Effective Date of the Order

The Companies (Auditor’s Report) Order, 2003 (CARO, 2003) was issued in June 2003 and came into force on the 1st day of July 2003. The said Order, from the date it came into force, superceded the MAOCARO, 1988. Further, the Order requires that every report made by the auditor under section 227
of the Act on the accounts of every company examined by him to which the Order applies, for every financial year ending on any day on or after the commencement of this Order, shall contain matters specified in paragraphs 4 and 5 of the said Order. This implies that the auditor’s report, on accounts in
respect of financial year ending on or before 30th June 2003, even if issued on or after 1st July 2003 is not required to contain report on matters specified in the CARO, 2003. However, the auditor’s report, in such cases, should include a statement on matters specified in the erstwhile MAOCARO, 1988.
The Ministry of Company Affairs of the Government of India, subsequent to issuance of the Order, has issued a Circular numbered, GC No. 32/2003 as regards the date of compliance with the Order. According to the Circular, the companies to whom the Order is applicable should make serious efforts to
comply with the new CARO, 2003 from the effective date. In the cases of non-compliance for accounts pertaining to financial year which closes on 31st December 2003 or earlier, Government would take a lenient view provided the accounts at least carry MAOCARO Report, if required. The circular, however, provides that accounts in respect of financial years ending on 1st January 2004 or thereafter, will have to strictly follow the CARO, 2003. The Circular is reproduced in Appendix VII. The Government’s notification notifying the Companies (Auditor’s Report) (Amendment) Order, 2004
clarifies that the Amendment Order would be effective from the date of its publication in the Official Gazette; i.e., November 25, 2004. Therefore, all audit reports issued on or after November 25, 2004 are required to comply with amendments contained herein read with the Companies (Auditor’s Report)
Order, 2003 of June 12, 2003. The requirements of the Order apply in relation to full financial year irrespective of the fact that a part of such year may fall prior to the date of coming into force of the Order. Under some of the requirements of the Order, the auditor has to comment on the records maintained by the company, systems and procedures in vogue. It is possible that during the period prior to 1st July 2003, many of the companies might not have maintained such records or established such systems and procedures as are envisaged in the Order primarily because such requirements were not part of erstwhile MAOCARO, 1988 and were thus, not required to be commented upon by the auditor. It is advisable that in such situations, the auditor should also clearly mention the fact of non-maintenance of such records or non-existence of systems and procedures while making comments under the relevant clauses.

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