Page 218 - CA Final PARAM Digital Book.
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of director which is affirmative answer to the first part of the Clause (xv) of Paragraph 3 of
CARO, 2020, thus, reporting is required for the same.
➢ Draft report is given below.
• According to the information and explanations given to us, the Company has entered into
non-cash transactions with Mr. Rahul, son of one of the directors during the year, for the
acquisition of assets, which in our opinion is covered under the provisions of Section 192
of the Companies Act, 2013.
QNO Cl 16--Theory of Cl 16 Old Course – (M17R, N17R, N17M, M18R, M19M, N20E, N21M, SM21)
412.000 TITANIUM CNO—CARO.230
In the case of companies carrying on the business of a non-banking financial institution, the auditor
needs to report under CARO, 2020 whether the registration has been obtained under section 45-IA of the
Reserve Bank of India Act, 1934, if required.
You are required to state in brief the audit procedure to be followed while reporting under above
mentioned circumstances.
OR
The RBI restrict companies from carrying on the business of a non-banking financial institution without
obtaining the certificate of registration, therefore, obtaining registration under section 45-IA of the
Reserve Bank of India Act, 1934 is necessary Additionally, new clause has been inserted under CARO,
2020 for commenting whether the registration has been obtained, if required.
Being an expert in latest provisions under CARO, 2020, you are required to state in brief the audit
procedure and reporting to be followed under above mentioned circumstances
Answer Part I -- Relevant Standards & Laws
▪ Clause (xvi) of Para 3 of CARO, 2020
Part II -- Requirements of Relevant Standards & Laws
➢ Reporting under CARO, 2020 for Registration under RBI Act, 1934:
As per Clause(xvi) of paragraph 3 of the CARO, 2020, the auditor is required to report whether the
company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. If
so, whether the registration has been obtained.
➢ Audit Procedures and Reporting-
• The auditor should examine the transactions of the company with relation to the activities
covered under the RBI Act and directions related to the Non-Banking Financial Companies.
• The financial statements should be examined to ascertain whether company’s financial
assets constitute more than 50 per cent of the total assets and income from financial
assets constitute more than 50 per cent of the gross income.
• Whether the company has net owned funds as required for the registration as NBFC.
• Whether the company has obtained the registration as NBFC, if not, the reasons should be
sought from the management and documented.
• The auditor should report incorporating the following: -
• Whether the registration is required under section 45-IA of the RBI Act, 1934.
• If so, whether it has obtained the registration.
• If the registration not obtained, reasons thereof
QNO Cl 16--CIC (Case Study) Old Course – (N22E)
412.500 TITANIUM CNO— CARO.230
What is a Core Investment Company (CIC) under the Reserve Bank of India regulations? What are the
specific reporting requirements to be considered by an auditor in respect of CIC under CARO 2020?
Core Investment Companies: As per RBI Master Direction – Core Investment Companies (Reserve Bank)
Directions, 2016, (Reference may be made to aforesaid Master Direction), these directions shall apply to
every Core Investment Company (CIC), that is to say, a non-banking financial company carrying on the
business of acquisition of shares and securities and which satisfies the following conditions as on the date
of the last audited balance sheet:-
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