Company Audit Report Order, 2016

Prepared by Pawan Sain

1. Applicability of CARO.2. Auditor’s Report to contain matters

specified in Paragraphs of 3 & 4.3. Matters to be included in auditor’s Report.4. Reasons to be stated for unfavourable or

qualified answers.

INDEX

1.Applicability of CARO, 2016:-It shall apply to every company including foreign company ,

except:-

Company licensed u/s 8 of Company Act, 2013 (NGO,

NPO)

One Person Company (u/s-2(62)) & Small Company (u/s-

2(85))

Insurance Company

Registered under

Insurance Act,1938

Banking Company

registered under Banking

Regulation Act, 1949.

Private Limited Company Having:-1. Paid up capital & Reserve and Surplus < One

crore as on Balance Sheet date&

2. Borrowing from Bank or Financial Institution < One crore at any point of time during the

year.&

3. Total Revenue during the year < 10 crore during the year.

under section 143 of the Companies Act, 2013 on the accounts of every company audited by him, to which this Order applies, for the financial years commencing on or after 1st April, 2015, shall in addition, contain the matters specified in paragraphs 3 and 4, as may be applicable:

2.Auditor’s Report to contain matters specified in Paragraphs of 3 & 4.

3.Matters to be included in the auditor's report: - The auditor's report on the accounts of the company to which this Order applies shall include a statement on such listed matters.

Fixed Assets

Inventory

Loans

Loan to Directors

Deposits

Cost Records

Statutory Dues

Repayment of Loans

IPO & Term Loan

Frauds

Managerial Remuneration

Registration Under RBI

Non Cash Trans with Directors

Related Parties Transactions

Nidhi Company

Private placement of Shares & Deb.

Title deed of immovable property are held in name of

company. (New)

Proper Records With Quantitive Details

Physical verification in reasonable time period,

if discrepancies are there, properly dealt

with books of accounts.

1.Fixed assets

2.Inventory:-

Physical verification by management at

reasonable intervals and if discrepancies are noticed whether properly dealt in

books of accounts

3.Loans to others:-

Schedule of repayment of Principal & interest is stipulated & whether payments or receipts are regular.

State the total amount overdue >90 days as on date of F.Y. &

whether reasonable steps have been taken for the recovery of

same.

Terms & conditions are not prejudicial to company

Loans to companies, partnership firm, LLP & other parties

Compliance with Sec. 185 & 186 of Company

Act, 2013. If not complied provide

details.

4.Loans To Directors:-

According to sec 185 of CA,2013, No company shall provide loan to directors or in whom director is interested or any guarantee or provide any security in connection with a loan taken by him..

According to sec 186 of CA,2013, No company shall give loan or guarantee or provide security to any person or body corporate or acquire by way of subscription, purchase any body corporate, exceeding 60% of its paid up capital +free reserves +securities premium a/c or/c 100% of free reserves + securities premium a/c, which ever is more.

Complying with directives

issued by RBI

5.Deposits:- In case of company have accepted deposits, whether the company is-

Complying with sec 73 to 76 of

companies act, 2013

If not complied, Nature of such

contravention to be stated.

Sec 73 to 76 of CA, 2013 prohibit company from accept deposits from public, payment of deposits taken before commencement of Act, responsibility to officers of co. for non payment of deposits, accept deposits from public by certain companies.

6. Cost Records:-Whether cost records are

maintained as per sec 148 (1) of Companies Act, 2013

Regulatory Sectors Non Regulatory SectorsTelecommunication Services Turbo jets & turbo propellersGeneration, Transmission & distribution of electricity

Machinery used in defense, space & atomic energy

Petroleum products regulated by Petroleum & Natural Gas Regulatory Board.

Production, Import & supply or trading of medical devices such as heart valves, orthopedic implants, pacemaker, etc.

Drugs & pharmaceutical Steel, CementSugar & industrial alcohol Tyres & tubes

As per sec 148 (1) of CA, 2013 following companies required to maintain cost records including foreign company but excluding small company & micro enterprises:-

Report amount dues more then 6 months as on last day of financial year from the date from they became payable.

Regularly Depositing

of Undisputed Statutory

Dues From

Excise Duty

Income tax

Provident fund

VATSales Tax

Custom Duty

Employee State

Insurance

Service Tax

7.Statutory Dues:- 7.a:-

Disputed dues not has

been deposited of

Excise Duty

Income tax

VAT

Sales Tax

Custom Duty

Service Tax

Report amount due on account of dispute & Forum where dispute is pending shall be indicated.

7.b:-

Default in payment of loans & Borrowing to

BankGovernme

nt

Financial Institution

Dues to Debenture Holders

If default is made amount & period to be reported. (Lender wise details in case of Govt, Banks, Financial Institutions.)

8.Repayment:-

IPO & Term Loan

Money raised by way of IPO (including debt instrument) & term Loan were

applied for the purpose for which they are raised.

If not used for the same purpose, details with delays or default and

subsequent rectification , if any, as may be applicable to be reported.

10.Fraud:-

If fraud by company or fraud on the company by its officers or employees

has been noticed, nature and amount to indicated

11. Managerial Remuneration:-Managerial Remuneration as per provisions of sec

197 of company act, 2013 with schedule V of companies Act, 2013. If not, report on amount involved &Steps taken by company for securing refund.

As per sec 197 maximum remuneration of directors is as follow:-1. Remuneration to one MD, WTM, Manager shall not be

exceed 5% of not profit & more then 1 director shall not exceed 10 % of net profit.

2. Remuneration if to directors who are neither MD nor WTM shall not exceed :-

(a) 1 % of net profit, if there is a managing or whole time director or manager.

(b) 3% of the net profit in any other case.

12. Nidhi Company:-

As per sec 406 of CA, 2016 nidhi means a company which has been incorporated as nidhi with the object of:-Receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with rules of chapter xxvi of companies rules, 2014.

Whether Nidhi company has complied with net own funds to deposit in ratio of 1:20 to meet

out the liabilities &

Is maintaining 10 % unencumbered term deposit as specified in Nidhi Rules, 2014 to

meet out liability.

13. Related Parties Transactions;-

Transactions with related parties are in accordance with sec 177 & 188 of companies

act, 2013

Disclosed as per accounting standards in financial

statements.

Preferential allotment private placement of shares or

convertible debentures during the year is in accordance with sec 42 of companies act, 2013

Amount raised used for the purpose for which the funds are

raised. If not, provide details amount and nature of non-

compliance.

14. Private Placement:-

16.Regestration. Under RBI:-

15 .Non Cash Transactions:-Whether company has entered into any non cash transactions with

directors or persons connected with him and if so, whether provisions of sec 192 of companies act, 2013 have been complied

with.

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.

4. Reasons to be stated for unfavourable or qualified answers.-

2.Where the auditor is unable to express any opinion on any specified matter, his report shall indicate such fact together with the reasons as to why it is not possible for him to give his opinion on the same.

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 basis for such unfavourable or qualified answer, as the case may be.

Applicability of CARO, 2016 Applicability of CARO, 2015Not applicable to Pvt Ltd companies, which fulfills following 3 conditions:-

Not applicable to Pvt Ltd companies, which fulfills following 3 conditions:-

1. Paid up capital + Reserve & Surplus > 1 crore

1. Paid up capital + Reserve & Surplus > 50 Lakhs

2. Borrowing from Bank & Financial Institution > 1 crore

2. Borrowing from Bank & Financial Institution > 25 Lakhs

3.Turn over > 10 crore 3.Turn over > 5 crore

CARO, 2016 VS CARO, 2015:-

Matters Added in CARO, 2016

Matters Deleted from CARO, 2015

Loans to others Internal control system

Managerial Remuneration Accumulated Losses

Preference issue of shares & debentures

Guarantee

Non Cash Transactions

Nidhi Company

Reg. Under RBI

IPO & Term Loan

CARO, 2016 VS CARO, 2016:-

Thank You

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