CARO 2020

Question 1

BaSSI Pvt Ltd

Applicability

Answer 1

• every co. inc.foreign company
• exceptions :
  1. Banking co
  2. small company
  3. section 8 co.
  4. insurance co.
  5. Pvt Ltd ( not hold/sub of public co.)
  6. One person Co.
  7. PUSC+R&S <= 1 cr (BS Date)
  8. Borrowings(banks+FI) <= 1 cr (@ any point during the year)
  9. Revenue(inc.discontinued ops) <= 10 cr (as per FS)
  10. NA to consolidated FS (except clause xxi)

Question 2

Para 3 - Clause (i)

Answer 2

• Proper records -PPE & IA
• Physical verification - PPE -reasonable intervals- Material discrepencies - dealt in books?
• Title deeds - except lease agreements in the name of company - if not,provide details in the specified format
• Revaluation - as per registered valuer?-change >10% of net carrying valueof each class of assets
• proceedings - initiated/pending-benami property - benami transactions(prohibitions) act,1988- if yes, disclosed?

PPE & IA & ROU

PPT - Reva Ben

Question 3

Para 3 clause (ii)

Answer 3

• Physical verification - reasonable intervals- coverage & procedure appropriate? - discrepancies > 10% for each class of invventory- dealt properly?
• WC loan >5 cr - @ any point during the year- quaterly statements filed with banks in acceptance with books?

Inventory

Bank will physically verify inventory to grant WC loan

Question 4

Para 3 clause (iii)

Answer 4

during the year , indicate below:
* aggregate amount & balance o/s :
- to subsidiaries,JV,associates
- other than above
* terms & conditions - not prejudicial to interest of the co.
* schedule of repayment & repayments regular?
* total amt overdue >90 days:reasonble steps for recovery
* due during the year- renewed,extended,fresh loans granted - specify aggregate of such amt and % of aggregate total loans
* nature of loans repayable on demand/no specific terms or period of repayment - specify aggregate and % of aggregate to total

LIGS ; L - Loand /advances in the nature of loans`

3rd day of gym - leg day

Question 5

Para 3 clause (iv)

Answer 5

LIGS has to satisfy section 185 and 186

leg pain is still present in 4th day

Question 6

Para 3 - Clause (v)

Answer 6

• Deposits received/deemed to be deposits
• Directives by RBI, sec 73 to 76 of cos.act- complied
• contravention - stated?
• order - NCLT/RBI/CLB/any court or tribunal - complied or not?

Question 7

Para 3 - Clause (vi)

Answer 7

• Cost records:
  -specified by CG : sec 148 of Cos Act
  - Made and maintained?

Question 8

Para 3 - clause (vii)

Answer 8

• Undisputed statutory dues :
  
  • Regular?
  • extent of arrears > 6 months as on 31st March.
• Disputed statutory dues:
  
  • stat dues of clause (a) not deposited on account of dispute
  • Amount involved & forum where disput is pending

Mere rep to the concerned department - not dispute

STATUTORY DUES

Question 9

Para 3 - clause (viii)

Answer 9

• unrecorded transactions - surrendered/disclosed as income in tax assessments (IT Act,1961) during the year, - whether previously unrecorded income properly recorded during the year.

1+9+6+1=17=1+7=8

Unrecorded transaction

Question 10

Para 3 - clause (ix)

Answer 10

• Default in repayment - specified format
• whether declared wilful defaulter?
• applied - for specified purpose? - diverted - amount & the other purpose
• short term applied for long term -* nature & amount*
• taken funds to meet S,A,JV obligations - nature & amount
• raised loans - pledging securities held in S,A,JV

Loans

Question 11

Para 3 - clause (x)

Answer 11

• money - raised - ipo/fpo - used for the purpose? -if not default,delay,subsequent rectification
• preferntial allotment / private placement - shares/convertible debentures - sec 42 & sec 62 complied?- used for purpose?-if not, amount & nature of non-compliance

IPO/FPO REPORTING

IPO - Happy news- tentenaten tenten tara

Question 12

Para 3 - Clause (xi)

Answer 12

• Fraud - by the company/on the company-nature & amt
• Sec 143 - ADT -4 -rule 13
• whistle blower complaints - considered?

**11 ** countries’ police chasing DON

Question 13

Para 3 - Clause (xii)

Answer 13

• Net owned funds : Deposits = 1:20
• 10% unencumbered deposit- Nidhi Rules,2014
• Default in payment

Nidhi - 12 pm

Question 14

Para 3 - Clause (xiii)

Answer 14

• RP - compliance with sec.177 & sec 188
• whether details disclosed as per applicable accounting standards

Question 15

Para 3 - Clause (xiv)

Answer 15

• Internal audit system - commensurate with size & nature of business
• stat auditor - considered internal auditor’s report?

Question 16

Para 3 - Clause (xv)

Answer 16

Non- cash trans with directors/connected with him - sec 192 compliance

Question 17

Para 3 - Clause (xvi)

Answer 17

• registration under 45 IA + certificate obtained?
• NBFC /Housing fin act without COR ?
• CIC - fulfilll criteria of defn - is exempted or unregistered?
• 1 group > 1 CIC – indicate no. of CICs which are part of the group.

Question 18

Para 3 - Clause (xvii)

Answer 18

cash losses - in the FY and in the immediately preceding FY - amount of cash loss

Question 19

Para 3 - Clause (xviii)

Answer 19

Outgoing auditors(resignation) - issues,objections,concerns - considered?

Question 20

Para 3 - Clause (xix)

Answer 20

• Basis :
  
  • Fin ratios
  • Ageing
  • expected dates of realisation of assets & payment of liab.
• auditor’s opinion - material uncertainty on the date of audit report : can the co. meet its liab as on BS date & when they fall due within 1 year from the BS date.

Question 21

Para 3 - Clause (xx)

Answer 21

• other than ongoing projects - transferred unspent amount to sch VII fund - 6 months from expiry of fin. year - sec 135(5)
• ongoing projects - unspent amount - special a/c - sec 135(6)

20-20 Match - Reliance

Question 22

Para 3 - Clause (xxi)

Answer 22

• Qualifications/adverse remarks - reports of cos. in CFS - indicate details of cos.,para no. of CARO report containing qual/adv remark