The latest step by Corporate Affairs Ministry also comes against the backdrop of rising bad loans in the banking system and businessman Vijay Mallya coming under the scanner of multiple agencies for loan defaults.
Putting in place stricter reporting requirements for auditors, the ministry has notified the Companies (Auditor's Report) Order 2016.
As per the CARO, dated March 29, auditors would have to touch upon a slew of factors in their reports, such as whether a company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.
In case of any default, the auditor would have to mention the amount and the relevant period.
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Besides, lender-wise details have to be provided in the auditor's report.
The report should also mention whether a firm is regular in depositing "undisputed statutory dues" such as provident fund, employee's state insurance and various taxes.
Among others, an auditor should report whether monies raised by way of initial public offering, debt instruments and term loans were "applied for the purposes for which those were raised".
The ministry has come out with the CARO after extensive consultations.
Last September, the ministry had set up a committee to examine and recommend matters for inclusion in the statement to be attached with auditor's report under the Companies Act, 2013 for the financial year 2015-16 onwards.
After taking into consideration, the suggestions made by the panel, the ministry came out with the draft CARO in February which was also kept open for public comments.