Saturday 11 April 2015

CARO, 2015 (Clause Wise Comparison with CARO, 2003)




CARO, 2003 and CARO, 2015
-A Comparative Analysis

Ref.: Notification dated 10/04/2015 
CARO, 2015 applicable  from 01th April, 2014 

Clause No.
CARO, 2003
Clause No.
CARO, 2015
1.
It shall apply to every company including a foreign company as defined in section 591 of the Act, except the following :-



-


                                             






(iv) a private limited company

·         with a paid up capital and reserves not more than fifty lakh rupees and

·         has not accepted any public deposit and

·         does not have loan outstanding ten lakh rupees or more from any bank or financial institution and

·         does not have a turnover exceeding five crore rupees.
1
lt shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2O13 (18 of 2O13) [hereinafter referred to as the Companies Act], except -

(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;

* a new exemption is granted to one person company

(v) a private limited company

·         with a paid up capital and reserves not more than fifty lakh rupees and

·         has not accepted any public deposit and

·         does not have loan outstanding twenty five lakh rupees or more from any bank or financial institution and

·         does not have a turnover exceeding five crore rupees.

* In order to be exempt from the applicability of the CARO, the Pvt. Ltd. Company must satisfy all the conditions at any point of time during the financial year
2.
Definitions.

There are no such definitions which are now included in the CARO 2015.

4
Matters to be included in the auditor's report. - The auditor's report on the account of a company to which this Order applies shall include a statement on the following matters, namely :


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


(i)
(c)  if a substantial part of fixed assets have been disposed off during the year, whether it has affected the going concern;
(i)
(c) Deleted
(iii)
(a)   has the company either granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under section 301 of the Act. If so, give the number of parties and amount involved in the transactions.




(b)   whether the rate of interest and other terms and conditions of loans given or taken by the company, secured or unsecured, are prima facie prejudicial to the interest of the company;

(c)   whether payment of the principal amount and interest are also regular;

(d)  if overdue amount is more than one lakh, whether reasonable steps have been taken by the company for recovery/payment of the principal and interest;
(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,

* the clause as per CARO 2015 deals only with the loans granted by the Company


Deleted




(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  procedure 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. Whether there is a continuing failure to correct major weaknesses in internal control;
(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)
(a)  whether  transactions that need to be entered into a register in pursuance of section 301 of the Act have been so entered;

 (b) whether each of these transactions have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time;
(This information is required only in case of transactions exceeding the value of five lakh rupees in respect of any party and in any one financial year).
-
Deleted
(vi)
in case the company has accepted deposits from the public, whether the directives issued by the Reserve Bank of India and the provisions of sections 58A and 58AA of the Act and the rules framed there under, where applicable, have been complied with. If not, the nature of contraventions should be stated; If an order has been passed by Company Law Board whether the same has been complied with or not?
(v)
No Change except clause no.
(vii)
in the case of listed companies and/or other companies having a paid-up capital and reserves exceeding Rs.50 lakhs as at the commencement of the financial year concerned, or having an average annual turnover exceeding five crore rupees for a period of three consecutive financial years immediately preceding the financial year concerned, whether the company has an internal audit system commensurate with its size and nature of its business;
-
Deleted
(viii)
where maintenance of cost records has been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Act, whether such accounts and records have been made and maintained;
(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 such accounts and records have been made and maintained:
(ix)
(a)  is the company regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Custom Duty, Excise Duty, cess and any other statutory dues with the appropriate authorities and if 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 sales tax/income tax /custom tax/wealth tax/excise duty/cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending may please be mentioned.
(A mere representation to the Department shall not constitute the dispute).
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 if 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.
(x)
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 financial year immediately preceding such financial year also;
(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;
(xi)
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;
(ix)
No Change except clause no.
(xii)
whether adequate documents and records are maintained in cases where the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities; If not, the deficiencies to be pointed out.
-
Deleted
(xiii)
whether the provisions of any special statute applicable to chit fund have been duly complied with? In respect of nidhi/ mutual benefit fund/societies;
(a)        whether the net-owned funds to deposit liability ratio is more than 1:20 as on the date of balance sheet;
(b)        whether the company has complied with the prudential norms on income recognition and provisioning against sub-standard/default/loss assets;
(c)        whether the company has adequate procedures for appraisal of credit proposals/requests, assessment of credit needs and repayment capacity of the borrowers;
(d)        whether the repayment schedule of various loans granted by the nidhi is based on the repayment capacity of the borrower and would be conducive to recovery of the loan amount;
-
Deleted
(xiv)
if the company is dealing or trading in shares, securities, debentures and other investments, whether proper records have been maintained of the transactions and contracts and whether timely entries have been made therein; also whether the shares, securities, debentures and other securities have been held by the company, in its own name except to the extent of the exemption, if any, granted under section 49 of the Act;
-
Deleted
(xv)
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;
(x)
No Change except clause no.
(xvi)
whether term loans were applied for the purpose for which the loans were obtained;
(xi)
No Change except clause no.
(xvii)
whether the funds raised on short-term basis have been used for long term investment and vice versa; If yes, the nature and amount is to be indicated;
-
Deleted
(xviii)
whether the company has made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act and if so whether the price at which shares have been issued is prejudicial to the interest of the company;
-
Deleted
(xix)
whether securities have been created in respect of debentures issued?
-
Deleted
(xx)
whether the management has disclosed on the end use of money raised by public issues and the same has been verified;
-
Deleted
(xxi)
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.
(xii)
No Change except clause no.
5
Reasons to be stated for unfavourable or qualified answers. –
Where, in the auditor's report, the answer to any of the questions referred to in paragraph 4 is unfavourable or qualified, the auditor's report shall also state the reasons for such unfavourable or qualified answer, as the case may be. 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.
4
No Change except clause no.