Companies (Auditor’s Report) Order 2015 CARO 2015 Presented by : CA Kusai Goawala 30th May 2015 Pune Branch of ICAI, Pune
Companies (Auditor’s Report) Order 2015
CARO 2015
Presented by : CA Kusai Goawala30th May 2015Pune Branch of ICAI, Pune
APPLICABILITY OF CARO Applicable to every company including foreign company - place of Business in India – even through agent – electronic
mode – conducts business in India.
Exceptions from Applicability of CARO 2015
1) Banking Companies
2) Insurance Companies as defined under Insurance Act
3) Not for Profit Companies ( Section 8 Companies)
4) One Person Companies
5) Small Company – Capital < 50 lacs and Turnover < 2 crore – holding and subsidiary not covered
6) A private limited companies with
a) paid up capital and reserves not more than Rs. fifty Lakhs and;
b) doesn’t have outstanding loan Rs. 25 Lakhs from any bank or financial institution and;
c) Doesn’t have turnover exceeding Rs five crore
at any point during FYCA KUSAI GOAWALA
DELETED CLAUSES
Clause 1. (c)
if a substantial part of fixed assets have been disposed off during the year, whether it has affected the going concern Clause 3 (e) (f) and (g)
(a) Loan taken from parties listed in Register u/s 301
(b) Terms and Conditions not prejudicial
© Repayment of principle and interest is regular
In respect of loans given, the details of number of parties and maximum amount involved need not be given.
Further, clause regarding terms and conditions and interest rates prejudicial has been deleted. Clause 5
(a) Recording of transactions in Register u/s 301;
(b Transactions at prices which are reasonable and at market price; Clause 7.
Existence of Internal Audit CA KUSAI GOAWALA
DELETED CLAUSES
Clause 12.
Documentation regarding loans granted against pledge of shares, debentures or other security Clause 13
Compliance with provisions of special statutes wherever applicable to chit funds.
Further regarding Nidhi/Mutual benefit fund/societies – information relating to certain financial parameters, compliance with prudential norms, procedures for credit appraisals and guidelines for granting of loans.
Clause 14
In respect of trading of shares, maintenance of records and timely entries in the books of account
Further, whether the investment is held in the name of the Company
CA KUSAI GOAWALA
Clause 17.
Short term funds used for long term purposes
Clause 18.
In case of preferential allotment to parties listed in 301 register – price is not prejudicial to the interest of the company
Clause 19.
whether securities have been created in respect of debentures issued?
Clause 20.
whether the management has disclosed on the end use of money raised by public issues and the same has been verified
DELETED CLAUSES
CA KUSAI GOAWALA
FIXED ASSETS
Fixed Asset Register to be maintained giving particulars of quantitative and situation of fixed assets
Physical verification by management at reasonable intervals
Discrepancies – how dealt with.
Audit W/P Verification list of assets by the management
Discrepancies
Tallying the Fixed Asset Register with carrying amount as per Financial Records
CA KUSAI GOAWALA
Physical verification by management at reasonable intervals
Procedure for conducting physical verification – reasonable and adequate – inadequacies to be reported
Proper stock records maintained – any discrepancies on verification – proper adjustment in books of accounts
Audit W/P Stock Verification sheet and discrepancies
Reconciliation with Stock Ledger
Note in relation to procedure for physical verification
INVENTORY
CA KUSAI GOAWALA
Loans granted to parties listed in Register maintained u/s 189
Principle and interest receipts are regular
Overdue of more than Rs. 1 lacs – steps taken to recover the same.
Provisions relating to reporting number of parties and maximum amount deleted.
No need to report on the terms and conditions and interest rates whether they are prejudicial to the Company
Audit W/P Parties required to be listed in Register u/s 189
Provisions of Section 185/186 to be kept in mind.
Letter for granting of loan
LOANS TO PARTIES COVERED U/S 189
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DIRECTORS INTERESTED - DISCLOSURES
Section 189 refers to a disclosure of Register for parties as per Section 184(2) and 188
As per Section 184 (2) following parties are covered : Director in relation to other Body Corporate
– 2% shareholding (including with other directors)
Promoter
Manager
CEO
Director in relation to any other entities Partner
Owner
Member
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LOANS TO RELATED PARTIES
Related parties as per Section 188
Who are RTP Director/Relatives KMP/Relatives Firm – Director, Manager, Relative partner Pvt Co – Director – member or director Pub Co – Director – Director – or holds with Relatives 2% shares Co – where Director directs the Board Any person – where Director directs Holding, Subsidiary or their associates Fellow Subsidiaries
CA KUSAI GOAWALA
Adequate Internal Control System – commensurate to
Size of the Company Nature of its business
In relation to Purchase of inventory Fixed Assets Sale of Goods and Services
Continuing failure to correct major weaknesses in internal control system Audit W/P
ICQ Testing of Internal Control process with sample data
INTERNAL CONTROL SYSTEM
CA KUSAI GOAWALA
A stringent and wide provisions for acceptance of deposit under Companies Act 2013
Loopholes plugged – Loan from shareholders/Advances for properties
Penalty for violation
Deposit as defined u/s 73 and 76
Not an exempt deposit
Compliance with directives of RBI and provisions of Section 73 and 76
Nature of Contravention
Order from RBI/CLB /Court complied with
DEPOSITS
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DEPOSITS (CONTD) Provisions of Section 73 and 76 All amounts received by Company considered as Deposits unless exempted Exempted category
Inter Corporate Deposits/Commercial Paper
Loans from Banks/FI/Foreign Source as per FEMA
Amounts received from Government
Loans from Directors out of their own funds
Advances from customers unless remaining unadjusted beyond 365 days
Advances for property unless supported by Contract or Agreement
Promoters Contributions
Employee Security Deposit not in excess of one years salary
Secured Debentures or Convertible Debentures
Share Application money where shares are not allotted within 60 days and not refunded after 15 days
CA KUSAI GOAWALA
DEPOSITS
If a receipt is considered as Deposit, compliance u/s 73 and 76 as under :
Only Public Companies having networth of Rs.100 crores or Sales turnover of Rs.500 cr can accept deposits
Deposit cannot exceed 25% of capital plus free reserves
Interest rates not exceeding rates prescribed by RBI
Maturity Period not to exceed 36 mths
15% of deposits due for renewal in next 12 months to be kept under liquid deposit
Advertisement or Circular to be published
Return of Deposit to be filed
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Maintenance of Cost Records specified – Section 148
Prima facia maintained
Reconciliation of cost records with financial records
Section 148 and requirement for maintaining cost records
COST RECORDS
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COST ACCOUNTING RULES
Application of Rules for maintenance of cost records:- These rules shall apply to every company, including the foreign company as
defined under section 591 of the Act., Which are engaged in production, processing, manufacturing or mining activities. SMC are exempt.
Wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds thirty five crores of rupees; or
COST RECORDS – WHAT CONSTITUTES RECORDS
Cost Records which enable the Company to :
Control over various operating cost.
Optimum utilisation of resources
It enables to compute per unit cost of production/operations/services
It includes documents like
GRN
Material Issue Note
Labour Hour utilisation
Overhead allocations
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COST RECORD RULES
Separate Rules for Cost Accounting Records (Bulk Drugs) Rules, 1974
Cost Accounting Records (Formulations) Rules, 1988
Cost Accounting Records (Fertilizer) Rules, 1993
Cost Accounting Records (Sugar) Rules, 1997
Cost Accounting Records (Industrial Alcohol) Rules, 1997
Cost Accounting Records (Electricity Industry) Rules, 2001
Cost Accounting Records (Petroleum Industry) Rules, 2002
Cost Accounting Records (Telecommunications) Rules, 2002
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Undisputed Statutory Dues outstanding for more than six months from the due date Provident Fund / ESIC
Income tax including advance tax
Sales tax/VAT
Wealth Tax
Service Tax / Excise Duty
Cess – 441A Companies Act 1956 – no corresponding section under Companies Act 2013
Any other statutory liability
Disputed Statutory Dues Amount due and disputed At which forum (mere representation is not a dispute) Transfer to Investor Education protection fund : - compliance for amount and timely transfer – reference to
Companies Act 1956. Also reference of the same in main report
STATUTORY DUES
CA KUSAI GOAWALA
Applicable to Companies that has completed five years after incorporation
Accumulated losses at the end of the financial year greater than or equal to fifty percent of its networth
Cash losses (Loss before depreciation and amortisation but after taxes) in current financial year
Immediately preceding financial year
Cash losses – deferred tax ?
ACCUMULATED LOSSES
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Default in repayment and interest to financial institution
bank
debenture holders
To be reported even if default made good
Period of Default – Number of months or days
Amount defaulted
DEFAULT OF LOAN
CA KUSAI GOAWALA
Guarantee given for loan taken by others From Bank
Financial Institutions
Terms and Conditions – whether prejudicial
Any guarantee given will be prejudicial unless there is a quid pro quo
Audit W/P Refer and Reconcile with Contingent liabilities
Refer Sanction letters for guarantee given by the Company and loans availed by others
Assess Risk of Guarantee
Quid pro quo
Evaluate whether benefit to the Company higher than the risk involved
GUARANTEE FOR LOAN
CA KUSAI GOAWALA
Term Loan availed during the year
Term loan availed in preceding year and utilised during the year
Purpose for which sanctioned/availed
End use of the loan
Money is fungible – Bridge finance
Repayment of liability for end use incurred earlier
USAGE OF LOAN
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Fraud noticed or reported : On the Company
By the Company
Whistle Blower provisions under the Companies Act 2013 – 143(12)
Guidance note for fraud by ICAI
Nature of fraud
Amount involved
FRAUD REPORTING
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ANY QUERIES?ANY QUERIES?
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