Notified on April 10,2015

Practically  (1 st part) Main Audit Report (2 nd part) Annexure which is covered by S.A. 700 which is covered by CARO

Applicable to all type of companies including Foreign Company as defined u/s 2(42) of the Companies Act, But shall not apply to: 1)a banking company; 2)an insurance Company; 3)a company licensed to operate under section 8; 4)one person company as defined u/s 2(62) and small company as defined u/s 2(85); 5)a private limited company:  with a paid up capital and reserves not more than Rs.50 lakh; and  which doesn’t have loan outstanding exceeding Rs.25 lakh from any bank or financial institution; and  doesn’t have turnover exceeding Rs.5 crore at any point of time during the financial year. Applicable From 10 th April 2015

 Capital :– Equity + preference + forfeited shares capital (due to schedule III of Companies Act, 2013).  Reserve :– (capital reserve + revaluation reserve) + (Revenue reserve- debit balance of P&L Account to the extent of free reserve).  Share application money should not be considered as a part of paid up capital.  Turnover :– a. Sale during the year + service rendered – sales return (even belongs to the prior year) – trade discount – taxes (if charged separately). b. Commission to third party not allowed to be deducted from turnover.

 Loan may be in form of term loan, demand loans, cash credit overdraft, export credit, bill purchased/ discounted. ( means all related with only & only “ Bank & Financial Institutions”).  Loan from NBFC should not be considered. ( if convert to BFC before 31 st march then considered)  Interest on loan should not be considered as loan.

S. No.CaseExemption 1.Is exemption available for both life insurance and general insurance? 2.In December NBFC was converted into bank. 3.In December bank was converted in NBFC. 4. Private limited company has equity share capital of Rs, 20 lakh, preference share capital of 10 lakh, general reserve of 30 lakh, P&L debit balance (60) lakh, securities premium of 10 lakh capital reserve of 15 lakh, share application 20 lakh, share forfeiture 5 lakh, revaluation reserve 8 lakh. Will this company get exemption? 1. Yes, applicable to both.2.Yes, we have to see status as on year end and it is a bank at year end. 3. No, we have to see status as on year end and it is a NBFC at year end. 4. Computation of paid up capital and reserve:- equity 20 lakh + pref. 10 lakh + general reserve 30 lakh- debit balance P&L(30)+security premium 10 lakh + capital reserve 15 lakh+ share forfeited 5 lakh+ revaluation reserve 8 lakh =68 lakh. As it crosses 50 lakh, CARO is applicable.

S. No.CaseExemption 5.Private limited company has following borrowing from Mr. Ambani 20 lakh, Mr. Vijay 5 lakh, ICICI bank 5 lakh, IFCI 10 lakh. Is exemption available? 6.Private unlimited company has paid up capital of 40 lakh, O/S loan 15 lakh, turnover of 3.5 crore. 7.Pvt Ltd. Company has sale of goods Rs 4 crore, sale of services 2 crore, sale return Rs 1.5 crore(including 0.5 crore from previous year) Excise duty included in sale of goods Rs 75 lakh, other income Rs. 40 lakh, VAT on sale included above 20 lakh. Is CARO applicable? 5. We have to consider borrowing from banks & FIs, so total is ICICI 5 lakh+ IFCI 10 lakh=15 lakh, it is below 25 lakh. So exemption is available. 6. No, it is unlimited company. Exemptions are only for limited company. 7. Computation of turnover sale (goods) 4 crore + sale(services) 2 crore-sales return 1.5 crore-excise duty 25 lakh-VAT on sales 20 lakh=3.55 crore. As turnover is below 5 crore CARO will not applicable.

1.Fixed Assets 2.Inventory 3.Loans to 5.Deposits 4.Internal control 6.Cost Records 7.Statutory Dues 8.Accumulat ed losses 11.Uses of loan 12.Fraud Reporting 10. Guarantee given 9.Repayment of dues (a)ADEQUACY of record:- Whether company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. (b)VERIFICATION:- Whether F.A. has been physically verified, at reasonable intervals. if material discrepancies were noticed  same has been properly dealt with in the books of account.

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues (a) VERIFICATION:- physically verified,at reasonable period. (b) Procedures of verification followed by mngt. are reasonable and adequate. (c) ADEQUACY OF RECORDS:-proper records & if discrepancies then properly dealt.

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues Loan to directors or interested parties covered u/s 189. (a)REPAYMENT- receipt of principle & interest are regular (b) STEPS FOR RECOVERY, if overdue amount is more than one lakh

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues (a) ADEQUATE I.C.S. with size & nature of business for purchase of inventory & F.A. and sale of goods & service (b) Continuing failure to CORRECT major weakness in internal control.

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues Ensure that it has complied with:- (a) directives issued by Reserve Bank of India. (b) section 73 to 76 or any other provision. (c) order issued by company law board/ tribunal/RBI/any court. (d)Nature of contravention (if any).

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues Where maintenance of cost records has been specified by Central Government under section 148(1), whether such accounts have been prepared and maintained properly.

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues (a) Is company regular in depositing Undisputed statutory dues including P.F., all Taxes & others. If not paid regularly, then O/s dues at last day of F/Y concerned for a period of more than 6 months from the date of payable, shall be indicated in the report. (b) If any dispute for dues, then the amount involved and the forum where the dispute is pending should also be mentioned. (c) If required to transfer to investor education and protection fund, has been transferred within time.

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues If Company registered for a period not less than five year, reported whether:- (a)Accumulated loss of F/Y exceeded 50% of the company’s net worth (b)Company has incurred cash losses in the immediately preceding F/Y.

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantee given Repayment of dues (a)Whether the company has paid the principal and interest to F.I. Banks, Debenture holders without default. (b) The period and amount of default(if any)

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Usage of loan Fraud Reporting Guarantees given Repayment of dues If guarantee given for loans taken by others from bank & F.I., whether or not the terms and conditions are prejudicial to the interest of the company

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Uses of loan Fraud Reporting Guarantee given Repayment of dues Whether or not terms loan are used for the purpose for which such loans were obtained

Fixed Assets Inventory Loans to Deposits Internal control Cost Records Statutory Dues Accumulated losses Uses of loan Fraud Reporting Guarantee given Repayment of dues If any fraud on or by company has been noticed or reported during the year, the nature of amount should be indicated

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