July 7, 2021 / Company Law Compliances

WIDE COVERAGE ON COMPANIES (AUDITOR’S REPORT) ORDER (CARO), 2016.

MCA PROPOSES NEW CARO, 2016 WITH WIDE COVERAGE

On 9th February 2016, Ministry of Corporate Affairs (MCA) has issued draft Companies (Auditor’s Report) Order (CARO), 2016. As per Section 143 of the Companies Act, 2013, every auditor’s report under this section shall contain matters specified under applicable CARO (currently CARO, 2015). In comparison to the existing CARO (2015), CARO (2016) proposes reporting on some new requirements and eliminates some of the existing reporting requirements.

In comparison to CARO, (2015), CARO (2016) proposes additional reporting on the following:-

Auditor should report

Whether title deeds of immovable properties are held in the name of the company. If not, provide details thereof.
Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered by clause (76) of Section 2 of the Companies Act, 2013. If so,
Whether the terms and conditions of the grant of such loans are not prejudicial to the company’s interest.
In respect of loans, investments and guarantees, whether provisions of Section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide details thereof.
Whether managerial remuneration has been paid/ provided in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same.
Whether the Nidhi Company has complied with the Net Owned Fund in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining 10% liquid assets to meet out the unencumbered liability.
Whether all transactions with the related parties are in compliance with Section 188 and 177 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc. as required by the accounting standards and Companies Act, 2013.
Whether the company has made any preferential allotment / private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of Section 42 of the Companies Act, 2013 have been complied and the amount raised have been used for the purposes for which the funds were raised. If not, provide details thereof.
Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether provisions of Section 192 of Companies Act, 2013 have been complied with.

Further, in the case there is any unfavourable/ qualified/ disclaimer of opinion, auditor’s reports should state reasons for the same.

Stakeholders need to provide their comments on the proposed CARO, 2016 by February 23, 2016.

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