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CARO 2013

Written By Admin on Monday, 13 April 2015 | Monday, April 13, 2015


[TO  BE  PUBLISHED  IN  THE  GAZETTE  or INDIA  EXTRAORDINARY,  PART  11,
SECTION 3,  SUB-SECTION (ii)]
GOVERNMENT OF‘  INDIA
MINISTRY OF CORPORATE AFFAIRS

Order

New Delhi,   the  10 April, 2015

S.O.   ___(E}.—   In  exercise  of  the  powers  conferred  by  sub-section  (11)     of section  143   of the  Companies Act,  2013   (18  of 2013 )   and  in  supersession of the  Companies  (Auditor’s  Report)   Order,   2003,  published  in  the  Gazette  of India,  Extraordinary, Part II,  Section 3,  Sub—section  (i),  vide  number G.S.R.  480 (E),  dated  the  12”‘ June,  2003,  except as  respects things done  or omitted  to  be done  before  such   supersession,  the  Central  Government,  after  consultation with  the  Institute  of  Chartered  Accountants  of  India,  constituted  under  the Chartered  Accountants  Act,   1949  (38  of  1949),  hereby  makes  the  following Order,  namely:-

1.        Short  title,  application  and  commencement.

(1)  This  order may be called the Companies (Auditor's Report)  Order,  2015.

(2)        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)  [hereinafter referred to as the  Companies Act], except

(i)   a  banking  company  as  defined  in  clause  (c)  of section  5  of the  Banking Regulation Act,  1949  (10 of 1949); (ii)   an  insurance  company  as  defined  under  the  Insurance  Act,1938  (4  of 1938p

(iii) a company licensed to operate under section  8 of the Companies  Act;

(iv) 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; and

(v) a private limited company with a paid up capital and reserves not more than rupees fifty lakh and which does not have loan outstanding exceeding rupees  twenty five lakh from any bank or financial  institution and does not have a turnover exceeding  rupees five crore at any point of time during the financial year.

3 It shall come into force on the date of its publication in the Official Gazette.

2. Auditor's report to contain matters specified ln paragraphs 3 and 4. Every report made by the auditor under section 143 of the Companies Act, on the accounts  of every company  examined by him to which this Order applies for the financial year commencing on or after 1st April, 2014, shall contain the matters specified in paragraphs 3 and 4.

3. Matters to be included in the auditor's report. - The auditors report on the account of a company to which this Order applies shall include a statement on the following matters, namely:-

(i) (a) whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) 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;

(ii) (a) whether physical verification of inventory has been conducted at reasonable intervals by the management;

(b) 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;

(c) 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;

(iii) 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,

(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;

(iv) 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.

(v) 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 there under, where applicable, have been complied with? II 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?

(vi) where maintenance of cost records has been specified by the Central Government under sub—section (1) of section 148 of the Companies Act, whether 3 such accounts and records have been made and maintained:

(vii) (a) 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 ii 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.

(b) 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).

(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.

(viii) 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;

(ix) 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:

(x) 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;

(xi) whether term loans were applied for the purpose for which the loans were such accounts and records have been made and maintained;

(xii) 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.

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

-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 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.
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