COMPANIES (AUDITORS REPORT) ORDER, 2003

APPRAISAL NOTE
Applicability (Any of the Following)
1.
2.
3.
4.

Paid up capital and reserves of more than 50 Lacs.

Has accepted any public deposit.
Turnover exceeding Rs.5 Crores.
Outstanding Loans of Rs.10 Lacs or more from bank(s) and financial institution(s).

Reserve: The following explanations are important in this regard:

(a) Reserve shall include both capital as well as revenue reserves
(b) Revaluation reserve should also be taken into consideration while determining
the figure of reserves.
(c) The credit balance of Profit & Loss Account should also be considered as a part
of reserve and the debit balance of P & L A/c should be reduced from the figure
of revenue reserves. However, miscellaneous expenditure to the extent not
written off should not be deducted as such.
Turnover: shall mean as the aggregate amount for which sales are effected by the
company. The term sales effected would include sale of goods as well as services
rendered by the company.
Compliance Note of CARO, 2003
1. FIXED ASSETS
(a) Check whether the Register of Fixed Assets has been maintained or not.
(b) Check whether the necessary entries have been duly incorporated in the said
register or not.
(c) Disclosure in the CARO in regard to disposal of fixed assets substantially, during
the year.
(d) Compliance of section 293(1) (a) of the Companies Act, 1956 in case of Limited
Companies.
(e) Minutes of the Board and General Meeting (in compliance of section 293).
2. LOANS UNDER SECTION 301 OF THE COMPANIES ACT, 1956
(a) Loan includes Secured or Unsecured, taken or granted (u/s 301).
(b) Check whether the Register of Contracts or Arrangements / Interest or Concern
u/s 301, made or not.
(c) Check whether the necessary entries have been duly incorporate in the said
register or not.
(d) Checklist of Relatives and Form No. 24AA by all the Directors.
(e) Disclosure in the CARO in regard to the following:
Number of parties
Maximum amount during the year.
Amount involved at the end of the year.
Transactions squared during the year and amount involved.

Rate of Interest for such loans.

Whether prejudicial to the interests of the company or not.
Payment of Loans / Interest as per Schedule.
Disclosure in relation to recovery / payment of overdue amount, if the
same is more than Rs. 1 Lac and action thereof.
(f) Details of transactions with related parties u/s 301, if the value of such
transactions, exceed Rs. 5 Lacs in respect of any party and in any one financial
year.
(g) Compliance of section 297 and 299 of the Act.
(h) Minutes of the Board and General Meetings in this regard.
3. PUBLIC DEPOSITS - UNDER SECTION 58A OF THE COMPANIES ACT, 1956
(a) List of persons from whom unsecured loans has been taken during the year and
nature of relationship of such persons, e.g. whether Shareholder, Director, their
Relatives or Inter corporate.
(b) The following details in connection of the above:
Maximum amount during the year.
Amount involved at the end of the year.
Transactions squared during the year and amount involved.
Rate of Interest for such loans.
(c) Minutes of the Board Meetings in this regard.
4. INTERNAL AUDIT LIMIT UNDER CARO
(a) Increased from Rs.25 Lacs to Rs.50 Lacs linked to Paid-up Capital and Free
Reserves.
(b) Increased from Rs.2 Crores to Rs. 5 Crores linked to Turnover.
(c) Minutes of the Board Meetings in this regard.
5. DETAILS OF SHARE APPLICATION
(a)
(b)
(c)
(d)
(e)

Amount received as Share Application during the year and date of receipt.
Whether pending for allotment or not.
Whether interest being paid or not on such share application.
Details of refund of share application during the year.
Any amount whether due for transfer to Investor Education and Protection Fund
being due for payment for more than 7 years.

6. STATEMENT OF ARREARS OF STATUTORY DUES

(a)
(b)
(c)
(d)

Arrears of statutory dues for more than 6 months.

When such dues should be deposited with the concerned authorities.
Details of delay exceeding 30 days in case of Provident Fund Dues.
Reasons for delay.

7. DETAILS IN TERMS OF SICK COMPANIES

(a) Whether the company is registered for more than 5 years.
(b) Accumulated losses being not less than 50% of its net worth-disclosure in CARO.

(c) Disclosure in CARO Reporting in relation to cash losses for the current year and
previous year after making adjustments of items of non-cash nature.
8. PAYMENT OF LOANS TO BANKS / FINANCIAL INSTITUTIONS
(a) Whether there is any default in repayment of loans / interests to any bank or
financial institutions during the year.
(b) Necessary disclosure in relation to Amount of such default and period involved.
9. DEALING / TRADING IN SHARES OR SECURITIES
(a) Applies to companies, involved in dealing and trading of shares and securities.
(b) Necessary entries in the Register of Investments in case of other companies.
(c) Compliance of Section 372A of the Companies Act, 1956 in case of Limited
Companies.
(d) Necessary disclosures in Minutes.
10. DETAILS OF GUARANTEE
(a) Details of Guarantees given by the Company.
(b) Compliance of Section 295, 372A of the Companies Act, 1956 in case of Limited
Company.
(c) Necessary disclosure in Minutes.
11. PREFERENTIAL ALLOTMENT OF SHARES
(a) Details of preferential allotment to parties and companies covered in the register
maintained u/s 301 of the Act.
(b) Disclosure in relation to pricing of such preferential allotment and concern /
interest of the company in this regard. Determination of price based on earnings,
dividends, assets value, goodwill etc.
(c) Compliance of SEBI Guidelines, in case of Listed Company.
(d) Compliance of provisions of section 81(1A) of the Companies Act, 1956 in case
of Limited Company.
Further, the following disclosures are also important:
(a) Compliance of special statute, if any, applicable in case of companies having specific
nature of activity e.g. compliance of RBI Guidelines and Prudential Norms in case of
NBFC Company.
(b) Notice or report of any fraud on or by the company during the year, if any, the nature
and the amount involved thereunder.
Caution: The order places a considerable responsibility on the auditor. If he is to
discharge his duties under the order properly, he should obtain, on the one hand,
the co-operation of the management and on the other, the respect and confidence
of the members to whom he is reporting. The auditor may be liable, however, if it
is found that he expressed his opinion without the exercise of reasonable care
and skill, or without applying his mind to the facts, or if he expressed his opinion
in complete disregard of the facts.