Reporting Under CARO, 2015
The Ministry of Corporate Affairs, on 10th April, 2015, notified
the Companies (Auditor’s Report) Order, 2015 (CARO, 2015).
APPLICABILITY:-
It shall apply to every company including a foreign company
as defined in clause (42) of section 2 of the Companies Act, 2013 (18 of 2013)
[hereinafter referred to as the Companies Act], except –
(i) a banking company as defined in clause (c) of section
5 of the Banking Regulation Act, 1949 (10 of 1949);
(ii) an insurance company as defined under the Insurance
Act,1938 (4 of 1938);
(iii) a company licensed to operate under section 8
of the Companies Act;
(iv) a One Person Company as defined under
clause (62) of section 2 of the Companies Act and a small company as defined under clause (85) of section
2 of the Companies Act; and
(v) a private limited company with a paid up
capital and reserves not more than rupees fifty lakh and which does not
have loan outstanding exceeding rupees twenty five lakh from
any bank or financial institution and does not have a turnover exceeding rupees
five crore at any point of time during the financial year.
COMMENCEMENT:-
Financial Year start on or after 01/04/2014
Matters to be included in the auditor’s report :
The auditor’s report on the account of a company to which
this Order applies shall include a statement on the following matters, namely:-
(i) FIXED ASSETS
(a) whether the company is
maintaining proper records showing full particulars, including quantitative
details and situation of fixed assets;
(b) 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;
(Note: Requirement to report disposing off of substantial
part of fixed assets during the year is not required now)
(ii) INVENTORY
(a) whether physical verification of inventory has been
conducted at reasonable intervals by the management;
(b) 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;
(c) 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;
(iii) LOANS AND ADVANCES
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 of
the principal amount and interest arc 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;
(Note: Reporting of loans taken by the Company not included
in CARO, 2015.)
(iv) 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.
(Note: Reporting on sale of services also included under
CARO, 2015 )
(v) DEPOSITS
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?
( Note: order has been passed by 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? included under CARO, 2015)
(vi) COST ACCOUNTING RECORDS
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;
(vii) STATUTORY DUES
(a) 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.
(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.
(Note: Reporting on Service Tax and Value added tax also
included under CARO, 2015, the reporting whether 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 there
under has been transferred to such fund within time)
(viii) LOSS MAKING COMPANIES
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;
(ix) REPAYMENT OF
DUES
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;
(x) GUARANTEE
GIVEN
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;
(xi) USE OF FUNDS
whether term loans were applied for the purpose for which the
loans were obtained;
(xii) FRAUD
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.
REPORTING FORMAT OF CARO 2015
To the Members of XYZ Limited
We refer to our report on the financial statements of XYZ
Limited (the Company) for the year ended March 31, 2015 issued on _________.
The Gazette version of the Companies (Auditor’s Report) Order, 2015 (CARO 2015)
was not available in the Official Gazette of India on the date of our report.
Accordingly, our report does not contain an Annexure on the matters specified
in paragraphs 3 and 4 of CARO 2015.
Subsequent to the issuance of our report dated _______, CARO
2015 has been published in the Official Gazette of India. While it is not
obligatory on our part to issue our report on the matters specified in
paragraphs 3 and 4 of CARO 2015, based on the discussions with the Company, as
a measure of good governance, we give hereinafter a statement on the matters
specified in paragraphs 3 and 4 of CARO 2015. This may be treated as an
Annexure to our aforesaid Report on standalone financial statements for the
year ended March 31, 2015.
i. In respect of its fixed assets:
a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed assets on the
basis of available information.
b) As explained to us, all the fixed assets have been
physically verified by the management in a phased periodical manner, which in
our opinion is reasonable, having regard to the size of the Company and nature
of its assets. No material discrepancies were noticed on such physical
verification.
ii. In respect of its inventories:
a) The inventories have been physically verified during the
year by the management. In our opinion, the frequency of verification is
reasonable.
b) In our opinion and according to the information and
explanations given to us, the procedures of physical verification of
inventories followed by the management are reasonable and adequate in relation
to the size of the Company and the nature of its business.
c) The Company has maintained proper records of inventories.
As per the information and explanation given to us, no material discrepancies
were noticed on physical verification.
iii. In respect of the loans, secured or unsecured,
granted by the Company to companies, firms or other parties covered in
the register maintained under Section 189 of the Companies Act, 2013:
a) The principal amounts are repayable over varying periods
upto five years, while the interest is payable annually, both at the discretion
of the Company.
b) In respect of the said loans and interest thereon, there
are no overdue amounts.
iv. In our opinion and according to the information and
explanations given to us, the Company has an adequate internal control
system commensurate with its size and the nature of its business for
the purchase of inventory and fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any continuing
failure to correct major weaknesses in such internal control system.
v. According to the information and explanations given to us,
the Company has not accepted any deposit from the public.
Therefore, the provisions of Clause (v) of paragraph 3 of the CARO 2015 are not
applicable to the Company.
vi. We have broadly reviewed the cost records
maintained by the Company pursuant to the Companies (Cost Records and
Audit) Rules, 2014 prescribed by the Central Government under Section 148(1)(d)
of the Companies Act, 2013 and are of the opinion that, prima facie,
the prescribed accounts and cost records have been maintained. We have,
however, not made a detailed examination of the cost records with a view to
determine whether they are accurate or complete.
vii. In respect of statutory dues:
a) According to the records of the Company, 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 other material statutory dues have been generally regularly
deposited with the appropriate authorities. According to the information and
explanations given to us, no undisputed amounts payable in respect of the
aforesaid dues were outstanding as at March 31, 2015 for a period of more than
six months from the date of becoming payable.
b) According to records of company, there are no 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.
c) According to the records of the Company, there are no
amounts that are due to be transferred to the 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.
viii. The Company does not have accumulated losses
at the end of the financial year. The Company has not incurred cash losses
during the financial year covered by the audit and in the immediately preceding
financial year.
ix. Based on our audit procedures and according to the
information and explanations given to us, we are of the opinion that the
Company has not defaulted in repayment of dues to financial
institutions, banks and debenture holders.
x. The Company has given guarantees for loans taken
by others from banks and financial institutions. According to the information
and explanations given to us, we are of the opinion that the terms and
conditions thereof are not prima facie prejudicial to the interest of
the Company.
xi. The Company has raised new term loans during the year.
The term loans outstanding at the beginning of the year and those raised during
the year have been applied for the purposes for which they were raised.
xii. In our opinion and according to the information and
explanations given to us, no fraud by the Company and no
material fraud on the Company has been noticed or reported during the year.
For ___________
(Chartered Accountants)
FRN: _________
MRN: _________
Date: _______
Place: ______
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