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9/13/2016

CARO2016Applicability&ReportingRequirements

CARO2016Applicability&ReportingRequirements
(http://taxguru.in/companylaw/caro2016applicabilityreporting
requirements.html)
admin(http://taxguru.in/author/admin/) |CompanyLaw(http://taxguru.in/category/companylaw/)
02Jun2016(http://taxguru.in/2016/06/02/) 67,168Views
Comments(http://taxguru.in/companylaw/caro2016applicabilityreportingrequirements.html#disqus_thread)
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RajatAggarwal
Background
Section 143(11) of the Companies act, 2013 (2013 Act) requires that the Auditors report of specified class of companies should include a
statementontheprescribedmatters.Thesereportingrequirementshavebeenprescribedunderthecompanies(AuditorsReport)Order,2015
(CARO 2015) (http://taxguru.in/companylaw/companiesauditorsreportorder2015caro2015.html) issued by the Ministry of Corporate Affairs
(MCA)10thApril2015.
NewDevelopment
The MCA had setup a committee on 16 September 2015 to examine and recommend matters that should form part of the statement. This
statementwouldbeattachedwiththeauditorsreportundersection143(11)forthefinancialyearFY201516andthereafter.
Thecommitteemadetherecommendationsonthematterstobeincludedinthestatementandonthebasisofrecommendations,MCAissued
thedraftcompanies(Auditorsreport)Order,2016(CARO2016)on9February2016(http://taxguru.in/companylaw/mcainvitecommentsdraft
companiesauditorsreportorder2016.html).
Applicability
EveryReportmadebytheauditorundersection143ofthe2013ActfortheFYcommencingonorafter1stApril2015wouldincludeCARO
2016 (http://taxguru.in/companylaw/companiesauditorsreportordercaro2016wef01042015.html). It would be applicable to every company
(exceptsomecompanies)includingaforeigncompanydefinedundersection2(42)ofthe2013Act.TheCAROwouldnotbeapplicabletothe
auditorsreportonconsolidatedfinancialstatements.
Companies

Exempted

under

the CARO2016

(http://taxguru.in/companylaw/companiesauditorsreportordercaro2016wef

01042015.html)
InthesecompaniestheauditorisexemptedtocommentonmattersprescribedundertheCARO2016withcomparedtoCARO2015.
Companies

not covered under CARO 2016

(http://taxguru.in/companylaw/companiesauditorsreportordercaro2016wef

01042015.html)
1.BankingCompaniesasdefinedundersection5(c)oftheBankingRegulationAct,1949
2.InsuranceCompanyasdefinedundertheInsuranceAct,1938
3.CompaniesIncorporatedwithCharitableobjectsetc,i.e.companieslicensedtooperateundersection8ofAct2013
4.Onecompanyasdefinedundersection2(62)ofthe2013Act
5.SmallCompanyasdefinedunder2(85)ofthe2013Act
6.Privatecompanynotbeingaholdingorasubsidiarycompanyofapubliccompany:
withapaidapaidupcapitalandreservesandsurplusnotmorethanINR1crore
doesnothavetotalborrowingsexceedingINR1crorefromanybankoranyfinancialinstitutionatanypointoftimeduringtheFYand
doesnothavetotalrevenueasdefinedinscheduleIII,tothe2013Act(includingrevenuefromdiscontinuingoperations)exceedingINR10
croreduringthefinancialyearasperthefinancialstatements.
CompaniesnotcoveredunderCARO2015(http://taxguru.in/companylaw/companiesauditorsreportorder2015caro2015.html)
1.BankingCompaniesasdefinedundersection5(c)oftheBankingRegulationAct,1949
2.InsuranceCompanyasdefinedundertheInsuranceAct,1938
3.CompaniesIncorporatedwithCharitableobjectsetc,i.e.companieslicensedtooperateundersection8ofAct2013
4.Onecompanyasdefinedundersection2(62)ofthe2013Act
5.SmallCompanyasdefinedunder2(85)ofthe2013Act
6.Privatecompanynotbeingaholdingorasubsidiarycompanyofapubliccompany:
withapaidupcapitalandreservesandsurplusnotmorethan50Lakhs
doesnothaveoutstandingloanliabilityexceedingINR25Lakhsfromanybankoranyfinancialinstitution,and
doesnothaveaturnoverexceedingINR5croreatanypointoftimeduringthefinancialyear
MatterstobeincludedinCARO2016
AscomparedtoCARO2015,thereportingrequirementsunderCARO2016havebeenincreased.Therearesomenewrequirementswhichare
asfollows:
a.FixedAssets
Whethertitledeedsofimmovablepropertiesareheldinthenameofcompany,ifnot,providedetailsthereof.

http://taxguru.in/companylaw/caro2016applicabilityreportingrequirements.html

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9/13/2016

CARO2016Applicability&ReportingRequirements

b.LoansandInvestments
Inrespectofloans,investmentsandguarantees,whetherprovisionsofSection185and186ofthe2013Acthavebeencompliedwith.If
notprovidedetailsthereof.
c.ManagerialRemuneration
Whether managerial remuneration has been paid/provided in accordance with the requisite approvals mandated by the provisions of
section197readwithscheduleof2013Act,ifnotstatetheamountandstepsinvolvedbythecompanyforsecuringrefundofthesame.
d.RelatedPartyTransactions
Whetheralltransactionswithrelatedpartiesareincompliancewithsection188and177ofthe2013Actwhereapplicableandthedetails
havebeendisclosedinthefinancialstatementsetc.asrequiredbytheaccountingstandardsand2013Act.
e.PreferentialAllotment/PrivatePlacement
Whetherthecompanyhasmadeanypreferentialallotment/privateplacementofsharesorfullyorpartlyconvertibledebenturesduringthe
yearunderreviewandifso,astowhethertherequirementofSection42ofthe2013Acthavebeencompliedwithandtheamountraised
hasbeenusedforthepurposesforwhichthefundswereraised.Ifnotprovidedetailsthereof.
f.NonCashTransactions
Whether the company has entered into any noncash transactions with directors or persons connected with him and if so, whether
provisionsofsection192ofthe2013acthavebeencompliedwith.
Requirementsthathavebeencarriedforwardwithcertainmodifications:
a.Inventory
Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material
discrepancieswerenoticedandifso,howtheyhavebeendealtwithinthebooksofaccounts.
b.DELETEDREQUIREMENT
Aretheproceduresofphysicalverificationofinventoryfollowedbythemanagementreasonableandadequateinrelationtothesizeof
companyandthenatureofitsbusiness.
Whetherthecompanyismaintainingproperrecordsofinventory.
c.Defaultinpaymentofdues
Whetherthecompanyhasdefaultedinrepaymentofduestoafinancialinstitutionorbankordebentureholder,ifyesthentheperiodandamount
ofdefaulttobereported(incaseofbanksandfinancialinstitution,lenderwisedetailstobeprovided)NewRequirementItrelatestolenderwise
detailsofperiodandamountofdefault.
d.FraudReporting
Whetheranyfraudbythecompanyoranyfraudonthecompanybyitsofficers/employeeshasbeennoticedorreportedduringtheyear,Ifyes,
thenatureandtheamountinvolvedshouldbeindicated.NewRequirementItisrestrictedtoofficersandemployeesofthecompany.
RequirementsthathavebeendeletedascomparedtoCARO2015
a.InternalControlSystem
Isthereanadequateinternalcontrolsystemcommensuratewiththesizeofthecompanyandthenatureofitsbusinessforthepurchaseofits
inventoryandfixed assets and for the sale of goods and services Whether there is a continuing failure to correct major weakness in internal
controlsystem.
b.DepositofStatutoryDues
Whether the amount required to be transferred to Investor and Education Protection fund in accordance with relevant provisions of the
companiesAct,1956andrulesmadethereunderhasbeentransferredtosuchfundwithintime.
c.GuaranteeforLoansbyothersfrombanksorfinancialinstitution
Whetherthecompanyhasgivenanyguaranteeforloanstakenbybanksfrombanksorfinancialinstitutions,thetermsandconditionswhereof
areprejudicialtotheinterestofthecompany.
(Authorcanbereachedatrjt.garg68@gmail.com(mailto:rjt.garg68@gmail.com))

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