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3rd Year Exam 2016 : Commercial Studies (Iinstitute Of Chartered Accounts Of India , Vijayawada )

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Poreddy Subbareddy
Institute of Chartered Accountants of India (ICAI)

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CA Clues Nikhil Gupta Companies (Auditors Report) Order, 2015 [CARO] 1. What types of Companies are specifically exempted from application of CARO? 1. Applicability: CARO 2015 applies to all Companies including a Foreign Company as defined u/s 2(42). 2. Exceptions / Exemptions: CARO does not apply to the following classes of Companies (a) Banking Company as defined u/s 5(c) of the Banking Regulation Act, 1949, (b) Insurance Company as defined Insurance Act, 1938. (c) Company licensed to operate u/s 8 of the Companies Act, 2013 and (d) One percent Company as per Sec.2(62) and a Small Company as per Sec.2(85) of the Companies Act, (e) Private Limited Companies subject to the following conditions Aggregate of Paid Up Capital and Reserves should not exceed ` 50 Lakhs. Loan outstanding from any Bank or Financial Institution should not exceed ` 25 Lakhs. Turnover should not exceed ` 5 Crores. 2. List the matters to be reported under CARO, 2015. 1. FIXED ASSETS [3(i)]: (a) Adequacy of Records: Whether or not proper records have been maintained to show full particulars including quantitative details and details about situation of Fixed Assets. (b) Verification: 2. Whether the Management of the Company has physically verified the Fixed Assets, at reasonable intervals, and Whether material discrepancies observed, if any, on such verification have been suitably dealt with in the books of account. INVENTORIES [3(ii)]: (a) Verification: Whether Management has physically verified all the inventories at suitable intervals. (b) Adequacy of procedures: Whether the procedures for physical verification of inventory are reasonable and adequate, having regard to the size of the Company and the nature of its business. (c) Adequacy of Records: 3. Whether the Company is maintaining proper records of inventory, and Whether any material discrepancies were noticed on physical verification and if so, whether the same have been properly dealt with in the books of account. LOANS TO DIRECTORS AND INTERESTED PARTIES [3(iii)]: LOANS GIVEN: Has the Company granted any loans, secured or unsecured, to Companies, Firms or other parties covered in the Register maintained u/s 189 of the Act. (a) Repayment: Whether receipt of the Principal and the interest amount are regular. (b) Steps for recovery: If overdue amount is more than ` 1,00,000, whether reasonable steps have been taken by the Company for recovery of Principal and Interest. 4. INTERNAL CONTROL [3(iv)]: (a) Adequacy: 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 its goods and services. (b) Correction of Weakness: Whether there is a continuing failure to correct major weaknesses in Internal Control. 1

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