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CARO 2015 Applicability and Matters to be included in Audit Report

CARO 2015

The Ministry of Corporate Affairs, on 10th April, 2015, notified the Companies (Auditor’s Report) Order, 2015 (CARO, 2015).

Commencement: Financial Year start on or after 01/04/2014.

It applies to all companies including foreign companies, but it is not applicable to
1. Banking Company,
2. Insurance Company,
3. Section 8 (formerly Section 25) Company,
4. Small Company within the meaning of Sec 2(85) of the Companies Act, 2013,
5. One Person Company and
6. Select class of Private Company (if it satisfies all the 3 conditions below)
(i) its paid-up capital and reserves are `50 lacs or less;
(ii) its outstanding loan from any bank or financial institution are `25 lacs or less; and
(iii) its turnover does not exceed `5 crores

Matters to be included in Audit Report

Fixed Assets
(a) whether maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;
(b) whether physically verified by the management at reasonable intervals; whether the material discrepancies have been properly dealt with in the books of account,if any;


(a) whether physical verification of inventory has been conducted at reasonable intervals.
(b) are the procedures of physical verification of inventory reasonable and adequate in relation to the size 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 the material discrepancies have been properly dealt with in the books of account,if any;

Loans and Advances to companies, firms or other parties covered in the register under sec.189

(a) whether receipt of 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;

Internal Control

is there an adequate internal control system commensurate with the size of the company and the nature of its business,
(a) for the purchase of inventory and fixed assets and
(b) for the sale of goods and services.
Whether there is a continuing failure to correct major weaknesses in internal control system.

Acceptance of Deposits

(a) 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;
(b) 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?

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;

Statutory Dues

(a) is the company regular in depositing undisputed 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 Due date, shall be indicated by the auditor.
(b) in case dues of income tax or sales 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. (Central Government Taxes).
(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

Extent of Accumulated Losses

whether in case of a company 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;

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;

Guarantee by 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;

Use of Funds

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

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.

Reasons to be stated for unfavourable or qualified answers.–
(1) Where, in the auditor’s report, the answer to any of the questions above 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.

  1. Kavita says:

    Cpt dec2015quation paper

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