Matters to be Included under CARO, 2003-A Checklist

The CARO, 2003 has also speciIied the matters to be included in the auditor`s report oI
various companies. The auditor`s report on the account oI a company to which this Order
applies shall include a statement on the matters, as speciIied in paragraphs 4 and oI CARO,
2003.
Every report made by the auditor under section 227 oI Companies Act, 1956 on the accounts
oI every company examined by him to which this Order applies Ior every Iinancial year
ending on any day on aIter the commencement oI this Order (viz. Ior audit report Ior the year
ended 31.03.2004) shall contain the matters speciIied in paragraphs 4 and 5. In this part, I
have discussed the all the matters to be included in the auditors` report under the CARO,
2003 in a reader Iriendly manner.
1. ixed assets
1. Whether the company is maintaining proper records showing Iull particulars,
including quantitative details and situation oI Iixed assets.
2. Whether the management at reasonable intervals has physically veriIied these
Iixed assets.
3. Whether any material discrepancies were noticed on such veriIication and iI
so, whether the same have been properly dealt with in the books oI account.
4. II a substantial part oI Iixed assets have been disposed oII during the year,
whether it has aIIected the going concern.
2. Inventory
1. Whether physical veriIication oI inventory has been conducted at reasonable
intervals by the management.
2. Are the procedures oI physical veriIication oI inventory Iollowed by the
management reasonable and adequate in relation to the size oI the company
and the nature oI its business?
3. II not, the inadequacies in such procedures should be reported.
4. Whether the company is maintaining proper records oI inventory.
5. Whether any material discrepancies were noticed on physical veriIication and
iI so, whether the same have been properly dealt with in the books oI account.
3. Loans taken/granted
1. as the company either granted or taken any loans, secured or unsecured to/
Irom companies, Iirms or other parties covered in the register maintained
under section 301 oI the Act.
2. II so, give the number oI parties and amount involved in the transactions.
3. Whether the rate oI interest and other terms and conditions oI loans given or
taken by the company, secured or unsecured, are prima Iacie prejudicial to the
interest oI the company.
4. Whether payment oI the principal amount and interest are also regular.
5. II overdue amount is more than one lakh, whether reasonable step have been
taken by the company Ior recovery / payment oI the principal and interest.
. Internal control
1. Is there an adequate internal control procedure commensurate with size oI the
company and the nature oI its business, Ior the purchase oI inventory and
Iixed assets and Ior the sale oI goods?
2. Whether there is a continuing Iailure to correct major weakness in internal
control.
5. Section 301
1. Whether transactions that need to be entered into a register in pursuance oI
section 301 oI the Act have been so entered.
2. Whether each oI these transactions have been made at prices which are
reasonable having regard to the prevailing market prices at the relevant time.
3. This inIormation is required only in case oI transactions exceeding the value
oI Iive lakh rupees in respect oI any party and in any one Iinancial year.
. Deposits from public
1. In case the company has accepted deposits Irom the public, whether the
directives issued by the Reserve Bank oI India and the provisions oI sections
58A and 58AA oI the Act and rules Iramed there under, where applicable,
have been complied with.
2. II not, the nature oI contraventions should be stated.
3. II an order has been passed by Company Law Board whether the same has
been complied with or not.
. Listed companies
1. Whether the company has as internal audit system commensurate with its size
and nature oI its business.
2. This is to be reported in the case oI Iollowing companies: -
(i) All listed companies and / or,
(ii) Other companies having a paid-up capital and reserves exceeding Rs.
50 lakh as at the commencement oI the Iinancial year concerned, or
(iii) Other companies having an average annual turnover exceeding Iive
crore rupees Ior a period oI three consecutive Iinancial years
immediately preceding the Iinancial year concerned.
. Cost records
1. Whether maintenance oI cost records has been prescribed by the Central
Government under clause (d) oI sub-section (1) oI section 209 oI the Act.
2. II so, whether such accounts and records have been made and maintained.
. Statutory dues
1. Is the company regular in depositing undisputed statutory dues including
Provident Fund, Investor Education and Protection Fund, Employees` State
Insurance, Income tax, Sales-tax, Wealth-tax, Custom Duty, Excise Duty,
Cess and any other statutory dues with the appropriate authorities.
2. II not, the extent oI the arrears oI outstanding statutory dues as at the last day
oI the Iinancial year concerned Ior a period oI more than six months Irom the
date they became payable, shall be indicated by the auditor.
3. In case dues oI sales-tax / income-tax / custom tax/ wealth-tax/ excise
duty/cess have not been deposited on accounts involved and the Iorum where
dispute is pending may please be mentioned.
4. For this purpose, a mere representation to the Department shall not constitute
the dispute.
10. Accumulated losses/cash losses
1. Whether the company is a company, which has been registered Ior a period
not less than Iive years.
2. In such a case, whether its accumulated losses at the end oI the Iinancial year
are not less than IiIty per cent oI its oI its net worth.
3. Whether it has incurred cash losses in such Iinancial year and in the Iinancial
year immediately preceding such Iinancial year also.
11. Default in repayment of dues
1. Whether the company has deIaulted in repayment oI dues to a Iinancial
institution or bank or debenture holders?
2. II yes, the period and amount oI deIault to be reported.
12. Loans and advances
1. Whether adequate documents and records are maintained in cases where the
company has granted loans and advances on the basis oI security by way oI
pledge oI shares, debentures and other securities?
2. II not, the deIiciencies to be pointed out.
13. Special statute-Chit fund companies
1. Whether the provisions oI any special statute applicable to chit Iund have been
duly complied with?
2. II not, the nature oI contraventions should be stated.
1. Nidhi/ mutual benefit fund/ societies-special aspects
1. Whether the net owned Iunds to deposit liability ratio is more than 1:20 as
on the date oI balance sheet.
2. Whether the company has complied with the prudential norms on income
recognition and provisioning against sub-standard / deIault / loss assets.
3. Whether the company has adequate procedures Ior appraisal oI credit
proposals / requests, assessment oI credit needs and repayment capacity oI the
borrowers.
4. Whether the repayment schedule oI various loans granted by the nidhi is based
on the repayment capacity oI the borrower and would be conducive to
recovery oI the loan amount.
15. inancing companies- Special aspects
1. II the company is dealing or trading in shares, securities, debentures and other
investments the auditor has to consider the certain additional points.
2. Whether proper records have been maintained oI the transactions and
contracts.
3. Whether timely entries have been made therein.
4. Whether the shares, securities, debentures and other securities have been held
by the company, in its own name except to the extent oI the exemption, iI any,
granted under section 49 oI the Act.
1. Guarantee for loans
1. Whether the company has given any guarantee Ior loans taken by others Irom
bank or Iinancial institutions, the terms and conditions where oI are
prejudicial to the interest oI the company.
1. Term loans
1. Whether term loans were applied Ior the purpose Ior which the loans were the
loans were obtained.
1. Usage of funds
1. Whether the Iunds raised on short-term basis have been used Ior long term
investment.
2. Whether the Iunds raised on ling-term basis have been used Ior short term
investment.
3. II yes, the nature and amount is to be indicated.
1. Preferential allotments
1. Whether the company has made any preIerential allotment oI shares to
parties and companies covered in the Register maintained under
section 301oI the Act.
2. II so whether the price at which shares have been issued is prejudicial to the
interest oI the company.
20. Creation of securities
1. Whether securities have been created in respect oI debentures issued?
21. Disclosure of end use of funds
1. Whether the management has disclosed on the end use oI money raised by
public issues and the same has been veriIied?
22. rauds
1. Whether any Iraud on or by the company has been noticed or reported during
the year?
2. II yes, the nature and the amount involved is to be indicated.
23. Others
1. Where, in the auditor`s report, the answer to any oI the questions reIerred to in
paragraph 4 is unIavourable or qualiIied, the auditor`s report shall also state
the reasons Ior such unIavourable or qualiIied answer, as the case may be.
2. Where the auditor is unable to express any opinion in answer to a particular
question, his report shall indicate such Iact together with the reasons why it is
not possible Ior him to give an answer to such question.