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COMPANIES (AUDITOR’S REPORT) ORDER, 2016



Ministry of corporate affairs (MCA) issued Companies (Auditor's Report) Order, 2016 which is applicable to all companies including a foreign company except the following:
·        A banking company
·        An insurance company
·        A company licensed under section 8 of companies act
·        A one person company
·        Small companies ( a company whose paid up capital does not exceed 50 lakhs and turnover does not exceed 2 crores)
·        A private limited company ( not being a subsidiary or holding of a public company) whose paid up capital and reserves and surplus less than or equal to Rs. 1 crore, or
Borrowing is less than or equal to Rs. 1 crore at any time during a financial year, or
Revenue is less than or equal to 10 crores in the financial year.


Matters to be included in the auditor's report under CARO, 2016
Following matters are required to be reported by the auditor mandatorily in the companies (auditor’s report) order, 2016:
1.      FIXED ASSETS
-        Whether the company is maintaining proper records and quantitative details and situation of the fixed assets.
-        Whether these fixes assets have been physically verified by the management at reasonable intervals and if any material discrepancies noticed they have been dealt in the books of accounts.
-        Whether the title deeds of immovable properties are held in the name of the company.
      
2.      INVENTORY
-        Whether physical verification of inventory has been conducted at reasonable intervals by the management and if any material discrepancies noticed they have been dealt in the books of accounts.

3.      LOANS GIVEN BY THE COMPANY
-        Whether the terms and conditions of the grant of loans are not prejudicial to the company's interest.
-        Whether schedule of repayment of principal and interest are regular.
-        Whether reasonable steps are taken for the recovery of principal and interest if the amount is overdue for more than ninety days.

4.      LOAN TO DIRECTOR AND INVESTMENT BY THE COMPANY
-        Whether compliance of section 185 and section 186 has been ensured.

5.      DEPOSITS
-        Whether the deposits have been accepted from the public in accordance with the provisions of section 76.
-        Whether there is default in repayment of such deposit.
-        Whether provisions of sections 73 to 76 have been followed.

6.      COST RECORDS
-        Whether cost accounts and records have been made and maintained when required under section 148(1).

7.      STATUTORY DUES
-        Whether Company is regular in depositing undisputed statutory dues.
-        Whether arrears of outstanding statutory dues for more than 6 months are indicated by the auditor.
-        In case of disputed statutory dues, the amounts involved stated along with the forum, where the dispute is pending.

8.      REPAYMENT OF LOANS
-        Whether the company has defaulted in the repayment of any loans. If yes, then amount and period of such default.

9.      TERM LOANS
-        Whether the terms and conditions subject to which the company has obtained the term loans are complied.
-        Whether the funds raised from public are utilised for the purpose for which they were raised.

10.   FRAUD
-        Whether requirements of SA- 240 have been complied.
-        If any fraud has occurred by the company.

11.   MANAGERIAL REMUNERATION
-        Limits prescribed under section 197 of the companies act, 2013 has been complied.
-        In case of excess remuneration paid by the company to the Director, same has been refunded to the company.
12.   NIDHI COMPANY
-        Whether the net owned funds and deposits in the ratio 1:20 has been maintained.

13.   RELATED PARTY TRANSACTION
-        Requirements of section 188 has been complied with.
-        Transactions are in accordance of SA 550.

14.   PRIVATE PLACEMENT
-        Whether the funds raised have been utilised for the purpose for which the funds were raised.
-        Compliance with the requirements of section 42 of the companies act, 2013.

15.   NON CASH TRANSACTIONS
-        Whether the limits and conditions have been followed by the company in case of non cash transactions with the director.

16.   REGISTRATION UNDER RBI ACT
-        Whether the company has obtained the registration certificate in case it is required to be registered under RBI ACT, 1934.

You may contact the author for further information at 8285558644 or taxwizersconsultant@gmail.com

Disclaimer: The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.