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Applicability of IFC, cash flow and CARO

Divya Khakhariya (31 Points)

29 December 2018

What is the limit for application of CARO, Internal Financial Control and Cash flow.?

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Hitesh (Student) (3549 Points)
Replied 29 December 2018

As per provisions of Section 143(3)(i) of companies Act, The Auditor Report shall state whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.

MCA vide its notification dated 13th June 2017 (G.S.R. 583(E)) amended the notification of the Government of India, In the ministry of corporate of affair, vide no G.S.R. 464(E) dated 05th June 2015 providing exemption from Internal Financial Controls to following private companies:

Which is one person Company (OPC) or a Small Company; or

Which has turnover less than Rs. 50 Crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less then Rs. 25 Crore.

CARO: Applicable to all companies including foreign companies except:

. Banking Companies as defined under section 5(c) of the Banking Regulation Act, 1949

2. Insurance Company as defined under the Insurance Act, 1938

3. Companies Incorporated with Charitable objects etc, i.e. companies licensed to operate under section 8 of Act 2013

4. One company as defined under section 2(62) of the 2013 Act

5. Small Company as defined under 2(85) of the 2013 Act

6. Private company not being a holding or a subsidiary company of a public company:

with a paid a paid up capital and reserves and surplus not more than INR 1crore

does not have total borrowings exceeding INR 1crore from any bank or any financial institution at any point of time during the FY and

does not have total revenue as defined in schedule III, to the 2013 Act (including revenue from discontinuing operations) exceeding INR 10 crore during the financial year as per the financial statements.

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Indira Priyadarsini Kota (Practice) (590 Points)
Replied 19 January 2021

CARO 2020 applies to all the companies including foreign companies except the following companies One person company Small companies (Companies with paid up capital less than/equal to Rs 50 lakh and with a last reported turnover which is less than/equal to Rs 2 crore) Banking companies Companies registered for charitable purposes Insurance companies The following private companies are also exempt from the requirements of CARO, 2020: – Whose gross receipts or revenue (including revenue from discontinuing operations) is less than or equal to Rs 10 crore in the financial year – Whose paid up share capital plus reserves is less than or equal to Rs 1 crore as on the balance sheet date (i.e. usually at the end of the FY) – Not a holding or subsidiary of a Public company – Whose borrowings is less than or equal to Rs 1 crore at any time during the FY Internal Financial controls are applicable to all the companies and S143(3) makes it mandatory for the auditor to report on the adequacy and operating effectiveness of IFC as per rule 8(5) of Companies Accounts Rules, the details regarding the adequacy of IFC are to be included in the Board's report.