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:
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Sl. No.
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Companies (Auditors’
Report) Order, 2015
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Companies (Auditors’
Report) Order, 2016
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Remarks
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Applicability
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Applicable on all companies other
than:
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Applicable on all companies other
than:
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Changes in respect of
applicability of CARO on Private limited company
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-Banking Company
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-Banking Company
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-Insurance Company
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-Insurance Company
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-Sec 8 Company
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-Sec 8 Company
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-One Person Company
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-One Person Company
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– Private Limited company not
having
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– Private Limited company (not
being holding/subsidiary of public company) not having
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:Paid up Capital and
reserves>50 Lacs during the year
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:Paid up Capital+ reserves>1
crores as on balance sheet date
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:loans outstanding> 25 Lacs
during the year
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:loans outstanding> 1 crores
during the year
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:Turnover > 5 crores during the
year
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:Total revenue as per schedule
II>10 crores
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1
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-Whether the company is
maintaining proper records showing full particulars, including quantitative
details and situation of fixed assets.
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-Whether the company is
maintaining proper records showing full particulars, including quantitative
details and situation of fixed assets.
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New CARO demands additional
reporting for such immovable assets whose title are not owned by the company.
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-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;
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-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;
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-Whether the company holds title
of immovable property held by the company, If not provides the details
thereof
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2
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-whether physical verification of
inventory has been conducted at reasonable intervals by the management
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-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.
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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.
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-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
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-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;
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3
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-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,
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-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,
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– The new CARO provides for the
term and conditions of loan provided.
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-whether receipt of the principal
amount and interest are also regular; and
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-Whether the schedule of repayment
is stipulated, whether the repayment is regular or not.
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– The new carob provides for
overdue payment for more than 90 days instead outstanding of amount above the
threshold limit of 1 lac
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-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;
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-Whether the term and conditions
of the grant of such loan are prejudicial to the interest of the
company
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-If the amount is over due , then
state the amount over due for more than 90 days and what steps company has
followed.
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4
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-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.
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-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.
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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.
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5
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-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?
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-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?
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No Change
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6
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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;
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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;
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No Change
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7
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-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.
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-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.
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In new CARO the auditor need not
provide for third limb of old CARO requirement
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-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).
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-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).
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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.
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8
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-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;
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-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
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The 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.
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9
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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
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whether 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;
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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
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10
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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;
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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;
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-Point no 12 of Old CARO has been
shifted to point 10 of New CARO.
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– Point 10 is no more in existence
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11
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whether term loans were applied
for the purpose for which the loans were obtained;
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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;
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-Point 11 of old CARO is covered
in point 9 of new CARO.
– Point
11 of New CARO is new insertion.
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12
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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;
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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:
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-Point no 12 of Old CARO has been
shifted to point 10 of New CARO.
– Point
12 of new CARO is new insertion.
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13
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–
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whether 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:
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New insertion
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14
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–
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whether 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:
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New insertion
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15
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–
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Whether 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;
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New insertion
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16
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–
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Whether 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.
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New insertion
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- See more at:
http://taxguru.in/company-law/comparison-caro-2015-caro-2016.html#sthash.jtDtitjA.dpuf
