If caro applicable then internal audit is required or not

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This query is : Resolved

CA. Naveen Jain (Querist)

12 October 2011 Sir, One of my client Private company has secured loan outstanding of Rs. 67 Lacs as on 31.03.2011 so CARO 2003 is applicable but its capital is only 5 Lacs and also turnover is only 70 Lacs.

Then Pls guide whether Internal Audit is applicable or not and if yes what will be the other compliance company has to follow.

CA Pabbaraju Laxmi Narasimha

CA Pabbaraju Laxmi Narasimha (Expert)

27 October 2011 If the private company wants to claim exemption from the CARO, then the conditions(3) for the exemption shall be satisfied cumilatively.
Even if one condition is not satisfied, the private company ceases to claim the exemption.
Since the Private company said by you has exceed the limit 25 lacks of the secured loan. i.e., 67>25 laks

The company cannot claim the exemption from caro.

Coming to the internal audit,
According to clause(vii) of the order,
The Company which has the PAID up capital and FREE reserves of more than 50 laks OR

AVERAGe annual turnover the preceeding 3 consecutive financial years exceed rs.5 crs

Then clause (7) is applicable

In the given case the Turnover of the previous year is not enough but, it needs the Free reserves and the Average turnover of the preceeding 3 years

Applicability of Clause 7 cannot be determined with the given data.

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