|Relevant line item in the Balance sheet||Description of item of property||Gross carrying value||Whether title deed holder is a promoter, director or relative# of promoter*/director or employee of promoter/director||Property held since which date||Reason for not being held in the name of the company**|
|PPE||Land||-||-||-||**also indicate if in dispute|
|Non-current asset held for sale||Land|
Ind AS implementation
Non Banking Financial Company – Definition (As per Ind AS Rules)
NBFC defined u/s 45-I(f) of the RBI ACT
Housing Finance Companies
AMCs and CICs
VC Fund Companies
SRCs under SARFAESI
Stock Broker / Sub-broker companies
Mortgage Guarantee Companies
Micro Finance Companies
Merchant Banking Companies, PF Companies, Mutual Benefit Companies
The auditor’s report (CARO 2020) shall include a statement on the following matters, namely:
Details of tangible and intangible assets.
Details of inventory and working capital.
Details of investments, any guarantee or security or advances or loans given.
Compliance in respect of a loan to directors.
Compliance in respect of deposits accepted.
Maintenance of costing records.
Deposit of statutory liabilities.
Default in repayment of borrowings.
Funds raised and utilization.
Fraud and whistle-blower complaints.
Compliance by a Nidhi.
Compliance on transactions with related parties.
Internal audit system.
Non-cash dealings with directors.
Registration under section 45-IA of RBI Act, 1934.
Resignation of statutory auditors.
Material uncertainty on meeting liabilities.
Transfer to fund specified under Schedule VII of Companies Act, 2013.
Qualifications or adverse auditor remarks in other group companies.
In a case where the auditor’s answer to any of the requirements mentioned above is unfavorable or negative, then the auditor’s report shall also state the basis for such unfavorable or qualified answer. Also, in a case where the auditor is unable to express any opinion on any specific matter, the report shall indicate such fact along with the reasons as to why it is not possible for the auditor to give an opinion on the same.
The Ministry of Corporate Affairs has released an order dated 25th February 2020 on Companies (Auditor’s Report) Order 2020 (CARO 2020). The CARO 2020 is applicable to the same types of companies as CARO 2016. The main changes in requirements of Auditor’s Report between CARO 2020 and CARO 2016 are as follows:
|CARO 2016||CARO 2020|
|Report on all Fixed Assets||Reporting on Property, Plant, Equipment and intangible assets only.Re evaluation of the company’s Property, Plant, and Equipment.|
|No format given||If the title deeds of all the immovable properties disclosed in the financial statements are not held in the name of the company, provide the details in given standard format including Reason for not being held in name of company.|
|Reporting on Inventory||Also include in reporting on Inventory whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed during physical verification and if they have been properly dealt with in the books of account.|
|Working Capital Limits|
|Not Present||Provide all details If the company has been sanctioned working capital limit in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets.|
|Defaulting in Repayment of Loans|
|Provide Information. No format given.||If the company has defaulted in repayment of loans, then provide details in given standard format.|
|Not Present||Also report if the company has been a declared willful defaulter by any bank, financial institution or lender.|
|Report on Term Loans||Also report if term loans were applied for the purpose for which the loans were obtained; if not, report the amount of loan so diverted and the purpose for which it is used.|
|Report Fraud||Also report if the auditor has considered whistle-blower complaints, if any, received during the year by the company.|
|Registered under RBI Act|
|Details of registration to be given if any.||Also report if the company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934|
|Resignation of Statutory Auditors|
|Not Present||Report if there has been any resignation of the statutory auditors during the year, and also report if the auditor has taken the issues, objections or concerns raised by the outgoing auditors into account.|
|Remarks by Auditors of included companies|
|Not Present||Report if there have been any qualifications or adverse remarks by the respective auditors in the CARO reports of the companies included in the consolidated financial statements. If present, Auditor needs to give details of the companies and the paragraph numbers of the CARO report that have the qualifications or adverse remarks.|
As per the Ministry of Corporate Affairs (MCA) order dated 25 February 2020, CARO 2020 was applicable for the Financial Year (FY) 2019-20 onwards. Subsequently, the MCA amended the applicability of CARO 2020 from FY 2019-20 to 2020-21 through its order dated 17 December 2020. Thus, CARO 2020 is applicable from 1 April 2021.
The CARO 2020 contains 21 clauses, whereas CARO 2016 has only 16 clauses. In CARO 2020, seven new clauses have been inserted, and the existing clauses of CARO 2016 have been re-drafted to elicit detailed comments from the auditors.
Yes, it is applicable to foreign companies as defined under section 2(42) of the Companies Act, 2013. Section 2(42) of the Companies Act, 2013 defines a foreign company as a company or body corporate incorporated outside India having a place of business in India, whether by itself or through an agent, electronic mode or physically, and conducts any business activity in India in any other manner.
No. CARO 2020 is applicable to the audit reports of the companies registered under the Companies Act, 2013. Since LLP is registered under the Limited Liability Act, 2008, the CARO 2020 does not apply to them.
CARO 2020 is applicable for the companies that are registered under the Companies Act, 2013.
The CARO 2016 did not apply to the consolidated financial statements. But the CARO 2020 contains a clause that is now applicable to report on consolidated financial statements. According to this clause, where any adverse remarks or qualifications are highlighted by the auditors in their respective standalone companies’ CARO reports, then the details of such remarks should be mentioned by the auditors of the companies in their CARO reports of consolidated financial statements.
Sec 185 of the CA 2013 restricts loans to Directors including private limited companies. However, as per the notification dated 6th June 2015, a private company may grant loan to its directors subject to fulfillment of all of the following conditions:
Yes, as per Rule 10(1) of Companies (Meetings of Board and its Powers) Rules, 2014, loan given by a holding company to its wholly owned subsidiary Company or a guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempt from the purview of Section 185 of CA, 2013 provided the same is utilized for the principal business activities of the subsidiary.
A private company is not exempt from the applicability of Section 186 of CA, 2013.
The amended provision clearly excludes employees of the company from the term ‘person’ to whom a company cannot directly or indirectly give loan exceeding the prescribed threshold. The same was clarified by the Ministry vide its General Circular  dated 10th March, 2015. However, the said Circular provided two conditions for such exclusion i.e. the loan being given should be in terms of service policy of the company along with the same being in terms of remuneration policy of the company – these conditions are no more applicable, as the provision directly excludes employees from the term ‘person’.
There is a difference between advance and loan. Loan is lending of money with absolute promise to repay whereas advance is to be adjusted against supply of goods and services. Advance given to employees against current month’s salary will not be in the nature of loan and the same will not fall within the purview of Section 186.
No, the Company shall not provide any loan without interest. As per Section 186(7), no loan shall be given at a rate lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan.
As per Section 2(41) of the CA, 2013, “financial year” in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the Company or body corporate is made up.
The Financial Statements of a company is required to be signed as per the provisions of Section 134 of the CA, 2013 by:
As per Section 128(5) of the CA 2013, the books of account shall be preserved by the company for 8 financial years preceding the financial year.
Yes, as per Section 134 (3) of the CA, 2013, the Board’s Report shall be attached to the consolidated financial statements.
Since the holding company under liquidation is not required to have the accounts prepared as per Section 129, its subsidiary company’s accounts shall not be consolidated with the aforesaid holding company. However, the reasons for not consolidating must be explained in the notes as required by Schedule III.
Yes, as per Section 129(1), the financial statements should be prepared in accordance with the accounting standards. Further, as per Section 129 (5), in case of deviation from accounting standards, the financial statements must disclose the fact of such deviation and reasons for the same along with its financial effects.
The Company may maintain books of account either physically or electronically. In case the books of account is maintained electronically, the back-up of the books of account and other books and papers of the company shall be kept in servers physically located in India on a periodic basis.
Yes, as per Proviso to Section 128 (1), the books may be kept at such other place in India as the Board of Directors may decide after passing resolution in the duly held Board Meeting of the company. However, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place.
As per Section 138 of the CA, 2013 and Rule 13 of Companies (Accounts) Rules, 2014, the following companies are required to appoint an internal auditor:
“Chartered Accountant” or “Cost Accountant”, or such other professional as may be decided by the Board of Directors of the company can be appointed as internal auditor of the Company. The internal auditor may or may or may not be an employee of the company.
As per the proviso to the Section 148(3), the person appointed under Section 139 of the CA, 2013 as an auditor of the company shall not be appointed for conducting the audit of cost records.
As per the Section 139 of the CA, 2013, the first auditors should be appointed by the Board within 30 days of the registration of the company and in case of failure of the Board to appoint such auditors, the auditors shall be appointed by the members in general meeting. Further, such auditor shall hold office till the date of the conclusion of the first annual general meeting.
As per Section 139(2) of the CA, 2013 read with Rule 5 of Companies (Audit and Auditors) Rules, 2014, the following companies shall not appoint an individual as statutory auditor for more than one term of 5 years and a firm as statutory auditor for more than two terms of 5 year each:
As per Section 143(5), of the CA, 2013 the auditor of a Government Company shall be appointed by the Comptroller and Auditor General of India (“CAG”). Further, w.e.f. 4 September 2014, auditor of any other company owned or controlled directly or indirectly by Central Government or State Government and partly by Central Government and partly by one or more State Governments shall also be appointed by CAG.
As per Section 144, of the CA, 2013 an auditor shall not provide any of the following services:
The provisions on reporting fraud have been laid down under Section 143 (12) of the CA, 2013 and provides that if the auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall report the matter to the Central Government. However, as per the Companies (Amendment) Act, 2015 as notified by MCA vide notification dated 14 December 2015, the auditor shall report only those matters to the Central Government which involves or is expected to involve individually an amount of One Crore or above.
As per Rule 13(3) of Companies (Audit and Auditors) Rules, 2014, in case of fraud involving less than one crore rupees, auditor shall report the matter to the Audit Committee under Section 177 or to the Board immediately within 2 days of his knowledge of the fraud and also the same is required to be disclosed in the Board’s Report.
As per Section 143 (12) of the CA, 2013 read with Rule 13 of Companies (Audit and Auditors) Rules, 2014, the procedure for reporting of fraud if the amount of the fraud is equal or more than 1 crore, is as follows:
Secretarial Audit Report is required to be provided in the format prescribed in Form MR-3. (Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014).
As per Section 204(1) of CA, 2013 read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the following companies are required to obtain Secretarial Audit Report:
The Secretarial Audit Report should be signed by the Secretarial Auditor who has been engaged by the company to conduct the Secretarial Audit and in case of a firm of Company Secretaries, by the partner under whose supervision the Secretarial Audit was conducted.
Pursuant to the provisions of Section 204 of the CA 2013, every listed company and company belonging to class of companies as prescribed is required to annex with its Board’s Report, a Secretarial Audit Report given by a Company Secretary in Practice. Companies which are not covered under Section 204 may obtain Secretarial Audit Report voluntarily.
Yes, as per proviso to Section 2(71) of the CA, 2013, the company which is a subsidiary of a company, not being a private company, shall be deemed to be a public company for the purposes of this Act, even where such subsidiary company continues to be a private company in its articles if the prescribed criteria of the paid up share capital or turnover.
Secretarial Auditor is required to report and provide details of specific events and actions occurred during the reporting period having major bearing on the affairs of the Company in pursuant to above referred laws/ rules and regulations. Few events are also given as example in the format of audit report.
Yes, whenever a practicing company secretary is appointed as Secretarial Auditor in place of the existing Secretarial Auditor, he/she should communicate the appointment to the earlier incumbent in writing, in view of the provisions of clause (8) of Part I of the First Schedule to the Company Secretaries Act, 1980.
Yes, as per the exemption Notification No. GSR 464(E) of the MCA dated 5th June 2015, a Private Company can accept deposits from its members not exceeding 100% of aggregate of its paid up share capital, free reserve and securities premium account without complying with the provisions of Section 73(2) (a), (b), (c), (d) and (e) of the CA, 2013 and such company shall file details of monies so accepted in the manner as may be specified.
Eligible company refers to every public company having net worth of not less than 100 crore rupees or a turnover of not less than 500 crore rupees and which has obtained prior consent of shareholders in general meeting by means of a special resolution and made respective filings with the ROC before making any invitation to public.
In case, deposit is with respect to the specified limits under Section 180(1)(c) of the CA, 2013, an ordinary resolution may suffice the requirement.
Yes, as per the Companies (Acceptance of Deposits) Rules, 2014, advance towards annual maintenance service for more than 365 days will be treated as a deposit.
Yes, as per the Companies (Acceptance of Deposits) Rules, 2014, share application money pending allotment for more than 60 days is treated as a deposit.
Any amount received from a person who, at the time of the receipt of the amount, was a director of the company furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him borrowing or accepting loans or deposits from others, is not considered as deposit.
In case of private company, if the amount is borrowed from its member not exceeding 100% of the paid-up share capital, free reserves and securities premium, then it will not be treated as deposits.
No, it is not mandatory for a company to declare dividend.
The dividend warrants shall be dispatched by the company-
In case of ECS transfers for distribution of dividend, the transfer shall be made within 30 days of declaration of dividend.
As per the second proviso to Section 123(1) of the CA, 2013, a Company which has inadequate profit or has incurred loss in the immediately preceding financial year may declare dividend out of the accumulated profits of the company. However, as per Rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014, the rate of dividend shall not exceed the average of the rates at which dividend was declared by the company in the immediately preceding three financial years.
If a company has not declared dividend in any of the preceding three financial years, the restriction on the rate of dividend would not be applicable.
The Board can only recommend the final dividend to the shareholders of the Company for declaration at the AGM.
Dividend can be paid to any class of shareholders, but separate resolution for declaration of dividend to each class of shares is required to be passed at the meeting of the Board or shareholders, as the case may be.
Dividend once declared has to be paid to all the shareholders in a particular class.
As per proviso to Section 124(6) of the CA, 2013 claimant of shares shall be entitled to claim the transferred shares from IEPF and the procedure for that would be specified in the IEPF Rules.
As per Section 124(1) of the CA, 2013, dividend declared by the company which remains unpaid/ unclaimed for a period of 30 days from the date of declaration shall be transferred to Unpaid Dividend Account within 7 days from the date of expiry of the said period of 30 days.
The amount allocated for CSR can be spent for activities specified under Schedule VII of the CA, 2013.
Yes, every company irrespective of Private or Public Limited or a foreign company which has its branch office or project office in India having:
shall formulate a CSR Committee, who shall determine the CSR policy of the company and every such company is required to spend of 2% of average net profits of the company made during the immediately preceding financial years towards CSR.
In case of any shortfall of not spending the 2% of average net profits, the Board is required to be disclosed the same in the Board report along with reasons.
Compromise and Arrangement between company and its creditors or company and its members shall be done in accordance with the provisions of the CA, 2013. (MCA vide notification dated 7 December 2016 notified the Section 230 to 240 of the CA, 2013 which deal with Compromise and Arrangements)
As per the proviso to Section 230(4) of the CA, 2013, objection can be raised only by persons holding 10% or more of shareholding or having debt amounting 5% of the total outstanding debt as per the latest audited financial statement.
As per Explanation to Rule 9 of the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016:
As per explanation to the rule 4 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, corporate debt restructuring means a scheme that restructures or varies the debt obligations of a company towards its creditors.
As per Section 230(9) of the CA, 2013, if 90% of the creditors in value agree and confirm to the scheme by way of affidavit, NCLT may dispense the holding of meeting of creditors or class of creditors.
As per Section 232(3)(h) of CA, 2013, where the transferor company is a listed company and the transferee company is an unlisted company, then:
No, as per Section 230(10) of the CA, 2013, NCLT shall not approve any scheme of compromise or arrangement in respect of buy-back of securities which is not in compliance with the provisions of Section 68 of the CA, 2013.