceding such financial year also

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;

No Change

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 reported

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 reported

No Change

whether adequate documents and records are maintained in cases where the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities; If not, the deficiencies to be pointed out

Omitted

 

whether the provisions of any special statute applicable to chit fund have been duly complied with? In respect of nidhi/ mutual benefit fund/societies

Omitted

 

if the company is dealing or trading in shares, securities, debentures and other investments, whether proper records have been maintained of the transactions and contracts and whether timely entries have been made therein; also whether the shares, securities, debentures and other securities have been held by the company, in its own name except to the extent of the exemption, if any, granted under section 49 of the Act

Omitted

 

whether 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 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

No Change

whether term loans were applied for the purpose for which the loans were obtained

whether term loans were applied for the purpose for which the loans were obtained

No Change

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

Omitted

 

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 have been issued is prejudicial to the interest of the company

Omitted

 

whether securities have been created in respect of debentures issued?

Omitted

 

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

Omitted

 

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

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

No Change

Reasons to be stated for unfavourable or qualified answers. - Where, in the auditor's report, the answer to any of the questions referred to in paragraph 4 is unfavourable or qualified, the auditor's report shall also state the reasons for such unfavourable or qualified answer, as the case may be. Where the auditor is unable to express any opinion in answer to a particular question, his report shall indicate such fact together with the reasons why it is not possible for him to give an answer to such question

Reasons to be stated for unfavourable or qualified answers.- (1) Where, in the auditor's report, the answer to any of the questions referred to in paragraph 3 is unfavourable or qualified, the auditor's report shall also state the reasons for such unfavourable or qualified answer, as the case may be.

(2) Where the auditor is unable to express any opinion in answer to a particular question, his report shall indicate such fact together with the reasons why it is not possible for him to give an answer to such question

 

No Change