Guidance Note on CARO 2016-AASB-ICAI. CARO 2016 has introduced a number of new or modified reporting requirements for the auditors.

Guidance Note on CARO 2016-Communication from AASB of ICAI

Dear Members

As you are aware, the Companies (Auditor’s Report) Order, 2016 (CARO 2016) was notified by the Ministry of Corporate Affairs (MCA) on 30^th March 2016.  The Order is applicable for the audits of financial statements for the financial year beginning on or after 1^st April, 2015. 

As compared to the Companies (Auditor’s Report) Order, 2015, the CARO 2016 has introduced a number of new or modified reporting requirements for the auditors.  These cover important aspects including:

• Title deeds being held in the name of the company
• Loans, secured or unsecured to parties covered under section 189 of the Companies Act 2013 – terms and conditions, repayment schedule and terms, regularity in repayment, etc
• Compliance with provisions of sections 185 and 186 of the Companies Act 2013
• Payment of managerial remuneration in accordance with section 197 of the Companies Act 2013
• Compliance with Net Owned Funds to Deposits ratio of 1:20 by Nidhi companies
• Compliance with section 177 and 188 of the Companies Act 2013 in case of transactions with related parties
• Compliance with section 42 of the Companies Act, 2013 in case of private placement and preferential allotment of shares/FCDs/PCDs and end use of the funds so raised
• Compliance with section 192 of the Companies Act 2013 in case of non-cash transactions with directors or persons connected therewith
• Registration under section 45-IA of the RBI Act 1934

These would have wide implications for all audits wherever these reporting requirements apply.

For the benefit of the members, the Auditing and Assurance Standards Board has brought out the Guidance Note on the Companies (Auditor’s Report) Order, 2016.  The Guidance Note contains comprehensive guidance on all the reporting requirements of CARO 2016.  It also contains checklist as well as text of relevant sections/ Rules for ready reference of the members.  The text of the Guidance Note is available on ICAI’s website at the URL http://resource.cdn.icai.org/42017aasb230416.pdf and can be downloaded free of cost.

In addition, the Board is also organizing programmes at various places for the members on reporting under CARO 2016.

Kind regards

(CA SHYAM LAL AGARWAL)
Chairman, Auditing & Assurance Standards Board