Applicability: CARO, 2016 is applicable to every company including a foreign company as defined by section2(42) of The Companies Act, 2013. Following classes of companies are exempt from the follow up, they are as follows:
I. A banking Company,
II. An Insurance Company
III. A company licensed to operate under section 8 Of the Companies Act, 2013
IV. One Person Company
V. A private company, not being subsidiary or holding company of a public company, having a paid up capital plus reserves and surplus not more than rupees one crore as on the balance sheet date and which does not have total borrowings exceeding rupees one crore from any bank or financial institution at any point during the financial year and which does not have total revenue as disclosed in Schedule III of the Companies Act 2013 exceeding rupees ten crores during financial year as per the financial statements.
Matters to be disclosed as per CARO 2016 in Auditor’s Report
The auditor’s report on the books of accounts in which the CARO 2016 applies are required to follow up certain disclosures on the matters, they are as follows:
I. Fixed Assets
• Whether the company is maintaining proper records showing full particulars relating to the fixed asset,
• Physical verification has been undertaken by the management at regular intervals,
• Title deeds of immovable properties are held in the name of company, if not provided so then further procedures undertaken
• Physical verification of inventory has been conducted at regular intervals by the management
• If any material discrepancy found then it should be properly dealt in the books of accounts
III. Loans to Directors & Investment by Company
• For loan purposes, guarantees and security is provided as per section 185 & 186 of the Companies Act 2013.
IV. Default in repayment of loans and borrowings
• Whether the company has defaulted any repayment of loans or borrowings to a financial institution, bank etc
• If defaulted then further details regarding the amount and other additional disclosures are required to be provided
V. Payment of statutory dues
• Whether the company has paid all the statutory dues like income tax, sales tax, service tax and etc liabilities applicable on it
• And if not paid there the amount in arrears on the last date on financial statements
• Whether the company officials and employees are deliberatory attempted any fraud. Then the disclosure is to made to the extend of impact of the fraud
VII. Application of funds raised
• Whether the funds have been properly utilized for the purpose which is raised from the public at the reasonable time. If not details about the delay should be provided.
VIII. Loans given by the company
• Whether any loans and borrowings are given by the company.If yes, proper register has been maintained for it
• Whether terms and conditions are not ambiguous to the company
• Whether the receipt of installment of loan given is properly received and accounted for in the books of the accounts. If not then details should be provided with proper justification
IX. Acceptance of deposits
• If the company has received any deposits and they have been properly complied with the norms of Reserve Bank of India.
X. Maintenance of Cost records
• Whether the maintenance of cost records has been specified by central government under section 148(1) of the Companies Act.
XI. Managerial Remuneration
• Whether the managerial remuneration is provided as per the provisions of the section 197, If not then what are the steps taken by the company for securing refund of the same.