Changes Made By CARO 2016 Regarding Auditor’s Report
I. New Requirements Added By CARO 2016
CARO 2016 has added seven new clauses relating to: (1) Compliance with Sections 185 and 186 in case of loans, investments, guarantees and security. (2) Payment of Managerial Remuneration in accordance with applicable provisions of the Act and Rules. (3) Nidhi Companies- compliance with Net Owned Funds to Deposits requirements. (4) Compliance with Sections 177 and 188 in case of transactions with related parties. (5) Preferential allotment or private placement of shares/debentures– Compliance with Section 42 and end use of funds raised. (6) Compliance with Section 192 in case of non cash transactions with directors or persons connected with him. (7) Requirement to obtain registration under section 45-IA of the RBI Act, 1934. CARO 2016 has also added a new sub-clause relating to “Title deeds of immovable properties” under the clause “Fixed Asset” and a new sub-clause relating to “whether the terms and conditions of grant of such loans are not prejudicial to the company’s interest” under the clause “Loans granted to parties”.
II. Requirements Omitted By CARO 2016
CARO 2016 has omitted three clauses relating to: (1) Adequate internal control system for the purchase of inventory and fixed assets and for the sale of goods and services. (2) Accumulated losses not less than fifty per cent of the net worth of company. (3) Guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company. CARO 2016 has also omitted the sub-clause relating to “Procedures of physical verification of inventory” under the clause “Inventories” and the sub-clause relating to “Amount required to be transferred to investor education and protection fund” under the clause “Statutory Dues”.
III. Requirements Changed By CARO 2016
In addition to introducing some new requirements and omitting some existing requirements, CARO 2016 has also made some changes in the existing requirements. Important changes made are as follows:
The reporting requirement on ‘maintaining proper records of inventory’ has been removed under the clause “Inventory”.‘Limited Liability Partnerships’ have been included in the list of parties under the clause “Loans granted to Parties”. Further, this clause now requires reporting of any amount overdue for more than 90 days. Earlier monetary limit of Rs 1 Lakh given in CARO 2015 has been removed.‘Wealth tax’ has been removed from the list of taxes under the clause “Regularity in depositing Statutory Dues”Government’ has been included in the list of parties under the clause “Defaults in repayment of loans, borrowings, dues”. Further, this clause now requires lender wise reporting in case of defaults to banks, financial institutions and Government.Funds raised by way of ‘Initial Public Offer (IPO)’ and ‘Further Public Offer (FPO)’ have been included under the clause “End Use of funds raised”. So now this clause will cover IPO, FPO and term loans.Under the clause ‘Fraud by or on the Company’, the reporting requirement in case of ‘fraud on the company’ has been limited to cover fraud by its officers or employees only. Earlier, the requirement in CARO 2015 covered all frauds on the company whether committed by third parties.
CARO 2016 – Companies Auditor’s Report Order, 2016Download New Audit Report Format Including CARO 2016Changes in Companies Auditor’s Report Order CARO 2016CARO 2016 Highlights SummaryDownload CARO 2016 With CARO 2015 Compression ChartSalient Features of the Guidance Note on CARO 2016
