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AASB issues Guidance on Reporting under the Companies (Auditors Report) Order, 2015 (CARO, 2015) and Consequential Amendment to the Format of the Auditors Report of a Company.
April, 24th 2015

I.      Reporting Under CARO, 2015

1.     As the members are aware, the Ministry of Corporate Affairs, on 10th April, 2015, notified
the Companies (Auditor's Report) Order, 2015 (CARO, 2015). The text of the Order is available on
the URL

2.      Members would have noted that, inter alia, the exemption criteria applicable to private
companies as laid down in the paragraph 1(v) of the CARO, 2015 is same as that in the Companies
(Auditor's Report) Order, 2003 (CARO, 2003). Also, it is noted that the twelve reporting clauses
given in paragraph 3 of CARO, 2015 are similar in their requirements to the corresponding clauses in
paragraph 4 of the CARO, 2003. Further, the requirement to state reasons for unfavourable or
qualified answers as given in paragraph 4 of the CARO, 2015 is also similar to that contained in
paragraph 4 of the CARO, 2003. Accordingly, members are advised to continue to draw in principle
guidance from the relevant paragraphs of the Statement on the Companies (Auditor's Report) Order,
2003, issued by the Institute of Chartered Accountants of India.

3.     For the benefit of the members, following is a reference table of reporting clauses of CARO,
2015 and the corresponding paragraphs of the Statements on CARO, 2003, wherefrom relevant
guidance can be drawn (subject to necessary changes in the context of the provisions of the
Companies Act, 2013 and the Rules issued thereunder):

                        Clause of CARO, 2015                               Relevant Paragraph/s of the
                                                                            Statement on CARO, 2003

(i) (a) whether the company is maintaining proper records showing                      44(a) to (n)
full particulars, including quantitative details and situation of fixed

(b) whether these fixed assets have been physically verified by the                    45(a) to (g)
management at reasonable intervals; whether any material
discrepancies were noticed on such verification and if so, whether
the same have been properly dealt with in the books of account;

(ii)(a) whether physical verification of inventory has been conducted                  47(a) to (d)
at reasonable intervals by the management;

1                                                                                 nd
         This Announcement is being issued in terms of the decision taken at the 342 meeting of the Council
of the Institute of Chartered Accountants of India.

                                                                                                 Page 1 of 4
(b) are the procedures of physical verification of inventory followed   48(a) to (k)
by the management reasonable and adequate in relation to the size
of the company and the nature of its business. If not, the
inadequacies in such procedures should be reported;

(c) whether the company is maintaining proper records of inventory      49(a) to (h)
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;

(iii) whether the company has granted any loans, secured or             50(a) to (f)
unsecured to companies, firms or other parties covered in the
register maintained under section 189 of the Companies Act. If so,

(a) whether receipt of the principal amount and interest are also       52(a) to (e)
regular; and

b) ifoverdue amount is more than rupees one lakh, whether               53(a) to (c)
reasonable steps have been taken by the company for recovery of
the principal and interest

(iv) is there an adequate internal control system commensurate          57(a) to (m)
with the size ofthe 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) in case the company has accepted deposits, whether the              60(a) to (l)
directives issued by the Reserve Bank of India and the provisions of
sections 73 to 76 or any other relevant provisions of the Companies
Act and the rules framed there under, where applicable, have been
complied with? II not, the nature of contraventions should be
stated; If an order has been passed by Company Law Board or
National Company Law Tribunal or Reserve Bank of India or any
court or any other tribunal, whether the same has been complied
with or not?

(vi) where maintenance of cost records has been specified by the        62(a) to (g)
Central Government under sub-section (1) of section 148 of the
Companies Act, whether such accounts and records have been
made and maintained;

(vii) (a) is the company regular in depositing undisputed statutory     63(a) to (r)
dues including provident fund, employees'state insurance, income-

                                                                                  Page 2 of 4
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                64(a) to (h)
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              The members may note that
education and protection fund in accordance with the relevant              the provisions relating to the
provisions of the Companies Act, 1956 (1 of 1956) and rules made           Investor     Education    and
thereunder has been transferred to such fund within time.                  Protection Fund (IEPF) are
                                                                           contained in section 205C of
                                                                           the Companies Act, 1956 and
                                                                           the IEPF (Awareness and
                                                                           Protection     of   Investors)
                                                                           Rules, 2001. For the purpose
                                                                           of reporting on this clause,
                                                                           the members would need to
                                                                           examine the date of transfer
                                                                           vis a vis the time prescribed
                                                                           in the aforesaid provisions
                                                                           and Rules and report

(viii) whether in case of a company which has been registered for a                 65(a) to (h)
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;

(ix) whether the company has defaulted in repayment of dues to a                    66(a) to (h)
financial institution or bank or debenture holders? If yes, the period
and amount of default to be reported;

(x) whether the company has given any guarantee for loans taken by                  71(a) to (h)
others from bank or financial institutions, the terms and conditions
whereof are prejudicial to the interest of the company;

                                                                                              Page 3 of 4
(xi) whether term loans were applied for the purpose for which the                72(a) to (j)
loans were obtained;

(xii) whether any fraud on or by the company has been noticed or                 77(a) to (k)
reported during the year; Ifyes, the nature and the amount involved
is to be indicated.

4.      Members may also continue to draw guidance, to the extent relevant, in respect of
applicability of the CARO, 2015, form of report and Board's report, from the guidance given in the
Statement on Companies (Auditor's Report) Order, 2003 (subject to necessary changes in the
context of the provisions of the Companies Act, 2013 and the Rules thereunder).

II. Consequential Amendment to the Format of the Auditor's Report of A

5.       The Auditing and Assurance Standards Board had, in December 2014, issued illustrative
formats of the auditor's report on financial statements of a company under the Companies Act,
2013. While reporting on the requirements of CARO, 2015, a reference thereto also needs be added
in the main audit report under the "Report on Legal and Other Regulatory Matters" paragraph as
                 Report on Other Legal and Regulatory Requirements

The aforesaid illustrative formats of the auditor's report, accordingly, stand amended to that extent.

                                                                CA ABHIJIT BANDYOPADHYAY
                                            Chairman, Auditing and Assurance Standards Board

                                                                                            Page 4 of 4
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