In exercise of the powers conferred by
sub-section (11) of section 143 of the Companies Act, 2013 (18 of 2013 ) and in
supersession of the Companies (Auditor's Report) Order, 2015 published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide
number S.O. 990 (E), dated the 10th April, 2015, except as respects things done
or omitted to be done before such supersession, the Central Government, after
consultation with the, committee constituted under proviso to sub-section (11)
of section 143 of the Companies Act, 2013 hereby makes the following Order,
namely:- (1)
This
Order may be called the Companies (Auditor's Report) Order, 2016. (2)
It
shall apply to every company including a foreign company as defined in clause
(42) of section 2 of the Companies Act, 2013 (18 of 2013) [hereinafter
referred to as the Companies Act], except- (i)
a
banking company as defined in clause (c) of section 5 of the Banking Regulation
Act, 1949 (10 of 1949); (ii)
an
insurance company as defined under the Insurance Act, 1938 (4 of 1938); (iii)
a
company licensed to operate under section 8 of the Companies Act; (iv)
a
One Person Company as defined under clause (62) of section 2 of the Companies
Act and a small company as defined under clause (85) of section 2 of the
Companies Act; and (v)
a
private limited company, not being a subsidiary or holding company of a public
company, having a paid up capital and reserves and surplus not more than rupees
one crore as on the balance sheet date and which does not have total borrowings
exceeding rupees one crore from any bank or financial institution at any point
of time during the financial year and which does not have a total revenue as
disclosed in Scheduled III to the Companies Act, 2013 (including revenue from
discontinuing operations) exceeding rupees ten crore during the financial year
as per the financial statements. Every report made by the auditor under
section 143 of the Companies Act, 2013 on the accounts of every company audited
by him, to which this Order applies, for the financial years commencing on or
after 1st April, 2015, shall in addition, contain the matters specified in
paragraphs 3 and 4, as may be applicable: Provided the Order shall not apply to the
auditor's report on consolidated financial statements. The auditor's report on the accounts of a
company to which this Order applies shall include a statement on the following
matters, namely:- (i)
(a)
whether the company is maintaining proper records showing full particulars,
including quantitative details and situation of fixed assets; (b) whether these 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; (c) whether the title deeds of immovable
properties are held in the name of the company. If not, provide the details
thereof; (ii)
whether
physical verification of inventory has been conducted at reasonable intervals
by the management and whether any material discrepancies were noticed and
if so, whether they have been properly dealt with in the books of account; (iii)
whether
the company has granted any loans, secured or unsecured to companies, firms,
Limited Liability Partnerships or other parties covered in the register
maintained under section 189 of the Companies Act, 2013. If so, (a)
whether
the terms and conditions of the grant of such loans are not prejudicial to the
company's interest; (b)
whether
the schedule of repayment of principal and payment of interest has been
stipulated and whether the repayments or receipts are regular; (c)
if
the amount is overdue, state the total amount overdue for more than ninety
days, and whether reasonable steps have been taken by the company for recovery
of the principal and interest; (iv)
in
respect of loans, investments, guarantees, and security whether provisions of
section 185 and 186 of the Companies Act, 2013 have been complied with. If
not, provide the details thereof. (v)
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? (vi)
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. (vii)
(a)
whether the company is regular in depositing undisputed statutory dues
including provident fund, employees' state insurance, income-tax,
sales-tax, service tax, duty of customs, duty of excise, value added tax, cess
and any other statutory dues to the appropriate authorities and if not, the
extent of the arrears of outstanding statutory dues as on the last day of the
financial year concerned for a period of more than six months from the date
they became payable, shall be indicated; (b) where dues of income tax or sales tax or
service tax or duty of customs or duty of excise or value added tax
have not been deposited on account of any dispute, then the amounts
involved and the forum where dispute is pending shall be mentioned. (A mere
representation to the concerned Department shall not be treated as a dispute). (viii)
whether
the company has defaulted in repayment of loans or borrowing to a financial
institution, bank, Government or dues to debenture holders? If yes, the
period and the amount of default to be reported (in case of defaults to banks,
financial institutions, and Government, lender wise details to be provided). (ix)
whether
moneys raised by way of initial public offer or further public offer (including
debt instruments) and term loans were applied for the purposes for which
those are raised. If not, the details together with delays or default and
subsequent rectification, if any, as may be applicable, be reported; (x)
whether
any fraud by the company or any fraud on the Company by its officers or
employees has been noticed or reported during the year; If yes, the nature
and the amount involved is to be indicated; (xi)
whether
managerial remuneration has been paid or provided in accordance with the
requisite approvals mandated by the provisions of section 197 read with
Schedule V to the Companies Act? If not, state the amount involved and steps
taken by the company for securing refund of the same; (xii)
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; (xiii)
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; (xiv)
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; (xv)
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; (xvi)
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. (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.COMPANIES
(AUDITOR'S REPORT) ORDER, 2016
PREAMBLE