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
·
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.