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CARO 2020 Applicability, Guidance Notes and Downloads

CARO 2020 Applicability, Guidance Notes and Downloads

CARO 2020 Applicability: Applicability of CARO 2020 by ICAI MCA Draft Revised CARO, Download CARO 2020 PDF (Companies Auditors’ Report Order). The MCA has recently made some amendments in CARO. The MCA has prepared-draft of CARO 2020 (Companies Auditor’s Report Order). MCA has also invited comments on draft CARO 2020.

Ministry of Corporate Affairs has issued a notification on February 25, 2020. The draft Companies (Auditor’s Report) Order, 2020 has been placed on the Ministry’s website at www.mca.gov.in. It has been decided to invite suggestions/comments on the above draft.

Accordingly, the draft Companies (Auditor’s Report) Order, 2020 has been placed on the website of MCA, with a notice inviting suggestions/comments thereon along with justification in brief.

CARO 2020 Applicability

Applicability of CARO 2020 on Companies:

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) except:–

  • A banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949).
  • An insurance company as defined under the Insurance Act,1938 (4 of 1938).
  • A company licensed to operate under section 8 of the Companies Act.
  • 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.
  • A private limited company:
    • not being a subsidiary or holding of a public company,
    • having a paid up capital and reserves and surplus not more than rupees one crore as at the balance sheet date
    • which does not have total borrowings exceeding rupees one crore from any bank or financial institution at any point of time during the financial year
    • and which does not have a total revenue as defined in Scheduled III to the Companies Act, 2013 (including revenue from discontinuing operations) exceeding rupees ten crore during the financial year as per the financial statements.

BARE TEXT OF DRAFT CARO 2020

CARO 2020

CARO 2020

The auditor’ report on the accounts of a company to which this order applies hall include a statement on the following matters, namely:

(i) (a) (A) whether the company is maintaining proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment.

(B) whether the company is maintaining proper records showing full particulars of intangible assets.

(b) whether these Property, Plant and Equipment 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.

(c) whether the title deeds of all the immovable properties. (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company. If not, provide the details thereof in the format below;

Description of propertyGross carrying
value
Held in name ofWhether promoter, director     or
their relative or employee
Period held

– indicate range, where appropriate

Reason for not being held in name of company*
*also indicate if in dispute

(d) Whether the Company has revalued its Property, Plant and Equipment (including Right of Use assets) or intangible assets or both during the year and, if so, whether the revaluation is based on the valuation by a Registered Valuer; specify the amount of change, if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment or intangible assets.

(e) Whether any proceedings have been initiated or are pending against the company for holding any Benami property under the “Benami Transactions (Prohibition) Act, 1988 and Rules made there under; if so, whether the Company has appropriately disclosed the details in its financial statements.

(ii) (a) whether physical verification of inventory has been conducted at reasonable intervals by the management and whether, in the opinion of the auditor, the coverage and procedure of such verification by the management is appropriate; whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed and if so, whether they have been properly dealt with in the books of account.

(b) whether during any point of time of the year, the Company has been sanctioned working capital limits in excess of Rs. 5 crores, in aggregate, from banks or financial institutions on the basis of security of current assets; whether the quarterly returns or statements filed by the Company with such banks or financial institutions are in agreement with the books of account of the Company. If not, give details.

(iii) whether during the year the company has made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured to companies, firms, Limited Liability Partnerships or any other parties. If so,

(a) whether during the year the company has provided loans or provided advances in the nature of loans, or stood guarantee, or provided security to any other entity [not applicable to companies whose principal business is to give loans], if so, indicate-

  • The aggregate amount during the year, and balance outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to subsidiaries, joint ventures and
  • The aggregate amount during the year, and balance outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to parties other than subsidiaries, joint ventures and associates.

(b) whether the investments made, guarantees provided, security given and the terms and conditions of the grant of all loans and advances in the nature  of loans and guarantees provided are not prejudicial to the company’s interest.

(c) in respect of loans and advances in the nature of loans whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayments or receipts are regular.

(d) if the amount is overdue, state the total amount overdue for more than ninety days, and whether reasonable steps have been taken by the company for recovery of the principal and interest.

(e) whether any loan or advance in the nature of loan granted which has fallen due during the year, has been renewed or extended or fresh loans granted to settle the overdues of existing loans given to the same parties; If so, specify the aggregate amount of such dues renewed or extended or settled by fresh loans and the percentage of the aggregate to the total loans or advances in the nature of loans granted during the year. [Not applicable to companies whose principal business is to give loans].

(f) whether the Company has granted any loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment; if so, specify the aggregate amount, percentage thereof to the total loans granted, aggregate amount of loans granted to Promoters, related parties as defined in clause (76) of section 2 of the Companies Act, 2013.

(iv) in respect of loans, investments, guarantees,  and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof.

(v) in respect  of deposits accepted by the Company or amounts which are deemed to be 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, 2013 and the rules framed thereunder, where applicable, have been complied with? If not, the nature of such contraventions 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?

(vi) whether maintenance of cost records has been specified by the Central Government under sub- section (1) of section 148 of the Companies Act and whether such accounts and records have been so made and maintained.

(vii) (a) whether the company is regular in depositing undisputed statutory dues including Goods and Service Tax, provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as on 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.

(b) where statutory dues referred to in sub- clause (a) 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 be treated as a dispute).

(viii) whether any transactions not recorded in the books of account have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961; if so, whether the previously unrecorded income has been properly recorded in the books of account during the year?

(ix) (a) whether the company has defaulted in repayment of loans or other borrowings or in the payment  of  interest  thereon  to  any  lender? If yes, the period and the amount of default to be reported as per the format below:

Nature  of  borrowing,
including
debt securities
Name of lender*Amount not paid on due dateWhether principal or interestNo. of days delay or
unpaid
Remarks, if any
*lender wise details to be provided in case of defaults to banks, financial institutions and Government.

(b) Whether the company is a declared willful defaulter by any bank or financial institution or other lender?

(c) Whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported.

(d) whether funds raised on short term basis have been utilized for long term purposes? If yes, the nature and amount to be indicated.

(e) whether the Company has taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures? If so, details thereof with nature of such transactions and the amount in each case.

(f) whether the Company has raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies? If so, give details thereof and also report if the company has defaulted in repayment of such loans raised.

(x) (a) whether moneys raised by way  of  initial  public offer or further public offer (including debt instruments) during the year 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.

(b) whether the Company has made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible) during the year and if so, whether the requirements of Section 42 and Section 62 of the Companies Act, 2013 have been complied with and the funds raised have been used for the purposes for which the funds were raised. If not, provide details in respect of amount involved and nature of non- compliance.

(xi) (a) whether any fraud by the company or any fraud on the Company has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated.

(b) whether any report under sub-Section (12) of Section 143 of the Companies Act has been filed by the auditors in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules 2014 with the Central Government?

(c) whether the auditor has considered whistle- blower complaints, if any, received during the year by the Company?

(xii) (a) whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1:20 to meet out the liability.

(b) whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability.

(c). whether there has been any default in payment of interest on deposits or repayment thereof for any period and if so, the details thereof.

(xiii) whether all transactions with the related parties are  in  compliance  with  sections 177 and 188 of Companies Act where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards.

(xiv) (a) whether the company has an internal audit system commensurate with the size and nature of its business?

(b) Whether the reports of the Internal Auditors for the period under audit were considered by the statutory auditor?

(xv) whether the company has entered into any non- cash transactions with directors or persons connected with him and if so, whether the provisions of section 192 of Companies Act have been complied with.

(xvi) (a) whether the company is required to be registered under section 45-1A of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained.

(b) whether the Company has conducted any Non- Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act 1934.

(c) whether the Company is a Core Investment Company (CIC) as defined under the Regulations by the Reserve Bank of India? If so, whether it continues to fulfil the criteria of a CIC and In case the company is an exempted or unregistered CIC, whether it continues to fulfil such criteria.

(d) Whether the Group has more than one CIC as part of the Group, If yes, indicate the number of CICs which are part of the Group.

(xvii) whether the  Company  has  incurred  cash losses in the Financial Year and in the immediately preceding Financial year? If so, state the amount of cash losses.

(xviii) whether there has been any resignation of the statutory auditors during the year? If so, whether the auditor has taken into consideration the issues, objections or concerns raised by the outgoing auditors?

(xix) on the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, the auditor’s knowledge of the Board of Directors and management plans, whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report that company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.

(xx) (a) whether, in respect of other than ongoing projects, the company has transferred unspent amount to a Fund specified in Schedule VII to the Companies Act within a period of six months of the expiry of the financial year in compliance with second proviso to sub-section (5) of section 135 of the said Act.

(b) whether any amount remaining unspent under sub-section (5) of section 135 of the Companies Act pursuant to any ongoing project, has been transferred to special account in compliance with the provision of sub-section (6) of section 135 of the said Act.

(xxi) whether there have been any qualifications or adverse remarks by the respective auditors in the Companies (Auditor’s Report) Order (CARO) reports    of   the    companies    included in the consolidated financial statements? If  yes, indicate the details of the companies and the paragraph numbers of the CARO report containing the qualifications or adverse remarks.

Scroll Down to check previous data of CARO 2020

CARO 2016 Applicability: Applicability of CARO 2016 by ICAI MCA Draft Revised CARO, CA Final IPCC Nov 2016 Exams, Download CARO 2016 PDF (Companies Auditors’ Report Order). The MCA has recently made some amendments in CARO. The MCA has prepared-draft of CARO 2016 (Companies Auditor’s Report Order). MCA has also invited comments on draft CARO 2016.

CARO 2016

CARO 2016 | New Audit Report Format

CARO 2016 | New Audit Report Format

1. APPLICABILITY2. REPORTING REQUIREMENTS

  • Deletion in reporting requirements from CARO, 2015
  • Additional reporting requirements in CARO, 2016
  • Modification in reporting requirements of CARO, 2015

3.BARE TEXT OF DRAFT CARO, 2016 (New Audit Report Format)

Draft of CARO-2016:

Ministry of Corporate Affairs has issued a notification on February 9, 2016. The draft Companies (Auditor’s Report) Order, 2016 has been placed on the Ministry’s website at www.mca.gov.in. It has been decided to invite suggestions/comments on the above draft.

Accordingly, the draft Companies (Auditor’s Report) Order, 2016 has been placed on the website of MCA, with a notice inviting suggestions/comments thereon along with justification in brief. The same may be submitted latest by 23rd February, 2016 all concerned through email at caro@mca.gov.in.

MCA Notification on CARO-2016

Applicability of CARO-2016:

Still the MCA has prepared draft of CARO-2016. MCA or ICAI has not yet implemented it. Recently, MCA has invited comments on Draft CARO-2016. After taking view of all comments, the MCA and ICAI will take the decision in respect of applicability of CARO-2016.

CARO 2016 Applicability

CARO 2016 Applicability

Applicability of CARO-2016 on Companies:

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) except:–

  • A banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949).
  • An insurance company as defined under the Insurance Act,1938 (4 of 1938).
  • A company licensed to operate under section 8 of the Companies Act.
  • 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.
  • A private limited company:
    • not being a subsidiary or holding of a public company,
    • having a paid up capital and reserves and surplus not more than rupees one crore as at the balance sheet date
    • which does not have total borrowings exceeding rupees one crore from any bank or financial institution at any point of time during the financial year
    • and which does not have a total revenue as defined in Scheduled III to the Companies Act, 2013 (including revenue from discontinuing operations) exceeding rupees ten crore during the financial year as per the financial statements.

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New Audit Report Format

BARE TEXT OF DRAFT CARO, 2016 (New Audit Report Format)

The auditor’ report on the accounts of a company to which this order applies hall include a statement on the following matters, namely:

  1. Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;
  2. Whether title deeds of immovable properties are held in the name of the company. If not, provide details thereof.
  3. 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;
    1. Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, how they have been dealt with in the books of account;
    2. Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered by clause (76) of Section 2 of the Companies Act, 2013. If so,
  4.  Whether the terms and conditions of the grant of such loans are not prejudicial to the company’s interest;
  5.   Whether receipt of the principal amount and interest are regular. If not provide details thereof; and
  6.   If overdue amount is more than rupees five lakhs, whether reasonable steps have been taken by the company for recovery of the principal and interest;
  7. In respect of loans, investments and guarantees, whether provisions of Section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide details thereof.
  8.  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, 2013 and the rules framed thereunder, where applicable, have been complied with? If not, the nature of such contraventions 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?
  9. 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 (in case of banks and financial institutions, lender wise details to be provided).
  10. whether maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and whether such accounts and records have been so made and maintained;
  11. whether the company is regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-Lax, , service tax, duty of customs, duty of excise, value added tax, 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.
  12. Where dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax 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 be treated as a dispute).
  13. Whether moneys raised by way of public issue/ follow-on offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays / default and subsequent rectification, if any, as may be applicable, be reported;
  14.  Whether managerial remuneration has been paid / 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.
  15. Whether any fraud by the company or any fraud on the Company by its officers/ employees has been noticed or reported during the year; if yes, the nature and the amount involved be indicated.
  16. Whether the Nidhi Company has complied with the Net Owned Fund in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining 10% liquid assets to meet out the unencumbered liability.
  17. Whether the company has made any preferential allotment / private placement of shares or fully or partly convertible 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 and the amount raised have been used for the purposes for which the funds were raised. If not, provide details thereof.
  18. Whether all transactions with the related parties are in compliance with Section 188 and 177 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc. as required by the accounting standards and Companies Act, 2013.
  19. Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether provisions of Section 192 of Companies Act, 2013 have been complied with.

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Guidance Notes On CARO-2016:

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