1. Means Companies (Auditor's Report) Order, 2015.
2. It describes the matter on which statutory auditors has to report in their Audit Report.
3. Applicable From 10th April 2015.
(1st part) Main Audit Report
(2nd part) Annexure
Which is covered by S.A. 700
Which is covered by CARO
Applicability of CARO,2015
Applicable to all type of companies including Foreign Company as defined u/s 2(42) of the Companies
But shall not apply to:
1. a banking company;
2. an insurance Company;
3. a company licensed to operate under section 8;
4. one person company as defined u/s 2(62) and small company as defined u/s 2(85);
5. a private limited company:
With a paid up capital and reserves not more than Rs.50 lakh; and
Which doesn’t have loan outstanding exceeding Rs.25 lakh from any bank or financial
Doesn’t have turnover exceeding Rs.5 crore at any point of time during the financial year.
Points to remember
1.Capital – Equity + preference + forfeited shares capital (due to schedule III of Companies Act,
2.Reserve – (capital reserve + revaluation reserve) + (Revenue reserve- debit balance of P&L
Account to the extent of free reserve).
3.Share application money should not be considered as a part of paid up capital.
4.Turnover – a. Sale during the year + service rendered – sales return (even belongs to the prior
year) – trade discount – taxes (if charged separately).
Commission to third party not allowed to be deducted from turnover.
1. Loan may be in form of term loan, demand loans, cash credit overdraft, export credit, bill
purchased/ discounted. (Means all related with only & only “Bank & Financial Institutions”).
2. Loan from NBFC should not be considered. ( if convert to BFC before 31st march then
3.Interest on loan should not be considered as loan.
Cases on Exemption of CARO
Is exemption available for both life insurance and general insurance?
Yes, applicable to both.
In December NBFC was converted into bank.
Yes, we have to see status as on year end and it is a bank at year.
In December bank was converted in NBFC.
No, we have to see status as on year end and it is a NBFC at year end.
Private limited company has equity share capital of Rs, 20 lakh, preference share capital of 10 lakh,
general reserve of 30 lakh, P&L debit balance (60) lakh, securities premium of 10 lakh capital reserve of
15 lakh, share application 20 lakh, share forfeiture 5 lakh, revaluation reserve 8 lakh. Will this company
Computation of paid up capital and reserve:- equity 20 lakh + pref. 10 lakh + general reserve 30 lakhdebit
balance P&L(30)+security premium 10lakh + capital reserve 15 lakh+ share forfeited 5 lakh+ revaluation reserve 8 lakh=68 lakh.
As it crosses 50 lakh, CARO is applicable.
Private limited company has following borrowing from Mr. Ambani 20 lakh, Mr. Vijay 5 lakh, ICICI bank
5 lakh, IFCI 10 lakh. Is exemption available?
We have to consider borrowing from banks & FIs, so total is ICICI 5 lakh+ IFCI 10 lakh=15 lakh, it is
below 25 lakh.
So exemption is available.
Private unlimited company has paid up capital of 40 lakh, O/S loan 15 lakh, turnover of 3.5 crore.
No, it is unlimited company. Exemptions are only for limited company.
Pvt Ltd. Company has sale of goods Rs 4 crore, sale of services 2 crore, sale return Rs 1.5 crore
(including 0.5 crore from previous year) Excise duty included in sale of goods Rs 75 lakh, other income
Rs. 40 lakh, VAT on sale included above 20 lakh. Is CARO applicable?
Computation of turnover sale (goods) 4 crore + sale(services) 2 crore-sales return 1.5 crore-excise
duty 25 lakh-VAT on sales 20 lakh=3.55 crore.
As turnover is below 5 crore CARO will not applicable.
Matters to be reported under CARO
Fixed Assets [3(i)]
1. ADEQUACY of record: Whether company is maintaining proper records showing full
particulars including quantitative details and situation of fixed assets.
1. VERIFICATION: Whether F.A. has been physically verified, at reasonable intervals.
If material discrepancies were noticed à same has been properly dealt with in the books of account.
1. VERIFICATION: physically verified, at reasonable period.
2. Procedures of verification followed by management are reasonable and adequate.
3. ADEQUACY OF RECORDS:-proper records & if discrepancies then properly dealt.
Loan to directors or interested parties covered u/s 189. [3(iii)]
1. REPAYMENT- receipt of principle & interest are regular
2. STEPS FOR RECOVERY, if overdue amount is more than one lakh
Internal control [3(iv)]
1. ADEQUATE I.C.S. with size & nature of business for purchase of inventory & F.A. and sale of
goods & service
2. Continuing failure to CORRECT major weakness in internal control.
Ensure that it has complied with:-
1. Directives issued by Reserve Bank of India.
2. Section 73 to 76 or any other provision.
3. Order issued by company law board/ tribunal/RBI/any court.
4. Nature of contravention (if any).
Cost Records [3(vi)]
Where maintenance of cost records has been specified by Central Government under section
148(1), whether such accounts have been prepared and maintained properly.
Statutory Dues [3(vii)]
1. Is company regular in depositing undisputed statutory dues including P.F., all Taxes & others.
If not paid regularly, then O/s dues at last day of F/Y concerned for a period of more than 6
months from the date of payable, shall be indicated in the report.
2. If any dispute for dues , then the amount involved and the forum where the dispute is pending
should also be mentioned.
3. If required to transfer to investor education and protection fund, has been transferred within
Accumulated losses [3(viii)]
If Company registered for a period not less than five year, reported whether:-
1. Accumulated loss of F/Y exceeded 50% of the company’s net worth
2. Company has incurred cash losses in the immediately preceding F/Y.
Repayment of dues [3(ix)]
1. Whether the company has paid the principal and interest to F.I. Banks, Debenture holders
2. The period and amount of default(if any)
Guarantee given [3(x)]
If guarantee given for loans taken by others from bank & F.I., whether or not the terms and conditions
are prejudicial to the interest of the company
Uses of loan [3(xi)]
Whether or not terms loan are used for the purpose for which such loans were obtained
Fraud Reporting [3(xii)]
If any fraud on or by company has been noticed or reported during the year, the nature of amount
should be indicated.