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MCA has notified The Companies ( Auditorís Report ) Order 2015, (CARO 2015) recently on 10th April, 2015 .

MCA has notified The  Companies ( Auditor’s Report ) Order 2015, (CARO 2015) recently on 10th April, 2015 .CARO 2015 contains 12 clauses as compared to the 21 clauses contained in the Companies ( Auditor’s Report) ( Amendment ) Order 2004 (CARO 2004) . Key salient features of CARO 2015 are as follows:-

·      The applicability of CARO 2015 to companies has been kept in line with CARO 2004 with the clarification that it would also not apply to a One Person Company and a Small Company .

·      The reporting required in respect of nine( 9) earlier clauses and one (1)sub-clause pertaining to fixed assets has been dispensed with .

·      There is one(1) additional sub-clause added which requires the auditor to report on the amount required to be transferred to the investor education and protection fund under Companies Act,1956

·      Further reporting on undisputed statutory dues now also requires reporting in respect of value added tax.

These changes are welcome since the Companies Act 2013 has covered compliance with certain provisions in the Act itself such as with respect to appointment of Internal Auditors in certain specified companies ( Section 139 ) as well as related party transactions  ( Section 188 ).

·         In respect of the internal control system the auditor would  need to comment (under CARO) on the adequacy of such system pertaining to purchase of inventory and fixed assets and sale of goods and services along with continuing failure to correct major weaknesses in the internal control system. At the same time, there is a requirement for the auditor to opine on the adequacy of the internal financial system in place and the operating effectiveness of such controls in the main report itself { Section 143(3)(i)}. Perhaps this requirement under CARO has been retained since the reporting in the main report wrt the aforesaid clause has been made  voluntary for the financial year commencing from 1st  April 2014 and mandatory for the financial year commencing from 1st  April 2015 for the auditor (vide MCA notification dated 14th October,2014)

ICAI would soon bring in fresh guidance in respect of CARO 2015. However , till such time  the existing Statement on CARO would remain applicable in respect of the applicable clauses .