Companies (Auditor’s Report) Order 2003: A Critique

Posted: Monday, Jul 07, 2003 at 0000 hrs IST
Updated: Monday, Jul 07, 2003 at 0000 hrs IST

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: Manufactu-ring and Other Companies (Auditors Report) Order 1988 (MAOCARO) has been rechristened as CARO. This is how one can sum up the Companies (Auditor’s Report) Order 2003. The aforesaid CARO has been notified and this order comes into effect from 1st July, 2003 which means all statutory audit reports issued after this date will have to be in compliance. It applies to every company including a foreign company as defined in section 591 of the Act except (1) a banking company (2) an Insurance company (3) a company licensed to operated under section 25 of the Act and a private limited Company with a paid up capital and reserve of not more than fifty lacs and has not accepted any public deposits and does not have a turnover exceeding five crore rupees.

DCA seems to have forgotten Company Law. Section 3 (1) (iii) (d) prohibits a private company from accepting deposits from public. It is pertinent to note that this new order repeals the earlier order. MAOCARO was applicable for all companies except Foreign Companies subject however to the saving provision under sub section 2 (a)& (b). To put it in a nut shell MAOCARO applied to private companies also irrespective of the criterion of paid up capital or turnover. Unfortunately, MAOCARO was being followed in a stereo typed manner. On a careful reading of such order in any Balance sheet would reveal that the Auditor has used ‘copy and paste’ technology, in the sense that the report was a verbatim word by word reproduction of MAOCARO without any details as to specifics. The CARO makes it incumbent upon the statutory Auditor to make a specific statement. There are certain new requirements specified under the CARO which requires ‘interalia’ certain vital information to be disclosed. Such as a) if a substantial part of the Fixed assets have been disposed off whether it has affected the going concern b) Where loans have been given by the company if the principal amount and interest are regular or if overdue amounts is more than one lac whether reasonable steps have been taken by the company for recovery / payment of the principal and interest. Whether transactions that need to be entered into a register in pursuance of section 301 of the Act have been so entered. In case...

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