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CARO 2016 Or Companies Auditor’s Report Order 2016 Format

CARO 2016 Or Companies Auditor’s Report Order 2016 w.e.f 01/04/2015. In the previous article, we have given CARO 2015. Today we are providing CARO 2016 or companies auditor’s report order 2016 applicability, report format etc. At the end of this article, you can also download guidance note on companies auditor’s report 2016 by ICAI. This summary notes is also useful for CA IPCC and CA Final students. This is important in exam point of view as well as it plays a vital role in auditors report.

Section 143(11) empowers the Central Government to issue suitable instructions to auditors to report on certain additional matters in the audit report in respect of classes of companies notified. In pursuance of the powers conferred by section 143(11), the Central Government hereby makes companies auditor’s report order 2016.

CARO 2016 Or Companies Auditor's Report Order 2016 Format

CARO 2016 Or Companies Auditor’s Report Order 2016


CARO, 2016 is applicable to every company including a foreign company as defined in section 2(42) of the companies Act,2013.


  • A banking company; as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
  • An insurance company; as defined under the Insurance Act,1938 (4 of 1938);
  • A company licensed to operate under section 8 of the Companies Act,
  • A one person Company; and
  • A private limited company provided the following cumulative conditions are satisfied:
    • Paid up capital and reserves not more than Rs.100lacs and
    • Loan outstanding shall not exceed Rs.100lacs from any bank or financial institution and
    • Turnover shall not exceed Rs.10crores at any point of time during the financial year.

The auditor’s report on the accounts of every company to which CARO applies shall contain the matters specified below for the financial year commencing on or after 1st April, 2015.

Terms Used in the Order

1) Paid – up capital and reserves

Paid-up share capital would include both equity share capital as well as preference share capital. While calculating the paid – up capital,Amount of calls unpaid should be deducted from the paid – up capital. The amount originally paid-up on forfeited shares should be added to the figure of paid-up capital. Share application money received should not be considered as part of the paid-up capital.

The term “reserves” include both capital Reserves as well as Revenue Reserves. This also includes revaluation reserve. The debit balance of the profit and loss account, if any, should be reduced from the figure of revenue reserves. However, miscellaneous expenditure to the extent not written off should not be deducted for arriving at reserves.

2) Loan Outstanding

This include all fund based loans such as term loans, demand loans , export credits, working capital limits, cash credits, overdraft facilities, bills purchased or discounted etc. However, this does not include non fund based limit such as bank guarantees. However, if the bank guarantee has been converted into fund based limit, is should also be considered. The term also includes interest accrued and due.

3) It does not included a non – banking financial company (NBFC).

4) Turnover

The term “turnover” has not been defined by the order. However, according to part ii of Schedule iii of the companies Act, 2013 “Turnover” means aggregate amount of sales affected by the company.l the term “sales affected” include sale of goods as well as services rendered by the company. For determination of turnover, the following points should be considered:

  • Sales tax collected or excise duties collected should not be taken into account if they are credited separately to sales tax account or excise duty account.
  • Trade discounts should be deducted from the figure of turnover;
  • Commission allowed to third parties should not be deducted from the figure of turnover; and
  • Sales returns should be deduced from the figure of turnover even if the returns are from the sales made in the earlier years.

5) Date of determination of limits

If at any point of time during the financial year covered by the audit report, the company defeats any of the conditions mentioned for a private company for its exclusion from the order, the order is made applicable.

Matters to be included in the auditor’s report

1) Fixed Assets:

a) whether the company is maintain proper records showing full particulars, including quantitative details and situation of fixed assets;

b) whether theses fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;

2) Inventory

Whether physical verification of inventory has been conducted at reasonable intervals by the management;

3) Loans Granted

Whether the company has granted any loans, secured or unsecured to companies or other parties covered in the register maintained under section 189 of the companies Act. If so

  • Whether receipt of the principal amount and interest are also regular;
  • If overdue amount is more than rupees one lakh, whether reasonable steps have been taken by the company for recovery for the principal and interest;

4) Internal Control

Is there an adequate internal control system commensurate with the size of the company and the nature of its business,for the purchases of inventory and fixed assets and for the sale of goods and services. Whether there is continuing failure to correct major weaknesses in internal control system

5) Statutory Dues

Is the company regular in depositing undisputed statutory dues including provident fund,employees state insurance, income tax,sales tax,wealth tax, service tax, duty of customs, duty of excise, value added tax,cess and any other statutory dues with appropriate authorities.

6) Repayment of Dues

Whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders? if yes, the period and amount of default to be reported:

7) Guarantees Given

Whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company;

8) Fraud

Whether any fraud on or by the company has been noticed or reported during the year; if yes the nature and the amount involved is to be indicated. It is the duty of the Auditors to report on Frauds, according to section 143(12) of the companies Act.2013, if during the course of audit, the auditor has reason to believe that an offence involving fraud is being or has been committed against the company by officers for employees of the company he shall immediately report the matter to the Central Government but not later than 60 days of his knowledge.

And the following points shall also be considered:

(1) in case, the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed thereunder, where applicable, have been complied with? If not, the nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?

(2) whether maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and whether such accounts and records have been so made and maintained.

(3) whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability;

(4) whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards;

(5) whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of section 42 of the Companies Act, 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non-compliance;

(6) whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions of section 192 of Companies Act, 2013 have been complied with;

(7) whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained.

Reasons to be stated for unfavourable or qualified answers :

(1) Where, in the auditor’s report, the answer to any of the questions referred to in paragraph 3 is unfavourable or qualified, the auditor’s report shall also state the basis for such unfavourable or qualified answer, as the case may be.

(2) Where the auditor is unable to express any opinion on any specified matter, his report shall indicate such fact together with the reasons as to why it is not possible for him to give his opinion on the same.

Click Here to download guidance note on companies auditor’s report 2016 by ICAI.

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