CARO’ 2015 Applicability

Introduction

Implementing the Companies act, 2013, the central government made the auditor’s report applicable from the financial year beginning on 1st April 2014. Section 227(4A) of the old companies act ceased to be operational from 2014, under the provisions of the Companies Act, 2013. Thus, MCA on 10th April 2015 issued CARO-2015. CARO is applicable only to a specific class of companies.

Applicability of Order

• MCA in notification Published In official Gazette,
• Prescribed a list of Exempted Categories on Which CARO-15 is not applicable.
• In other words other than exempted Category of companies CARO-15 is applicable to all companies.
• The Order also applies to Foreign Companies as defined U/S 2(42) of the 2013 Act. The Order is also applicable to the Audits of branches of a Company under the Act.

Class of Companies Excluded from Ambit of CARO-15

a) Banking Company,

b) Insurance Company,

c) Companies having charitable objectives

d) Private Company (Subject to Fulfillment of Specified Conditions),

e) One Person Company U/S-2(62),

f) Small Company.

Category of companies

a) One Person Company

b) Small Company

C) Private Limited company

is subject to conditions. They are exempted from CARO-15 if they fulfill certain conditions-

i) A paid up capital and reverse not more than 50 lakh.

ii) Must not have any outstanding loan of amount more than 25 lakh from any bank

iii) Does not have a turnover exceeding Rs. 5 cores. At any point of time during the financial year

If any one of these conditions stands unfulfilled, the auditor needs to report to the orders.

 D) Small Company

Any company, excluding public companies, whose paid up share capital doesn’t exceed Rs 50 lakh or a higher amount as may have been prescribed, is referred to as a small company by the Companies act, 2013. Also, the turnover of the Company should not be more than Rs. 2 crores poor higher amount as may have been prescribed.

Other companies which will not qualify to be a small company are-

• A Company or Body Corporate governed by Any Special Act (e.g. banking co., Insurance Co.),
• A Company registered under the Section 8 of 2013 Act,
• Holding or a Subsidiary

Certain Clarifications

• A private company, which is a subsidiary of a public company will be treated as a public company and CARO-15 will always be applicable.
• The Indirect tax components such as Excise Tax, Vat etc. shall be Included as a part of Turnover if the Company is Complying with Inclusive Method of Accounting.
• The Expression Turnover Will Also Include Scrap Sales
• Whether CARO is applicable or not shall be examined on Balance-Sheet Date.
• If CARO isn’t applicable to private and small companies, the auditor must mention this in the report.
• If CARO is applicable for one year, it doesn’t make it mandatory to be applicable for the next year as well. Applicability will change on a year to year basis.