CHAPTER 7 : REPORTING

CARO, 2020
Applicability Applicability and Exceptions
All About CARO

It shall apply to every company including a foreign company 1. Why CARO?

(section 2(42)) of the Companies Act, 2013, except– 2. CARO - Financial or Propriety Audit?
Ü A banking company as defined in clause (c) of section 5 of Section 143(11) confers power to the Central 1 Though an auditor is concerned with truthful and fairness of
the Banking Regulation Act, 1949; Government to issue order to the auditor of financial statements presentation, under CARO an auditor is also
Ü An insurance company as defined under the Insurance the company for matters to be included in his 2 required to report on various other matters which are propriety in
Act,1938; report. Under that section, Central Government nature and not necessarily affect financial statement. Like delays in
Ü A company licensed to operate under section 8 of the has notified CARO (Companies Auditor Report repayment of dues to lenders, statutory dues, etc.
Companies Act; Order, 2020) making it mandatory for auditor of
Ü A One Person Company as defined under clause (62) of companies covered under such order to furnish his
section 2 of the Companies Act and a small company as comments on matters specified in this order.
defined under clause (85) of section 2 of the Companies 4. Report or Certificate? Test or 100% Check?
Act; and CARO is a report given by the auditor, & not a certification. Hence,
Ü A private limited company, 3. Limits or Enhances Responsibility? Exhaustive auditor is expected to conduct test check only though being a
 not being a subsidiary or holding company of a public or Inclusive? 3 specific order the sample size would be larger than usual. Further,
company, CARO reporting is no guarantee and still suffers from risk of certain
The requirements of the order are in addition
 having a paid up capital and reserves and surplus not
(supplemental) to the existing provisions of
4 material misstatements remaining undetected by the auditor.
more than ` 1 crore as on the B/S date and
section 143 of the act. Order not to limit, but
 which does not have total borrowings exceeding ` 1
crore from any bank or FI at any point of time during the requires a statement on specified matters to be
F.Y. and included in the audit report.
6. Is CARO applicable to:
 which does not have a total revenue as disclosed in
Scheduled III to the Companies Act, 2013 (including a) Government Company?
revenue from discontinuing operations) exceeding ` 10 5. Compulsory Reporting or Exception Reporting? 5 Applicable to government companies too and is in addition
crore during the F.Y. as per the FS. Report to compulsory mention all the points in to directions given by the Comptroller and Auditor General of
CARO, whether the comments are affirmative, 6 India in respect of government companies.
qualificatory, explanatory or the clause is not b) Branch Auditor?
applicable. Yes it is applicable to branch auditor as well
EXEMPTIONS FROM CARO
7. Whether CARO Report part of Auditor’s 7
Companies exempted under this order are as follows: 8. Order on Companies or Auditor? Contravention of CARO would
Report?
Ü Banking Companies
attract any penalty to company?
Ü Not for Profit companies under Section 8 The auditor's comments in the terms of order
Ü Private Limited Companies satisfying certain conditions 8 The Order contains certain matters on which the auditors of
forms part of his report & therefore the board will
Ü Insurance companies companies (except of those categories of companies which are
be bound to give in its Director's Report under
Ü OPC specifically exempted under the order) have to make a statement in
section 134 the fullest information & explanation
Ü Small Companies their audit report. Thereby the order is direction to auditor and not
Ü Specified private companies regarding every adverse comment in the auditor’s
the companies, for inclusion of certain matters in their auditor’s
report, as required u/s 134 Director's Report in
report and accordingly auditor to modify their audit procedures.
Directors Responsibility Statement.

94 CARO, 2020 CA FINAL AUDIT BY CA SJ

 CHAPTER 7 : REPORTING

CARO: Private Limited Company: Exemption: 7. Borrowings: Maximum O/S Closing Treated as Borrowings
during the year Bal. A/cing adjustment & not treated as loan by
Q. No Questions: CARO applies? Answer > Bank Borrowings: (Figure in lacs) FI till due & not paid.
(Assume all other conditions of exemption are met) a) Term Loan 35 15 35 + 20 + 20 + 20 + 5 = 100
b) Working Capital Loan 20 25 hence, exemption available.
1. Company registered with unlimited liability No Exemption as it is not c) O/D Limit 20 NIL
(not limited by shares) which is a Private Co. a “Pvt. Ltd. Co.”, means sanctined & drawn.
CARO applies. > FI: Unsecured Loan taken 20 20
2. Company registered as a “private limited > Relative: Secured Loan taken 21 10
company” and has a > Debentures from public 22 20
a) Parent Co. which Is: > Interest on bank loan:
Due not paid 5 5
 a private Co. Eligible for exemption
> Int. an Unsec loan 2 2
 a public Co. No exemption (Co. will (accrued not due)
be a deemed public Co.)
b) Subsidiary which Is: 8. SPL: “SPL” Revenue is from all operations or only
 a private Co. Eligible for exemption Revenue from operations disclosed in SPL 9 crores continuing operations?
 a public Co. No exemption Other income 1 crore Ans: S-III: SPL – Revenue is only of cont.
Rev. from Discontinued Operations 1 crore operations.
3. Public Ltd. Co. has its Parent Co. - a Pvt. Ltd. No Exemption as it is not Total Revenue for CARO applicability = 9 + 1
As per latest FS. What will be the amount of revenue for
Co. & no subsidiaries a Pvt. Ltd. Co. + 1 =11
applicability of CARO?
4. ESC Paid Up 120 lacs as on B/S date Exemption available as Hence, exemption NA.
R&S (-) 30 lacs Paid Up Cap. & R&S = 9. CARO applicable in FY 2023-24? Revenue
CARO applicable based on above? 90 lacs. Revenue (Gross) 23-24 12 crores a) 12 b) 10.50 c) 9.50
Sales Return recd. in 23-24 CARO N.A. as sales return recd. in C.Y.
5. Sh Capital: Called Up 80 lacs Paid Up Cap. = : Out of 23-24 sales 1.50 crore reduced from C.Y. sales irrespective of which
(of Pvt Ltd. Calls in Arrear 10 lacs 80-10+2+0 = 72 lacs : Out of 22-23 sales 1 crore year sales it relates to.
Co. with Sh. Forfeiture 2 lacs R&S = 29 lacs
no H/S….) Calls in Advance 5 lacs
As on B/S date  R&S 29 lacs  >100 lacs
COMPANIES (AUDITOR’S REPORT) ORDER, 2020
Based on this CARO applicable? No Exemption.
Matters to be included in the auditor’s report -
6. Pvt Ltd Co. Paid Up SC: 50 lacs
I. Maintaining records of PPE and Intangible assets
Paid Up SC 50 lacs R&S: 50 lacs
Capital Reserve 5 lacs Total 100 lacs
Topic Provision Limits
Security Premium 10 lacs Hence, Exemption
Deb. Redemption Fund 10 lacs available.
Credit (Provision for legal claim A. (A) Whether the company is maintaining proper Cost, Dep, Useful life or rate of dep.
ESOP/SBP Reserve 5 lacs
Balance. excluded in R&S) Adequacy records showing full particulars, including Reval, Impairment, Adj, Date, Qty,
Provision for Legal Claims 6 lacs
of Records quantitative details and situation of Property, Plant Components, Identification No
General Reserve 10 lacs
and Equipment; (survey nos, reg no. etc.)
PorL Cr. Bal. 10 lacs
(B) Whether the company is maintaining proper Custody of PPE, Agreements &
records showing full particulars of intangible assets; Litigations on IA E-records.

CA FINAL AUDIT BY CA SJ CARO, 2020 95

 CHAPTER 7 : REPORTING

Topic Provision Limits II. Physical Verification of Inventories

B. Whether these Property, Plant and Equipment Based on risk, atleast once in (a) Whether physical verification of inventory has been IndAS2
Physical have been physically verified by the 3 years conducted at reasonable intervals by the management ABC based, once in a year
verification management at reasonable intervals; whether and whether, in the opinion of the auditor, the coverage atleast SA 501
and procedure of such verification by the management is
any material discrepancies were noticed on such
appropriate; whether any discrepancies of 10% or more in the
verification and if so, whether the same have aggregate for each class of inventory were noticed and if so,
been properly dealt with in the books of account; whether they have been properly dealt with in the books of
C. Whether the title deeds of all the immovable Only immovables classified account;
Title properties (other than properties where the as PPE and not inventory Only when limits are against
Deeds company is the lessee and the lease agreements TDR, P&M affixed to Land – (b) Whether during any point of time of the year, the company has security of current assets
been sanctioned working capital limits in excess of five crore No need to audit, just
are duly executed in favour of the lessee) Not immovables
rupees, in aggregate, from banks or financial institutions on compare with books. Only
disclosed in the financial statements are held Lost deed – FIR, MR, Certified the basis of security of current assets; whether the quarterly quarterly returns check even
in the name of the company, if not, provide the Copies. returns or statements filed by the company with such banks if company is submitting
details thereof in the format below:- Description or financial institutions are in agreement with the books of returns monthly.
of property Gross carrying value held in name of account of the company, if not, give details;
Whether promoter, director or their relative or
employee period held – indicate range, where III. Repayment of investments, guarantee, security and loans granted by the company
appropriate reason for not being held in name of Whether during the year the company has made investments in, provided any guarantee or security
company* - - - - - *also indicate if in dispute or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms,
D. Whether the company has revalued its Property, To be reported in Schedule Limited Liability Partnerships or any other parties, if so,- {L – all (If principal biz loans then a & e N.A.),
Revaluation of Plant and Equipment (including Right of Use 3 as well Companies G or S – a and b, I – b only}
Property, Plant assets) or intangible assets or both during the (Registered Valuers and (a) Whether during the year the company has provided loans or L-G-S : (Other than Principal
and Equipment year and, if so, whether the revaluation is based Valuation) Rules, 2017 provided advances in the nature of loans, or stood guarantee, Biz to give loans):
on the valuation by a Registered Valuer; specify set out valuation rules for or provided security to any other entity [not applicable to Amt during the year and
the amount of change, if change is 10% or more valuation u/s 247 companies whose principal business is to give loans], if so, balance OS to :
in the aggregate of the net carrying value of indicate- S/JV/A and Others
each class of Property, Plant and Equipment or (A) the aggregate amount during the year, and balance
intangible assets; outstanding at the balance sheet date with respect to
such loans or advances and guarantees or security to
E. Whether any proceedings have been initiated or To be reported in Schedule subsidiaries, joint ventures and associates;
Proceedings for are pending against the company for holding any 3 as well applicable where (B) the aggregate amount during the year, and balance
holding Benami benami property under the Benami Transactions proceedings initiated against outstanding at the balance sheet date with respect
Property (Prohibition) Act, 1988 (45 of 1988) and rules the company as benamidar to such loans or advances and guarantees or security
made thereunder, if so, whether the company (person who lends his to parties other than subsidiaries, joint ventures and
has appropriately disclosed the details in its name to own a property of associates;
financial statements; a beneficiary) by Initiating
Officer (AC/DC of IT) (b) Whether the investments made, guarantees provided, security L-G-S-I – Prejudicial?
given and the terms and conditions of the grant of all loans and
Property can be movable or
advances in the nature of loans and guarantees provided are
immovable not prejudicial to the company’s interest;

96 CARO, 2020 CA FINAL AUDIT BY CA SJ

TDR = Transferrable Development Rights
 CHAPTER 7 : REPORTING

IV. Compliance of Section 185 & 186

(c) In respect of loans and advances in L – Repayment specified and regular? (Entity wise
the nature of loans, whether the with extent of delay be reported)
schedule of repayment of principal In respect of loans, investments, S. 185 – Prohibition to give loan directly or
and payment of interest has guarantees, and security, whether indirectly to directors
been stipulated and whether the provisions of sections 185 and 186 of the (Exception –Govt Co. obtaining ministry
repayments or receipts are regular; Companies Act have been complied with, if permission) – Check MBP 1 & Register u/s 189.
(d) If the amount is overdue, state the L – Overdue? >90days? Reasonable steps taken? (Not not, provide the details thereof; Report non-compliance + Max O/S + Closing O/S
total amount overdue for more Entity wise) with R’ship
(NA to Govt Co. engaged in defence S. 186 – LGS/I to any other person or body
than ninety days, and whether
reasonable steps have been taken production) corporate and 2 Layers
by the company for recovery of the LGS to another Co or Investment in Other Co (NA
principal and interest; to banking / Ins / Housing Finance Co giving in
(e) L: (Other than Principal Biz to give loans): ordinary course) – SR needed if anytime LGS&I >
Whether any loan or advance in the
nature of loan granted which has Renewed or extended or fresh loan to settle existing higher of:
fallen due during the year, has been loan?  60% of Paid Up Cap + SP + Free Reserves OR
renewed or extended or fresh loans  100% of SP + Free Reserves
granted to settle the overdues of Loans to be not given at lower than Govt.
existing loans given to the same Securities yield for 1/3/5/10 year period.
parties, if so, specify the aggregate Prohibition to make investments > 2 Layers of Subs.
amount of such dues renewed or
extended or settled by fresh loans V. Acceptance of deposits
and the percentage of the aggregate
to the total loans or advances in the In respect of deposits accepted by the Section 76
nature of loans granted during the company or amounts which are deemed to A public company, having: Net worth of >=
year [not applicable to companies be deposits, whether the directives issued by 100crore rupees or Turnover of >= 500 crore
whose principal business is to give the Reserve Bank of India and the provisions rupees; and Prior SR in GM ; and filed
loans]; of sections 73 to 76 or any other relevant resolution with RoC can accept deposits from
(f) Whether the company has granted L – Repayable on demand or without repayment provisions of the Companies Act and the other than members.
any loans or advances in the nature terms rules made thereunder, where applicable, Check Systems, Compliance, IC and take MR
of loans either repayable on Suggested format for reporting under the clause: have been complied with, if not, the nature
demand or without specifying any of such contraventions be stated; if an
terms or period of repayment, if All Pro- Related order has been passed by Company Law
so, specify the aggregate amount, Parties moters Parties Board or National Company Law Tribunal or
percentage thereof to the total Reserve Bank of India or any court or any
loans granted, aggregate amount of Aggregate amount
of loans/advances in other tribunal, whether the same has been
loans granted to Promoters, related complied with or not;
nature of loans
parties as defined in clause (76)
of section 2 of the Companies Act, Repayable on demand (A) VI. Cost Records
2013;
Agreement does not
specify any terms or Whether maintenance of cost records has Whether prescribed, is so accounts /
period of repayment (B) been specified by the Central Government statements made and records maintained.
Total (A+B) under sub-section (1) of section 148 of the Applies irrespective of cost audit applicability
Companies Act and whether such accounts
Percentage of loans/ and records have been so made and
advances in nature of maintained;
loans to the total loans

CA FINAL AUDIT BY CA SJ CARO, 2020 97

 CHAPTER 7 : REPORTING
VII. Statutory dues IX. Default in repayment of loans or other borrowings

(a) Whether the company is regular in depositing Bonded warehouse imported (a) Whether the company has defaulted in repayment of loans or other Restructuring:
undisputed statutory dues including Goods and goods – Duty not payable, rent borrowings or in the payment of interest thereon to any lender, if Application Submitted –
Services Tax, provident fund, employees’ state and interest may be payable yes, the period and the amount of default to be reported as per the treat as due
insurance, income-tax, sales-tax, service tax, duty and is a stat. due format below: Approved – Report the fact
of customs, duty of excise, value added tax, cess Interest / Penalty also covered • Nature of borrowing, including debt securities Approved after B/S date –
and any other statutory dues to the appropriate Payable date – payable without • Name of lender (lender wise details to be provided in case of Report delays of the year
authorities and if not, the extent of the arrears interest. defaults to banks, financial institutions and Government) and state this fact.
of outstanding statutory dues as on the last day • Amount not paid on due date
of the financial year concerned for a period of • Whether principal or interest
more than six months from the date they became • No. of days delay or unpaid
payable, shall be indicated; • Remarks, if any

(b) Where statutory dues referred to in sub- Mere representation – not (b) Whether the company is a declared wilful defaulter by any bank or Report even if declared in
clause (a) have not been deposited on account disputed. financial institution or other lender; PY. Report even if declared
of any dispute, then the amounts involved Part disputed – balance treated by govt. authorities or non-
and the forum where dispute is pending shall as undisputed. (c) Whether term loans were applied for the purpose for which the lending banks/FI. (Source
be mentioned (a mere representation to the Appeal to be filed, time expired loans were obtained; if not, the amount of loan so diverted and the – RBI Circular, Bank website,
concerned department shall not be treated as a – Treat undisputed. purpose for which it is used may be reported; CIBIL, etc)
dispute); SCN – No due, unless demand Declared when unit fails
notice issued. (d) Whether funds raised on short term basis have been utilised for to pay even when it has –
long term purposes, if yes, the nature and amount to be indicated; funds to pay, misused funds,
siphoned to another entity
VIII. Disclosure of transactions not recorded in the books
(e) Whether the company has taken any funds from any entity or or disposed acquired assets.
person on account of or to meet the obligations of its subsidiaries,
Whether any transactions not recorded in the S. 158B of IT Act – Undisclosed associates or joint ventures, if so, details thereof with nature of such Term loan – Usually >36
books of account have been surrendered or income. transactions and the amount in each case; months. Misutilisation
disclosed as income during the year in the tax includes Diversion.
assessments under the Income Tax Act, 1961 (43 (f) Whether the company has raised loans during the year on the pledge Temporary investment of
of 1961), if so, whether the previously unrecorded of securities held in its subsidiaries, joint ventures or associate excess funds not diversion,
income has been properly recorded in the books companies, if so, give details thereof and also report if the company auditor to state the fact.
of account during the year; has defaulted in repayment of such loans raised;

X. Moneys raised by IPO, FPO & preferential allotment/ private placement of shares or convertible debentures
(a) Whether moneys raised by way of initial public offer or further public offer (including
debt instruments) during the year were applied for the purposes for which those are • Issue to Public
• Issue to Existing
raised, if not, the details together with delays or default and subsequent rectification, if Shareholders on
any, as may be applicable, be reported; proportionate
basis S. 62(1)(b) + S.42 S. 55 + S.42 S. 71 + S.42
(b) Whether the company has made any preferential allotment or private placement • (For no
• Issue to selective/
of shares or convertible debentures (fully, partially or optionally convertible) during identified group of
consideration- Equity & Preference
person including
the year and if so, whether the requirements of section 42 and section 62 of the Bonus and for
employees/existing Debentures
Consideration- Convertibles Shares
Companies Act, 2013 have been complied with and the funds raised have been used Rights Issue)
shareholders on non-
proportionate basis
for the purposes for which the funds were raised, if not, provide details in respect of
(Apart from these shares can be issued as Sweat Equity Shares/ESOPs)
amount involved and nature of non-compliance;

98 CARO, 2020 CA FINAL AUDIT BY CA SJ

 CHAPTER 7 : REPORTING

XI. Fraud Reporting XIV. Internal Audit System

(a) Whether any fraud by the company or Covers all financial frauds (a) Whether the company has an internal audit State whether required to have under 138
any fraud on the company has been Whether done by 3rd parties or officer or system commensurate with the size and Adequacy depends on –Size of IA department,
noticed or reported during the year, if yes, employees of Co. nature of its business; Qualification of IA, Reports, Follow-up systems, IC
the nature and the amount involved is to (b) Whether the reports of the Internal systems, AC reviews, Documentation etc. SA 610.
be indicated; Auditors for the period under audit were
(b) Whether any report under section Clause viii and ii(b) could also be relevant considered by the statutory auditor;
143(12) of the Companies Act has been 143(12) frauds reported by CS/CMA also to
filed by the auditors in Form ADT-4 as be reported here XV. Non-cash transactions with directors
prescribed under rule 13 of Companies
(Audit and Auditors) Rules, 2014 with the
Central Government; Whether the company has entered into any Restriction to enter in non-cash transaction with
non-cash transactions with directors or persons Director or party connected to him unless prior
(c) Whether auditor has considered Whistle blower mechanism required for connected with him and if so, whether the approval of resolution in GM obtained (incl of
Whistle-blower complaints, if any, all listed companies, companies accepting provisions of section 192 of Companies Act have holding Co. if director in holding company) else
received during the year by the company public deposits and companies borrowing been complied with; voidable.
(S.177(9)); funds of >50 crores from Bk or FI. SEBI – LoDR
also requires (R. 4(2)(d)) XVI. Registration with Reserve Bank of India

XII. Compliances by Nidhi Company (a) Whether the company is required to be registered under section 45-IA Refer chapter of NBFC
of the Reserve Bank of India Act, 1934 (2 of 1934) and if so, whether
(a) Whether the Nidhi Company has complied Every Nidhi shall, within a period of 1year the registration has been obtained;
with the Net Owned Funds to Deposits in from date of incorporation, ensure it has— (b) Whether the company has conducted any Non-Banking Financial or
the ratio of 1:20 to meet out the liability; (i) not less than 200 members; Housing Finance activities without a valid Certificate of Registration
(b) Whether the Nidhi Company is (ii) net owned funds of 20 lakh rupees or (CoR) from the Reserve Bank of India as per the Reserve Bank of India
maintaining ten per cent. unencumbered more; Act, 1934;
term deposits as specified in the Nidhi (iii) unencumbered term deposits of not less (c) Whether the company is a Core Investment Company (CIC) as defined
Rules, 2014 to meet out the liability; than 10% of the outstanding deposits; in the regulations made by the Reserve Bank of India, if so, whether
(c) Whether there has been any default in and it continues to fulfil the criteria of a CIC, and in case the company is
payment of interest on deposits or (iv) ratio of net owned funds (as per last an exempted or unregistered CIC, whether it continues to fulfil such
repayment thereof for any period and if audited B/S) to deposits of not more than criteria;
so, the details thereof; 1:20. (d) Whether the Group has more than one CIC as part of the Group, if yes,
indicate the number of CICs which are part of the Group;
XIII. Compliance with section 177 and 188

Whether all transactions with the related parties All specified RP transactions require approval XVII. Cash losses
are in compliance with sections 177 and 188 of of BoD and SH unless in ordinary course and XVIII. Resignation of the statutory
auditors
Companies Act where applicable and the details arm’s length and approved by AC. Transaction
Whether the company
have been disclosed in the financial statements, with 100% S then SH approval not needed. Whether there has been any resignation
etc., as required by the applicable accounting Specified transaction include relating to has incurred cash losses
of the statutory auditors during the year,
standards; goods, services, property, agency but not in the FY and in the
if so, whether the auditor has taken into
amalgamation, etc. immediately preceding
consideration the issues, objections or
Ordinary Course – based on MoA, purpose, FY, if so, state the amount
concerns raised by the outgoing auditors;
volume, transaction with other parties, of cash losses;
frequency etc. AS 18/ IndAS24 compliance

CA FINAL AUDIT BY CA SJ CARO, 2020 99

 CHAPTER 7 : REPORTING
XIX. NOTES TO ACCOUNTS Vs QUALIFICATION & AUDIT REPORT Vs CERTIFICATE
Capability of company of meeting its liabilities
existing at the date of balance sheet on the basis XXI. Consolidated FS Distinction between Notes on Accounts and
Whether there have been any qualifications Qualifications Distinction between Audit
of the financial ratios, ageing and expected dates Report and Certificate
of realisation of financial assets and payment of or adverse remarks by the respective auditors Notes not substitute for qualification
financial liabilities, other information accompanying in the Companies (Auditor’s Report) Order • Notes represents MGT’s stand on matter 1. The term ‘report’ is used
the financial statements, the auditor’s knowledge of (CARO) reports of the companies included While, qualification represents auditor’s where an expression of
in the consolidated financial statements, if disagreement on matter. opinion is involved.
the Board of Directors and MGT plans, whether the
yes, indicate the details of the companies • Client MGT may- insist auditor- for not
auditor is of the opinion that no material uncertainty 2. The term ‘certificate’ is
and the paragraph numbers of the CARO modifying opinion, if matter duly disclosed
exists as on the date of the audit report that by way of notes. preferable where the auditor
company is capable of meeting its liabilities existing report containing the qualifications or adverse comments on or verifies facts.
• Auditor to exercise PJ & assess if disclosure
at the date of balance sheet as and when they fall remarks. CARO report is given in Auditor’s alone would suffice, (such as a verification of
due within a period of one year from the Report on standalone FS except this clause investment by inspection
B/S date; where reporting is given under Auditor’s If yes, If No, or the checking of ballot
report on Consolidated FS. papers on a poll in a company
Consider the need to modify meeting).
O.K.
Following Ratios to be disclosed:- his report by either inserting 3. Under Co. Act, 2013, where
a qualification or EOM*. an auditor is required to
(a) Current Ratio, (g) Trade payables
(b) Debt-Equity Ratio, turnover ratio, • *EOM- not a substitute for- modification of issue a certificate rather
(c) Debt Service Coverage (h) Net capital turnover ratio, Reasons to be stated for opinion. than a report (u/s 66) - file
Ratio, (i) Net profit ratio, unfavourable or qualified answers • EOM- for matter appropriately presented & a certificate in the tribunal
(d) Return on Equity Ratio, (j) Return on Capital SAAE obtained. where company is proposing
(e) Inventory turnover ratio, employed, (a) Where, in the auditor’s report, the • If auditor’s modification is warranted-may for the reduction of capital.
(f) Trade Receivables (k) Return on investment. answer to any of the questions referred refer to the specific note given by MGT and
to in paragraph 3 is unfavourable or 4. However, the report u/s 143 is
turnover ratio, continue:
qualified, the auditor’s report shall also an opinion-based report and
(a) explaining more facts, and
state the basis for such unfavourable or (b) his assessment on the matter including is not a certificate.
qualified answer, as the case may be. quantification and
XX. (c) impact on the various FS
Transfer of amount remaining unspent under (b) Where the auditor is unable to express captions, to the extent possible.
section 135(5) to Fund specified in Schedule VII any opinion on any specified matter, his • Auditor must express nature
report shall indicate such fact together of qualification, in a clear and
(a) (b) unambiguous manner.
Whether, in respect of Whether any amount with the reasons as to why it is not
possible for him to give his • Where auditor answers any of the Where notes of a qualificatory nature
other than ongoing projects, remaining unspent under statutory affirmations in negative appear in the a/c’s, auditors should
the company has transferred sub-section (5) of section opinion on the same.
or with a qualification, report shall state all qualifications independently
unspent amount to a Fund 135 of the Companies Act, state the reasons for such answer. in their report so that user can assess
specified in Schedule VII to pursuant to any ongoing • All qualifications should be the significance of these qualifications.
the Companies Act within contained in AR. A reference to the notes to a/cs in the
project, has been transferred to
a period of six months AR does not automatically become
of the expiry of the FY in special account in compliance a qualification. The report must
CARO Communication to
compliance with second with the provision of section categorically state the matter from
135(6) of the Disclosures Management and TCWG the auditor’s standpoint and
proviso to section 135(5)
of the said Act; said Act; not from the MGT
Refer SA 260 for stand point.
Communication with TCWG.

100 CA FINAL AUDIT BY CA SJ