It’s an attempt to provide a brief synopsis of the
rationale for issuing the revised version of the CARO, its revised
applicability and clause by clause comparison between CARO 2015 and CARO
2016.
There were various reasons for modifying the already
issued CARO 2015, which may be categorized as follows:
2. Brief Summary
2.1 The need: There were various
reasons for modifying the already issued CARO 2015, which may be categorized as
follows:
2.1.1 Compatibility with
the Companies Act, 2013 (the Act 2013):
The Companies Act, 1956 had largely ceased to be in force effective from 1
April, 2014 (barring those sections which are still applicable) and,
consequently, CARO 2003 (as amended), issued under section 227(4A) of the said
Act also lost its validity from the said date. With the introduction of the Act
2013, CARO 2015 was issued; however, a need was felt to further revise the same
in such a short span of time for making it more compatible with the Act 2013. Consequently, following changes have been done
to CARO 2015:
§ Reporting on Internal
Control Systems deleted, due to a separate reporting on Internal Financial
Controls, as mandated by the Act 2013.
§ Reporting with
respect to loans, investments, guarantees and security under sections 185 and
186 of the Act 2013 added.
§ Reporting of the
fraud by the company and on the company by its officers or employees is
mandated now, as against all the frauds on or by the company earlier.
§ Reporting on
managerial remuneration added as per the Act 2013.
§ Reporting on
compliance with section 177 (Audit Committee) and section188 (Related Party
Transactions) of the Act 2013 added.
§ Reporting on non-cash
transactions with directors, etc., as per the provisions of section 192 of the
Act 2013 added.
2.1.2
Further improvements
§ Increasing of the
applicability limits for private companies for scoping out small sized
companies
§ Adding new provisions
for more transparency or complete reporting, e.g.,
o
Reporting
on holding the title deeds of immovable properties in the name of the company.
o
Reporting
of loan, etc., given to Limited Liability Partnerships.
o
Reporting
on schedule of repayment of loans.
o
Reporting
on lender-wise details to be made with respect to defaults on dues.
o
Reporting
on moneys raised by way of IPO or further public offer.
2.1.3 Applicability: Every
statutory audit report issued by an auditor under section 143 of the Act 2013
on the financial statements of a company, having CARO 2016 applicable for the
FY commencing on or after 1 April 2015, shall report matters specified under CARO
2016.
Order 2016 shall not apply to the
auditor’s report on consolidated financial statements.
CARO 2016 is applicable to every
company including a foreign company, barring following companies:
§ a banking
company;
§ an
insurance company;
§ a
company licensed to operate under section 8 of the Act 2013;
§ an
OPC and a Small Company as defined under the Act 2013; and
§ a
private limited company (not being a subsidiary or holding company of a public
company) with:
o
a
paid-up capital and reserves and surplus not more than Rs. 1 crore as on the
balance sheet date;
o
which
does not have total borrowings exceeding ` 1 crore from any bank or financial
institution at any point of time during the financial year; and
o
Which
does not have a total revenue as disclosed in Scheduled III to the Act 2013
(including revenue from discontinuing operations) exceeding RS. 10 crore during
the financial year as per the financial statements.
2.1.4 Reporting on adverse
comments by the auditors: In case the answer to any of the clauses under CARO
2016 is unfavorable or qualified, the auditor shall also provide the basis for
such unfavorable or qualified responses. However, in those instances where the auditor is unable to express any
opinion on a specified matter, he shall
indicate this fact along with the reasons for the same.
For more, please refer Taxmann’s Corporate Professionals
Today nVolume
35 nIssue
7 nApril
1 to 15, 2016
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