NAME OF THE CLIENT : Director In Charge :

PERIOD OF AUDIT : Senior In Charge :

Audit team :

LIST OF STATUTORY REGISTERS A COMPANY HAS TO MAINTAIN (THIS IS A GENERAL LIST)

SL NO PARTICULARS OF REGISTERS SECTION YES/NO/N.A REMARKS

13.1 Register of investments not held in company’s name 49(7)

13.2 Register of Deposits 58A

13.3 Creation/modification/satisfaction of charge & keeping 125, 135,
a record of the charges 136, 138
13.4 Register of charges 143
13.5 Register of members 150
13.6 Index of members where their number is more than 50 151

13.7 Register and index of debenture holders 152

13.8 Foreign register (and a duplicate) of members and 157
debenture holders, if any
13.9 Copies of all returns u/s 159 & 160 163
13.10 Minute books containing minutes of the proceedings of 193
general meetings, board meeting & committees of the
board
13.11 Books of accounts 209(1)(a) to
(c)
13.12 Register of contracts, with companies and firms, in 297 & 299
which directors are interested giving details

13.13 Register of contracts with companies and firms in 301

which directors are interested directly or indirectly

13.14 Register of directors, managing directors, managers 303

and secretary
13.15 Register of directors shareholding 307
13.16 Register of appointment of directors or an associate as 356 & 357
a selling agent outside India of goods produced by the
company, and for supply of or rendering of service

13.17 Register of loans to companies ‘under the same 370

management’
13.18 Register of loans made, guarantees given or securities 372A (5) &
provided to companies and investments in shares and (6)
debentures of other companies

CHECKED BY

Statutory reg-page1
NAME OF THE CLIENT : Director In Charge :
PERIOD OF AUDIT : Senior In Charge :
Audit team :

IMPORTANT SECTIONS OF THE COMPANIES ACT, 1956

CONTENTS SECTION NO.

Acceptance of deposits 58A
Civil liabilities for misstatement in prospectus 62
Criminal liabilities for misstatement in prospectus 63
Prohibition of allotment unless minimum subscription 69
received
Effect of irregular allotment 71
Application for and allotment of shares and debentures 72
Shares issued at a premium 78
Shares issued at a discount 79
Issue of sweat equity 79A
Compulsory redemption of irredeemable preference 80A
shares
Payment of dividend in proportion to amount paid up 93
Charges 125
Restriction on commencement of new business (not 149
applicable to private limited company)
Resolution to be filed with the registrar 192
Managerial personnel 197A
Overall maximum managerial remuneration and 198
managerial remuneration in case of absence of or
inadequacy of profits (not applicable to private company)

Calculation of commission in certain cases 199

Provisions relating to dividends 205, 205 A & 205 C

Imp sections-page2
Books of account to be kept by the company on accrual 209
basis and maintenance of cost records where applicable
Annual accounts 210
Forms of annual accounts presentation 211
Managing director and secretary to sign accounts 215
Auditor’s appointment, rights duties of auditors 224 & 229
Cost Audit 233 B
Provision relating to managing, whole time or non- 268
rotational directors to require government approval (not
applicable to private limited company)
Appointment or re appointment of managing director or 269
whole time director to require government approval in
certain cases. Mandatory appointment of managerial
personnel in certain cases
Disqualification of directors 274
Vacation of office by a director refer sub-section 1(14) 283
General power of the board 291
Certain powers to be executed by board only at board 292
meetings
Audit Committee (not applicable to private limited 292 A
companies)
Restrictions on powers of board 293
Prohibition regarding making of political contribution 293A
Appointment of sole selling/purchasing agents to require 294
approval of company in general meeting (not applicable to
private company)
Loans to Directors 295
Boards sanction required for certain contracts in which 297
particular directors are interested
Disclosure of interest by directors 299
Interested director not to participate or vote in 300
proceedings at board meetings
Maximum remuneration to directors (not applicable to 309
private limited company)
Increase in remuneration to require government sanction 310
(not applicable to private limited company)
Increase in remuneration of managing director or re- 311
appointment to require government sanction (not
applicable to private limited company)
Director’s holding office of profit 314

Imp sections-page3
Managing director not to be appointed for more than 5 317
years at a time (not applicable to private limited company)

Compensation to directors for loss of office 318 & 319

Determination of net profits (not applicable to private 349
limited company)
Ascertainment of depreciation 350
Loans etc., to companies under the same management 370
Purchase by company, of shares etc., of other companies 372 A
(not applicable to private limited company

Treatment of security deposits of employees and 417 & 418

company’s provident fund schemes
Accounts of foreign companies 594
Special provisions relating to government companies 619

Imp sections-page4
NAME OF THE CLIENT : Director In Charge :
PERIOD OF AUDIT : Senior In Charge :
Audit team :

COMPLIANCE WITH AAS

AAS NO SL NO PARTICULARS YES/NO/N.A REMARKS

1&2 1 Whether the audit complies with all the aspects of

the scope of audit?
2 Whether an inquiry made about the matters
covered under 227(1-A)? Adverse observations
noticed during inquiry needs to be reported
3 Whether the audit report in accordance with the
recommendation of Companies Act 1956 & ICAI
(Refer AAS 28)?
3 4 Whether a standardized format for working papers
followed? (For example, check lists, specimen
letters etc) If so, in respect of each audits has it
been completed in all respects?
5 Whether significant matters which require
exercise of judgment together with conclusions
thereon recorded in the working papers?
6 Whether the working paper file contains the
following?
a) Information about the organizational structure
of the client
b) Extracts of copies of important legal
documents, agreements and minutes relevant to
the
c) Aaudit
record for study and evaluation of internal
controls and accounting system of the client
d) Copies of audited financial statements for the
current as well as previous years
e) Analysis of significant ratios and trends
f) Management representation letter
g) Proof of communication with previous auditor,
if any, and the replies received from him
h) Notes on significant accounting policies.
i) Significant audit observations of earlier years.
j) Correspondence regarding annual appointment
k) Extract of minutes of important board meetings
l) Evidence for audit planning and copy of audit
program
m) A record for determining the nature, timing
and extent of audit procedures planned.
n) Evidence for work performed by assistants, its
supervision and review.
o) Copies of opinion from experts, other auditors
etc., if any.
p) Letters of confirmations received, if any.
q) Terms of audit engagement sent to the client
and the acknowledgement for it.
r) Copies of communication to the client in audit
matters

AAS-page5
 7 Whether the working papers are maintained for a
period of 10 years?
4 8 Whether an evaluation about the possibility of
misstatements arising in financial statements
either due to a) fraud risk factor or b) error is
made? Appendix 3 to AAS 4 outlines the
circumstances which may indicate the possibilities
of frauds or errors.
9 Whether the impact of misstatements considered
from the perspective of
a) Fraudulent financial reporting
b) Misappropriation of assets?
10 Whether the consideration of fraud risk factors is
in accordance with appendix 1 to AAS 4?
11 Whether the fraud risk factor analyzed from the
perspective of a) management fraud & b)
employee fraud?
12 When there is a possibility of existence of fraud, is
the response in accordance with
recommendations outlined in appendix 2 to AAS
4?
13 In those cases, where it is not possible to either
confirm the existence of fraud or error, is the
conclusions reached recorded in the working
papers?
14 Whether a communication about the fraud or error
is sent to those who are charged with
governance/management of the entity?
15 If fraud is committed by those who are charged
with governance, it should be properly disclosed.
Otherwise auditor’s report should disclose the
same.
16 In case of fraud, is it required to report to the
regulatory authorities?
Unless statutorily required an auditor need not
report.
17 Where due to non availability of adequate
evidence withdrawal from the audit engagement
is contemplated, whether is it ensured that the
communication sent to the incoming auditor does
not violate the confidentiality clause of auditor’s
responsibility?
5 18 Whether the best available evidence obtained
considering the materiality of the item, nature of
the item, adequacy of the internal controls, nature
and size of the entity, the type of frauds or errors
possible, type of information available, in respect
of individual financial statement assertions?

AAS-page6
 19 Whether the audit evidence collected is sufficient
and appropriate to form an opinion about the
financial statements?
20 Whether the review of compliance procedure
confirms its existence, effectiveness and its
continuity during the audit period of internal
controls?
21 Whether the process of obtaining substantial
procedure establish the following
a) Existence
b) Rights and obligations
c) Occurrence
d) Completeness
e) Valuation
f) Measurement
g) Presentation and disclosure
22 Whether external evidence obtained where ever
possible?
6 23 Whether an assessment made about the state of
internal control, accounting system & audit risk?
24 Whether the audit risk analyzed from the
perspective of its 3 components, inherent risk,
control risk and detection risk and its impact on
the financial statements?
25 Whether the above analysis documented and
recorded in working papers?
26 Whether the performance of substantial procedure
confirms the initial assessment of detection risk?
7 27 Whether is it planned to rely on the work of the
internal auditor?
28 If yes, whether a general evaluation of the internal
audit function is done from the perspective of
a) Their independence & status
b) Scope of function
c) Technical competence
d) Due professional care
29 On the basis of the above if it is decided to rely on
the work of an internal auditor, is it properly
planned and coordinated in respect of the audit
areas to be covered?
30 Whether a specific evaluation of the work of the
internal auditor conducted in terms of planning,
execution, sufficiency of evidence collected and
conclusions reached?

AAS-page7
 31 Whether the above evaluation documented and
recorded in the working paper file?
8 32 Whether the knowledge of the client business is
adequate to identify the events, transactions and
practices significant to the financial statements?
33 Whether the audit plan covers the following?
a) The terms of engagement and statutory
responsibilities
b) The nature and timing of reports or other
communication
c) Legal or statutory requirements
d) Effect of pronounce-ments of ICAI
e) Identification of significant audit areas
f) Setting the materiality levels
g) Areas requiring special attention
h) Assessment of audit risk
i) Assessment of fraud risk factors
34 Whether the audit plan documented and included
in the working papers?
35 Whether an audit program prepared and
documented?
9 36 Whether the audit areas where the expert’s
opinion required are identified?
37 If so, whether the expert’s skills, competence,
objectivity, confidentiality & their relationship with
the client evaluated?
38 Whether the expert’s report evaluated in terms of
source of data used, assumptions and methods
used and its consistency with the prior period and
auditor’s knowledge on the subject?
39 On the basis of above evaluation, whether the
expert opinion satisfies the requirements of
proper audit evidence?
40 In case of expert opinion is not satisfactory and it
is decided to issue other than clean report,
whether the permission of expert obtained if it is
decided to disclose his name in the audit report?
10 41 Whether it is ensured that, there is no restriction
on the scope of branch auditor’s work?
42 Whether a communication sent to branch auditor
about the nature & matters to be covered in his
report?
43 Whether the branch auditor’s report considered?
44 Whether there are any significant points arising
out of branch auditor’s report require further audit
considerations. If so has it been documented
including the conclusions reached on that matter?
45 Whether the audit report clearly discloses the
division of reporting responsibility?
11 46 Whether a representation obtained from the
management regarding the selection, consistent
application of accounting policies and
acknowledging their responsibility in the
preparation of financial statements?
47 Whether the representation dated before the
audit report?
48 Whether it covers all the assertions in the financial
statements?
12 49 In case of joint audits, whether the division of
responsibility clearly documented and kept in the
working paper file?
50 Whether there are any matters which require the
attention of other joint auditor? If so, has it been
communicated to him in writing?
51 Where in case of a disagreement with other joint
auditors on certain reporting aspects, whether a
separate report issued?
52 If the answer to the above question is yes,
whether the reason for the same is documented?

AAS-page8
13 53 Whether the materiality been fixed at overall
financial statements level and at the individual
account balance level?
54 If so, has it been documented including the basis
of such determination?
55 Whether the impact of items individually not
material but collectively material considered? If so
whether the management is approached for
correction of the financial statements?
56 Whether it has been corrected?
57 If the management does not accept the
suggestion for correction, whether the audit report
adequately discloses the position?
14 58 Whether the technique of analytical review used
at the planning stage to identify the assertions
that needs to be verified and also at the closing
stage of the audit?
59 When intending to perform analytical procedure
as a substantive procedure, whether the following
factors considered?
a) The extent to which analytical review can be
relied upon.
b) The nature of the entity and the extent to
which the information can be segregated.
c) Availability of the information
d) Reliability of the information
e) Relevance of the information
f) Source of the information
g) Comparability of the information
60 Whether the deviations have been properly
explained or investigated?
15 61 While employing the sampling technique for
evidential value whether the following factors
considered?
a) Specific audit objective
b) Population
c) Sample Size
d) Sampling risk
e) Stratification
62 Whether the basis of determination of tolerable
error level documented?
63 Whether the basis of determination of expected
error level documented?

AAS-page9
 64 Whether the sampling results evaluated in terms
of
a) Analysis of any errors detected in the sample
b) Projection of errors found in the sample to the
population
c) Reassessment of sampling risk
16 65 Whether the assumption of going concern
appropriate in the preparation of financial
statements?
66 Whether the financial, operative and other
indicators are considered in such a decision?
67 Where the assumption is not considered
appropriate, whether a satisfactory disclosure
68 made?
If not, whether the audit report expresses an
appropriate opinion?
17 69 Whether the quality control policy & procedures
as to acceptance, retention & quality of service to
clients adhered to?
70 Whether the quality control policy in respect of
individual audit adhered to?
71 Whether a proper documentation to show the
planning, direction, supervision and review for all
the individual audits exists?
18 72 Whether an identification of items in the financial
statements which are based on estimates made?
73 If so, whether a review of the same is made in the
following manner.
a) Evaluation of the estimates made by the
management
b) Has it been compared with the independent
estimates developed by the auditor?
c) Is the subsequent reviewe condected ?
74 In case of the difference between the estimates
made by the management and the auditor, does it
require any adjustment?
75 If so, is the adjustment made? If not, whether the
audit report adequately discloses the same?
19 76 Whether the subsequent events, which may
require the adjustment in the financial statements
identified? Materiality can be the guiding factor
here.
77 On the basis of above identification whether the
adjustment made? If not, whether the audit report
adequately discloses the same?
20 78 In case of a new client, whether an assessment
made about the present level of knowledge,
before acceptance and the possibilities of
enhancing the same in the course of the audit?
79 In continuing audits, whether the knowledge
frequently updated?
80 Whether the knowledge acquired is used to
evaluate the following
a) Assessing risks and identifying the problems
b) Planning and performing the audit
c) Assessment of audit evidence
21 81 Whether the operational and financial laws, which
have a material bearing on the financial
statements of the client identified?
82 On the basis of such identification, whether the
compliance of the same is tested?
83 While performing substantive procedures, whether
there are circumstances indicating the possibility
of non compliance with certain laws and
regulations?
84 If so, whether a discussion held with the
management to ascertain the possible compliance
or non compliance?
85 In case of confirmed non compliance, whether an
assessment made about its impact on the
financial statements?

AAS-page10
 86 In case where adequate evidence is not
obtainable in respect of compliance of law,
whether its impact on the financial statements
considered?
87 Whether the reporting responsibility properly
discharged in accordance with the requirements
of the relevant statute?
22 88 Whether the opening balances checked?
89 If the previous year’s financial statements are
audited, does it satisfy the evidential value?
90 Where the previous year’s financial statements
are not audited, whether the opening balances
have been verified in accordance with the
following methods
a) Current assets and Current Liabilities-By
checking the subsequent events.
b) Other Assets & Liabilities-Documentary and
other evidences
23 91 Whether a list of related parties obtained?
92 Whether the procedure for identification of related
parties and the transactions with them is
93 adequate?
Whether the disclosure of related parties and the
transactions with them is in accordance with the
requirements of AS 18
24 94 Whether the client relies on service organization
(SO)?
95 If so, whether an assessment made in respect of
material financial statement assertions affected
by the operations of SO?
96 If the operations of service organizations are
assessed as significant from the perspective of
financial statements, whether a review about the
internal controls & accounting systems of the SO
made?
97 Where the review about the SO is done by any
other auditor, whether a copy of his report
obtained and documented?
98 Whether the report of the other auditor is
evaluated for its evidential values?
25 99 Whether the comparatives (corresponding figures)
furnished as part of the current financial
statement disclosure, checked?
100 Whether the audit report for the prior period is
modified but the issue which caused the
modification is unresolved and results in a
modified report for the current year, whether it is
ensured that the current audit report regarding
corresponding figures are also modified?
101 If the issue which is not resolved but does not
require modification in the current report,
Whether is it ensured that the audit report
modified only for the corresponding figures?
102 Whether the matter which gave rise to the
issuance of a modified audit report in the earlier
year is resolved, has it been ensured that the
current year report does not draw a reference to
the same?
26 103 Whether the terms of audit engagement letter
issued to the client?

AAS-page11
 104 If your client is requesting to reduce the scope of
audit to provide a lower level of assurance than
initially appointed, whether the decision on the
same documented with reasons?
105 In case where the request is accepted for
reduction in scope, whether it is considered for its
appropriateness, reasonableness on the grounds
of:
a) Misunderstanding in the original terms of
engagement as to the nature of services provided
b) Change in circumstances
c) Restriction on the scope of engagement
106 In case where the reduction in scope is considered
as not appropriate and withdrawal from
engagement is contemplated is it ensured
whether a communication sent to appropriate
persons?
27 107 Whether the audit matters of governance interest
requiring communication to those who are
charged with governance, identified?
108 In the terms of engagement letter, whether the
relevant person to whom the communication to be
sent, identified?
109 Otherwise whether an agreement reached with
the client identifying such person?
28 110 Whether the audit report contains the following
basic elements?
1) Title
2) Addressee
3) Opening Paragraph
4) Scope Paragraph
5) Opinion Paragraph3
6) Date of the report
7) Place of signature
8) Auditor’s signature
111 Whether is it decided to issue unqualified report?
112 Whether is it decided to issue modified report?
113 In case of a modified opinion does it affect
auditor’s opinion? If not, whether the matter which
gave rise to modified report emphasized in the
paragraph before the opinion paragraph?
114 In case of a modified opinion, which affects the
auditor’s opinion is due to limitation on the scope
of the auditor’s work? If so whether a qualified
opinion or a disclaimer of opinion issued?

AAS-page12
 115 In case of modified opinion, which affects the
auditor’s opinion is due to disagreement with
management regarding the acceptability of the
accounting policies selected, the method of their
application or the adequacy of financial statement
disclosures? If so whether a qualified opinion or
adverse opinion issued?
29 116 Whether the entity operate in CIS environment?
A CIS environment exists when one or more
computer(s) of any type or size is (are) involved in
the processing of financial information, including
quantitative data, of significance to the audit,
whether those computers are operated by the
entity or by a third party.
117 Whether the audit approach covers the following?
(a) Understand the accounting and internal
control system of the client.
(b) Knowledge and Planning- Organizational
Policy, attitude/dependence.
(c) Assessment of Risk – Inherent risk, Control risk
& Detection Risk.
(d) Performance of test of control & substantive
procedures and consequent assessment of
detection risk.
(e) Evidence Collection.
(f) The extent to which the CIS environment is
used to record, compile and analyze accounting
information;
(g) The system of internal control in existence in
the entity with regard to:
(i) Flow of authorized, correct and complete data
to the processing center;
(ii) Processing, analysis and reporting tasks
undertaken in the installation; and
(h) The impact of computer-based accounting
system on the audit trail that could otherwise be
expected to exist in an entirely manual system
118 Is there a requirement for specialized skills?

119 If so, is it available in house?

120 Is it necessary to hire an expert?

121 Whether the audit working paper record the audit

plan, the nature, timing and extent of audit
procedures performed and the conclusions drawn
from the evidence obtained?
122 Whether the electronic evidences are properly
stored?

CHECKED BY

AAS-page13
e:

AAS-page14
AAS-page15
AAS-page16
AAS-page17
AAS-page18
AAS-page19
AAS-page20
AAS-page21
AAS-page22
NAME OF THE CLIENT : Director In Charge :
PERIOD OF AUDIT : Senior In Charge :
Audit team :

APPLICABILITY

Applicable to all companies except the following :

1. Banking company as defined in clause (C) of section 5 of the Banking Regulation Act,
1949 (10 of 1949)
2. An insurance company as defined in clause (21) of section 2 of the Act
3. Company licensed to operate under section 25 of the Act and
4. A private limited company with a paid up capital and reserves not more than 50 lacs and
has not accepted any public deposit and does not have loan outstanding of Rs. 25 lacs or
more from any bank or financial institution and does not have a turnover exceeding Rs. 5
crores (Comments: The conditions are cumulative)

COMMENCEMENT

Every report made by the auditor under section 227 of the Act, on the accounts of every
company examined by him to which this order applies for every financial year ending on any
day on or after 1st July 2003.

SL NO PARTICULARS
YES/NO/N.A REMARKS
Fixed Assets
1 Whether the Fixed Asset Records shows the following
details?
Description of the asset
Classification
Location
Quantity
Original cost
Year of purchase
Adjustment for revaluation
Date of revaluation
Rate of depreciation
Accumulated depreciation
Details of sale, discard demolition, or destruction

CARO-page23
 2 Whether physical verification conducted at reasonable
intervals by the management?
3 Whether any discrepancies were observed on such
verification? If so has it been properly dealt with in the
books of account? 
4 Whether a substantial part of the fixed assets have
been disposed off during the year? If so, whether it
affects the going concern? (Refer AAS 16)

Inventory
5 Whether physical verification of inventory has been
conducted, at reasonable intervals, by the
6 management?
Whether the procedures of physical verification of
inventory followed by the management is reasonable
and adequate in relation to the size of the company
and nature of its business? If not the inadequacies to
be reported?
7 Whether the company is maintaining proper records of
inventory?
8 Whether any material discrepancies were noticed on
such verification? If so has it been properly dealt with
in the books of accounts?

Loans granted/taken by the company

9 Whether Loans have been granted/taken from parties

listed in the register maintained under section 301 of
the Companies Act, 1956? If so, give the number of
parties and the amount involved in the transactions?

Prepare a list of names and the amount involved.

10 Whether the rate of interest and other terms and
conditions for loans granted/taken are prima facie
prejudicial to the interest of the company?
11 Whether the payment of principal and interest are
regular? 
12 Whether reasonable steps have been taken by the
company for recovery/payment of the principal and
interest where the overdue amount is more than Rs. 1
lac?

Internal control over purchase of inventory and fixed

assets and for sale of goods
13 Whether the internal control procedure is
commensurate with the size and nature of the
company and its business?

CARO-page24
14 Whether there is a continuing failure to correct major
weakness in internal control?
An auditor may be guided by the internal audit report
or management control assessment report to identify
the weakness, the adequacy of steps taken by the
management to correct the same and to decide about
the major weakness and its continuity.

Transactions with parties listed under section 301 of

the Companies Act, 1956 (Namely Director interested
contracts)

15 Whether a register is maintained under section 301 of

the Companies Act, 1956 and updated periodically?
16 Whether each of the transactions are made at prices
which are made reasonable with regard to prevailing
market prices at the relevant time?
(This information is required only in case of
transactions exceeding a value of Rs. 5 Lacs in respect
of any party in any one financial year)

Deposits from the public

17 Whether the company has accepted any deposits from

the public?
18 Whether the company has complied with the
provisions of Sections 58A & 58 AA of the Companies
Act 1956/directions of the RBI and the rules made
there under? If not nature of contravention to be
reported.
19 Whether the company has complied the requirement
of the order passed by the Company Law Board,
wherever applicable?

Internal audit system

20 Whether the company has an internal audit system

commensurate with its size and nature of business?
This is applicable to a company which is either listed
or having a paid up capital and reserves exceeding Rs.
50 lacs as the commencement of the financial year
concerned or having an average annual turnover
exceeding Rs. 5 crore for a period of 3 consecutive
financial years immediately preceding the financial
year concerned.

Cost records
21 Whether the company is required to maintain cost
records under Section 209(1) (d)?
22 If so whether such accounts and records are made and
maintained?

CARO-page25
 Statutory Dues
23 Whether the company is regular in depositing
undisputed statutory dues with appropriate authorities
in respect of the following?
PF
Investor Education and protection fund
ESI
Income Tax
Sales Tax
Wealth Tax
Customs Duty
Excise Duty
Cess and
Any other statutory dues
If not, the extent of arrears of outstanding statutory
dues as at the last day of the financial year concerned
for a period of more than 6 months from the date they
became payable shall be reported.

Disputed taxes and duties not paid

24 In case of above mentioned statutory dues are not

deposited due to disputes, then the amounts involved
and the forum where the dispute is pending should be
reported.
It is clarified a mere representation to the department
shall not constitute a dispute. 

Sick Company

25 Whether the company has been registered for a period

not less than 5 years?
26 Whether its accumulated losses at the end of the
financial year are not less than 50% of its net worth?
27 Whether it has incurred cash losses in such financial
year as well as in the immediately preceding financial
28 year?
If the above conditions are satisfied the same has to
be reported

Default in financial dues

29 Whether the company has defaulted in repayment of

dues to financial institutions/banks/debenture holders?
If so, report on the period and the amount of default.

CARO-page26
 Documentation in respect of loans granted

30 Whether adequate documents and records are

maintained in cases, where the company has granted
loans and advances on the basis of security by way of
pledge of shares, debentures and other securities? If
not the deficiencies to be reported.

Applicable to chit funds

31 Whether the provisions of any special statutes

applicable to chit fund have been complied with?

Applicable to Nidhi, Mutual Benefit Funds, Societies

32 Whether the net owned funds to deposit liability ratio

is more than 1:20 as on the date of balance sheet?
33 Whether the company has complied with prudential
norms on income recognition and provisioning against
substandard/doubtful/loss assets?
34 Whether the company has adequate procedures for
appraisal of credit proposals/requests, assessment of
credit needs and repayment capacity of the
borrowers?
35 Whether the repayment schedule of various loans
granted by the Nidhi is based on repayment capacity
of the borrower and would be conducive of the
recovery of the loan amount?

Applicable to companies dealing/trading of shares

and other instruments
36 Whether proper records have been maintained of the
transactions and contracts and whether timely entries
have been made therein?
37 Whether the shares/securities/debentures/other
securities are held in the name of the company, if not
have you verified whether the provisions of Section 49
of the Companies Act has been complied with?

Guarantees for Loans

38 Whether the company has given any guarantee for

loans taken by others from bank or financial
institutions, the terms and conditions whereof are
prejudicial to the interest of the company?

End use of funds

39 Whether terms loans have been applied for the

purpose for which the loans were obtained?
Obtain the project report and check the application of
funds for which the loan is obtained.
40 Whether the funds raised for short-term purpose have
been used for long-term investments and vice versa?
If yes, the nature and the amount to be indicated.
For example, acquiring fixed assets by utilizing
substantial/entire portion of borrowed working capital

CARO-page27
 41 Whether the management has disclosed on the end
use of money raised by public issues and whether the
same has been verified?

Preferential Allotment

42 Whether the company has made any preferential

allotment of shares to the parties and companies
covered under the register maintained u/s 301 of the
Companies Act? If so, whether the price at which
shares have been issued is prejudicial to the interest
of the company.
Debenture Issued

43 Whether securities have been created in respect of

debentures issued?

Frauds
44 Whether any fraud on or by the company has been
noticed or reported during the year? If so, the nature
and the amount involved to be indicated.
(Refer AAS 4)

AAS 16 – recommends that at every audit the auditor had to consider the appropriateness of
the assumption of the going concern concept. The factors that are to be considered are
Financial and Non Financial.

AS 4  –  recommends auditor’s consideration of frauds and errors in a financial statements.

Frauds are classified into fraudulent financial statements and misappropriation of assets.
Again frauds are classified into management fraud and employee fraud. The annexure to
AAS prescribes the possible instances of fraud risk factors and the auditor’s response to the
same.

CHECKED BY

CARO-page28
NAME OF THE CLIENT : Director In Charge :
PERIOD OF AUDIT : Senior In Charge :
Audit team :

MAOCARO 1988

SL NO PARTICULARS YES/NO/N.A REMARKS

Fixed Assets
1 Whether the Fixed Asset Records shows the following
details:
Description of the asset
Classification
Location
Quantity
Original cost
Year of purchase
Adjustment for revaluation
Date of revaluation
Rate of depreciation
Accumulated depreciation
Details of sale, discard demolition, or destruction
2 Whether physical verification conducted at reasonable
intervals?
3 Whether any discrepancies were observed on such
verification? If so has it been properly dealt with in the
books of accounts?

Revaluation of fixed assets

4 Whether the assets are revalued during the year? If so

basis of revaluation to be reported.
Obtain the basis of revaluation, valuer name and
qualification, class of assets

Stock of Finished Goods, Stores, Spare Parts and Raw

Materials
5 Whether physical verification conducted at reasonable
intervals?
6 Whether the procedures of Physical verification is
reasonable and adequate in relation to the size of the
company and nature of its business?
7 Whether any discrepancies were observed on such
verification? If so has it been properly dealt with in the
books of accounts?

MAOCARO-page29
 Loans taken by the company

8 Whether loans have been taken from parties listed in the

register maintained under section 301 of the Companies
Act 1956 or companies defined under section 370(1B) of
the Companies Act 1956 ?
9 If so whether the rate of interest and other terms and
conditions are prima facie prejudicial to the interest of the
company?

Loans given by the company

10 Whether the company has granted any loans to persons

listed in the register maintained under section 301 of the
Companies Act 1956 or to companies defined under
section 370(1B) of the Companies Act, 1956?
11 If so Check whether any terms is prima facie prejudicial to
the interest of the company?

Loans and advances in the nature of loans given by the

company
12 Whether the company has given any advance in the
nature of loans?
13 Whether the parties are repaying the principle and the
interest as stipulated?
If not has the company taken reasonable steps for the
recovery?
Internal control over purchase of stores, raw materials,
Components, Plant & Machinery, Equipments and other
assets and Sale of goods

14 Whether the internal control procedure is in

commensurate with the size and nature of the company
and its business?
Purchase of materials and goods and sale of materials,
goods and services from/to certain parties

15 Whether the list is obtained from the management

showing the aggregate of the transaction of purchase of
goods from and sale of materials, goods and services to
each party listed in the register under section 301 of the
Companies Act 1956?
16 Whether the aggregate of purchase/sale transactions
exceeds Rs.50000 in respect of each party?
17 Whether the transactions are made on the prevailing
market prices?
If not reasons there for should be reported

Damaged or unserviceable stores, raw materials or

finished goods
18 Whether there exists a procedure to identify the damaged
or unserviceable stores, raw materials or finished goods?
19 Whether Provision for loss has been made correctly?

Deposits from the public

20 Whether the company has accepted any deposits from the

public?

MAOCARO-page30
21 Whether the company has complied with the provisions of
sec 58A of the Companies Act 1956 or rules made there
under? If not nature of contravention to be reported

Sale and disposal of realisable by- products and scrap

22 Whether the company maintains reasonable records for

generation, sale and disposable and internal consumption
of by products and scrap? If not deviations to be reported.

Internal audit system

23 Whether the companies paid up capital exceeds Rs.50 lacs

or 3 years average annual turnover exceeds Rs.2 crores?

24 If so Whether the company has an internal audit system

commensurate with its size and nature of business?

Cost records

25 (a) Whether the company is required to maintain cost

records under Section 209(1) (d)?
(b) If so Whether such accounts and records are being
maintained?
Provident fund and ESI dues

26 Whether the company is regular in depositing the P.F and

E.S.I dues with the appropriate authority? If not extent of
arrears shall be reported.

Undisputed taxes and duties not paid

27 Whether the company has any undisputed liability amount

outstanding, as at the last day of the financial year
concerned, for more than six months in respect of
Income tax,
Wealth tax
Sales tax
Excise duty
Customs duty

MAOCARO-page31
 Personal Expenses

28 Whether personal expenditure has been charged to

revenue? If so it is to be reported.

Sick Industry A company would be treated as a sick

industrial company if the following conditions are satisfied

It must be an industrial Company

It must have been registered for a period of not less than
7 years
Its accumulated losses should be equal to or exceed its
net worth at the end of the financial year
It should have suffered cash losses in the financial year
and in the financial year immediately preceding such
financial year
If the company has become sick industrial company then
check whether the Board of Directors has made a
reference to BIFR within 60 days from the date of
finalization of duly audited accounts for the financial
year.
29 Whether the company falls within the meaning of section
3(1)(1) of Sick Industrial Companies (Special Provision)
Act,1985?If so whether a reference has been made to
BIFR?

SERVICE COMPANIES

30 Whether company has reasonable system with respect to

recording of receipts, issues and consumption of material
and stores and allocation of materials consumed to the
relative job commensurate with its size and nature of its
business?
31 Whether the company has a reasonable system of
allocating man-hours utilized to relative jobs,
commensurate with its size and nature of its business?
32 Whether the company has a reasonable system of
authorization with regard to issue of stores and allocation
of stores and labor to jobs?

TRADING COMPANY
33 Whether there is a system for properly identifying the
damaged goods and whether adequate provision for the
loss is made?

FINANCE, INVESTMENT, CHITFUND, NIDHI OR MUTUAL

BENEFIT COMPANY.

34 Whether the company is dealing or trading in Securities? If

so whether proper records have been maintained?

35 Whether the securities are held in the name of the

company, if not have you verified whether the provisions
of Sec 49 of the companies act has been complied with?

MAOCARO-page32
 36 Whether adequate documents and records are maintained
for loans and advances granted on the basis of security by
way of pledge of shares, debentures and other securities?

The following should be checked to ensure that the

company has custody of proper documents of the security
pledged.
• (a) Full name and address of the borrower
• (b) Amount of loan or advance
• (c) Terms of repayment, rate of interest
• (d) Type of security offered and its details
• (e) Recovery of principal and interest
• (f) Proof regarding borrowing powers of the
borrower
• (g) Market value of the security pledged
37 Whether the provisions of any special statute is applicable
to the company? If so has it been complied with?

Chit Fund Acts

Mutual Benefit Societies & Nidhis

CHECKED BY

THE FOLLOWING SHOULD BE INCLUDED IN THE PRELUDE

Ensure that all securities in a "body corporate" are covered. Section 372 deals with only shares in a
company. Section 372A however deals with "body corporate". Check section 2 of The Companies Act,
1956, for meaning of the term.

(Generally it was considered that "securities" meant quoted investments. However, going by the
definitions of "securities" and "listed company" in section 2 of the Companies Act, 1956, this view will
not be valid. Therefore consider that all instruments whether quoted or not are covered.)

MAOCARO-page33
NAME OF THE CLIENT : Director In Charge :
PERIOD OF AUDIT : Senior In Charge :
Audit team :

COMPARATIVE STATEMENT OF MAOCARO AND CARO

(Changes have been typed in bold letters)

SL No MAOCARO i.e. applicable prior to 1.7.2003 New CARO i.e. applicable from 1.7.2003

1 Applicable for Reports on accounts where financial year  Applicable for Reports on accounts where financial year ends on 
ends before 1.7.2003 or after 1.7.2003
2 Whether the company is maintaining proper records  Whether the company is maintaining proper records showing full 
showing full particulars, including quantitative details and  particulars, including quantitative details and situation of fixed 
situation of fixed assets; whether these fixed assets have  assets; whether these fixed assets have been physically verified 
been physically verified by the management at reasonable  by the management at reasonable intervals; whether any 
intervals; whether any material discrepancies were noticed  material discrepancies were noticed on such verification and if so, 
on such verification and if so, whether the same have been  whether the same have been properly dealt with in the books of 
properly dealt with in the books of account.  account.

3 Whether any of the fixed assets have been revalued during  Deleted
the year; if so, the basis of revaluation should be indicated.

4 If a substantial part of fixed assets have been disposed off

during the year, whether it has affected the going concern.

5 Whether physical verification has been conducted by the  Whether physical verification of inventory has been conducted by 
management at reasonable intervals in respect of finished  the management at reasonable intervals 
goods, stores, spare parts and raw materials
6 Are the physical verification of stocks followed by the  Are the physical verification of stocks followed by the 
management reasonable and adequate in relation to the  management reasonable and adequate in relation to the size of 
size of the company and the nature of its business? If not,  the company and the nature of its business? If not, the 
the inadequacies in such procedures should be reported. inadequacies in such procedures should be reported. 

7 Whether any material discrepancies have been noticed on  Whether the company is maintaining proper records of

physical verification of stocks as compared to book records, inventory and whether any material discrepancies have been 
and if so, whether the same have been properly dealt  noticed on physical verification of stocks and if so, whether the 
within the books of account ?  same have been properly dealt within the books of account ?

8 Whether the auditor, on the basis of his examination of  Deleted
stocks, is satisfied that such valuation is fair and proper in 
accordance with the normally accepted accounting 
principles? Is the basis of valuation of stocks same as in 
the preceeding year? If there is any deviation in the basis 
of valuation, the effect of such deviation, if material, should 
be reported.
9 If the company has taken any loans, secured or unsecured, If the company has taken any loans, secured or unsecured, from 
from companies, firms or other parties listed in the register companies, firms or other parties listed in the register maintained 
maintained under section 301 of the Companies Act, 1956,  under section 301 of the Companies Act, 1956. If so, give the
and /or from the companies under the same number of parties and the amount involved in the
management as defined under sub-section (1B) of transactions. Whether the rate of interest and other terms and 
section 370 of the Companies Act, 1956, whether the  conditions of such loans are prima facie prejudicial to the interest 
rate of interest and other terms and conditions of such  of the company. Whether the payment of the principal
loans are prima facie prejudicial to the interest of the  amount and interest are regular.
company.
 maintained under section 301 of the Companies Act, 1956, 
and /or from the companies under the same
management as defined under sub-section (1B) of
section 370 of the Companies Act, 1956, whether the 
rate of interest and other terms and conditions of such 
loans are prima facie prejudicial to the interest of the 
company.

If the overdue amount is more than Rs. 1,00,000, whether

reasonable steps have been taken by the company for
payment of principal and interest. 

10 If the company has granted any loans, secured or  If the company has granted any loans, secured or unsecured, to 
unsecured, to companies, firms or other parties listed in  companies, firms or other parties listed in the register maintained 
the register maintained under section 301 of the  under section 301 of the Companies Act, 1956. If so, give the
Companies Act 1956, and /or to the companies under number of parties and the amount involved in the
the same management as defined under sub-section transactions. Whether the rate of interest and other terms and 
(1B) of section 370 of the Companies Act, 1956,  conditions of such loans are prima facie prejudicial to the interest 
whether the rate of interest and other terms and conditions of the company. Whether the payment of the principal
of such loans are prima facie prejudicial to the interest of  amount and interest are regular.
the company.

If the overdue amount is more than Rs. 1,00,000, whether

reasonable steps have been taken by the company for
recovery of principal and interest.

NOTE: Loans etc., to companies under the same management covered

under section 370 of the Act is not applicable with effect from
31.10.1998 after the commencement of Companies (Amendment) Act,
1999. Hence the reporting on the same has been removed in the New
CARO.

11 Whether the parties to whom the loans or advances in the  Deleted
nature of loans have been given by the company are 
repaying the principal amounts as stipulated and are also 
regular in payment of the interest and if not whether 
reasonable steps have been taken by the company for the 
recovery of principal and interest. 

12 Is there an adequate internal control procedure  Is there an adequate internal control procedure commens-urate 
commensurate with the size of the company and the  with the size of the company and the nature of its business, for 
nature of its business, for the purchase of stores, raw the purchase of inventory and fixed assets and for the sale of 
materials, including components, plant and goods. Whether there is a continuing failure to correct
machinery, equipment and other assets, and for the  major weakness in the internal control.
sale of goods. 
13 Whether the transaction of purchase of goods and Whether the transaction that need to be entered in the register 
materials and sale of goods, materials and services,  maintained under section 301 of the Companies Act, 1956, have 
made in pursuance of contracts or arrangements entered in been so entered and whether each of the transaction have been 
the register maintained under section 301 of the  made at prices which are reasonable having regard to prevailing 
Companies Act, 1956, as aggregating during the year market prices at the relevant time.
to Rs. 50,000/- or more in respect of each party, 
have been made at prices which are reasonable having 
regard to prevailing market prices for such goods,
materials, or services or the prices at which
transactions for similar goods or services have been
made with other parties.

(This information is required only in case of transactions

exceeding the value of five lakh rupees in respect of any
party and in any one financial year).

14 Whether any unserviceable or damaged stores, raw  Deleted
materials, or finished goods, are determined and whether 
provisions for the loss, if any, have been made in the 
accounts.
15 In case the company has accepted deposits from the  In case the company has accepted deposits from the public, 
public, whether the directives issued by the RBI and the  whether the directives issued by the RBI and the provisions of 
provisions of section 58A of the Companies Act, 1956, and  section 58A and 58AA of the Companies Act, 1956, and the rules 
the rules framed thereunder, where applicable have been  framed thereunder, where applicable have been complied with. If 
complied with. If not, the nature of contravention should  not, the nature of contravention should be stated. If an order
be stated. has been passed by the company law board whether the
same has been complied with or not?
16 Is the company maintaining reasonable records for the sale  Deleted
and disposal of realisable by-products and scraps, where 
applicable. 
17 In the case of companies having a paid up capital In the case of listed companies having a paid up capital and
exceeding Rs. 25 lakhs as at the commencement of the  reserves exceeding Rs. 50 lakhs as at the commencement of 
financial year concerned, or having an average annual  the financial year concerned, or having an average annual 
turnover exceeding Rs. 2 Crores for a period of three  turnover exceeding Rs. 5 Crores for a period of three 
consecutive financial years immediately preceeding the  consecutive financial years immediately preceeding the financial 
financial year concerned, whether the company has an  year concerned, whether the company has an internal audit 
internal audit system, commensurate with its size and  system, commensurate with its size and nature of its business.
nature of its business.
18 Where maintenance of cost records has been prescribed by  Where maintenance of cost records has been prescribed by the 
the Central Government under section 209(1)(d) of the  Central Government under section 209(1)(d) of the Companies 
Companies Act, 1956, whether such accounts and records  Act, 1956, whether such accounts and records have been made 
have been made and maintained. and maintained.
19 Is the company regular in depositing Provident Fund and  Is the company regular in depositing Provident Fund and 
Employees’ State Insurance dues with the appropriate  Employees’ State Insurance dues with the appropriate authority 
authority and if not, the extent of arrears of Provident Fund and if not, the extent of arrears of Provident Fund and 
and Employees’ State Insurance dues shall be indicated by  Employees’ State Insurance dues shall be indicated by the 
the auditor.  auditor.
20 Whether any undisputed amounts payable in respect of  Whether any undisputed amounts payable in respect of income 
income tax, wealth tax, sales tax, customs duty and excise  tax, wealth tax, sales tax, customs duty and excise duty were 
duty were outstanding, as at the last day of the financial  outstanding, as at the last day of the financial year concerned, for 
year concerned, for a period of more than six months from  a period of more than six months from the date they became 
the date they became payable; if so, the amounts of such  payable; if so, the amounts of such outstanding dues should be 
outstanding dues should be reported.  reported. In case of dues of sales tax/income tax custom
tax/excise duty/cess have not been deposited on account
of any dispute, then the amounts involved and the forum
where dispute is pending may please be mentioned.

21 Whether personal expenses have been charged to revenue  Deleted
account; if so, details thereof should be reported. 

22 Whether the company is a sick industrial company within  Deleted
the meaning of clause (o) of sub-section (1) of section 3 of 
the Sick Industrial Companies (Special Provisions) Act, 
1985; if so, whether a reference has been made to the 
Board for Industrial and Financial Reconstruction under 
section 15 of that Act. 
23 Whether the company has a reasonable system of  Deleted
recording receipts, issues and consumption of material and 
stores and allocating materials consumed to the relative 
jobs, commensurate with its size and nature of its 
business.
24 Whether the company has a reasonable system of  Deleted
allocating man-hours utilized to the relative jobs, 
commensurate with its size and nature of its business. 
25 Whether there is a reasonable system of authorization of  Deleted
proper levels, and an adequate system of internal control 
commensurate with the size of the company and nature of 
its business, on issue of stores and allocation of stores and 
labour to jobs. 
26 Have the damaged goods been determined and if the value  Deleted
of such goods is significant, has provision made for the 
loss.
27 Whether in case of a company which has been registered
for a period not less than five years, its accumulated
losses at the end of the financial year are not less than
fifty percent of its networth and whether it has incurred
cash losses in such financial year and in the financial year
immediately preceding such financial year also

28 Whether the company has defaulted in the repayment of

dues to a financial institution or bank or debenture
holders? If yes, the period and amount of default to be
reported.

29 Whether adequate documents and records are maintained  Whether adequate documents and records are maintained in a 
in a case where the company has granted loans and  case where the company has granted loans and advances on the 
advances on the basis of security by way of pledge of  basis of security by way of pledge of shares debentures and other 
shares debentures and other securities. securities. If not, the deficiencies to be pointed out.
 30 Whether the provisions of any special statute applicable to  Whether the provisions of any special statute applicable to
chit fund, nidhi or mutual benefit society have been duly  chit fund, nidhi or mutual benefit society have been duly
complied with. complied with.

In respect of nidhi/mutual benefit fund/societies;

a) Whether the net owned funds to deposit liability ratio is more than
1:20 as on the date of balance sheet;
b) Whether the company has complied with the prudential norms on
income recognition and provisioning against sub-
standard/default/loss asset;

c) Whether the company has adequate procedures for appraisal of

credit proposals/requests, assessment of credit needs and
repayment capacity of the borrowers;

d) Whether the repayment schedule of various loans granted by the

nidhi is based on the repayment capacity of the borrower and would
be conducive to recovery of the loan amount.

31 If the company is dealing or trading in shares, securities,  If the company is dealing or trading in shares, securities, 
debentures and other investments, whether proper records  debentures and other investments, whether proper records have 
have been maintained of the transactions and contracts  been maintained of the transactions and contracts and whether 
and whether timely entries have been made therein; also  timely entries have been made therein; also whether the shares, 
whether the shares, securities, debentures and other  securities, debentures and other investments, have been held by 
investments, have been held by the company in its own  the company in its own name except to the extent of the 
name except to the extent of the exemption, if any,  exemption, if any, granted under section 49 of the Companies 
granted under section 49 of the Companies Act, 1956. Act, 1956.

32 Whether the company has given any guarantee for loans

taken by others from bank or financial institutions, the
terms and conditions whereof are prejudicial to the
interest of the company.

33 Whether the term loans were applied for the purpose for
which the loans were obtained.
34 Whether the funds raised on short-term basis have been
used for long term investment and vice versa; if yes, the
nature and amount is to be indicated.

35 Whether the company has made any preferential allotment

of shares to parties and companies covered in the register
maintained under section 301 of the Act and if so whether
the price at which shares have been issued is prejudicial to
the interest of the company.

36 Whether securities have been created in respect of

debentures issued?
37 Whether the management has disclosed on the end use of
money raised by public issue and the same has been
verified.

38 Whether any fraud on or by the company has been noticed

or reported during the year; If yes, the nature and the
amount involved is to be indicated.

APPLICABILITY

MAOCARO i.e. applicable prior to 1.7.2003 New CARO i.e. applicable prior to 1.7.2003 from 1.7.2003

The order applies to every company which is engaged or It shall apply to every company including a foreign company

proposes to engage in one or more of the following as defined in section 591 of the Act, except the following:
activities, namely—
a) Manufacturing, mining, or processing; (i)  a banking company as defined in clause (c) of Section 5 of 
the Banking Regulation Act, 1949;

b) Supplying and rendering services; (ii) an insurance company as defined in Section 2(21) of the 

Companies Act, 1956; 

c) Trading; and (iii) a company licensed to operate under Section 25 of the 

Companies Act, 1956; and
d) The business of financing, investment, chit fund,
nidhi or mutual benefit societies.
(iv) a private limited company with a paid up capital and
reserves not more than fifty lakh rupees and has not
accepted any public deposit and does not have loan
outstanding ten lakh rupees or more from any bank or
financial institution and does not have a turnover
exceeding five crores.

The order specially provides that it shall not apply to:

(i) A banking company as defined in clause (c) of Section 5 of 
the Banking Regulation Act, 1949 
(ii) An insurance company as defined in Section 2(21) of the 
Companies Act, 1956; and
(iii) A company licensed to operate under Section 25 of the 
Companies Act, 1956.