The Companies (Auditor's Report) Order, 2003 (CARO) has been notified by the Central Government (vide notification No. G.S.R. 480(E), dated 12-6-2003 in place of the Manufacturing and Other Companies (Auditor's Report) Order, 1988 (MAOCARO). The new CARO, 2003 shall be applicable for all auditors' report of companies, w.e.f. 01.07.2003 (viz. for audit reports for the year ended 31.3.2004 onwards).

The Order has been made after consultation with the Institute of Chartered Accountants of India [constituted under the Chartered Accountants Act, 1949 (38 of 1949), in regard to class of companies to which this Order applies and other ancillary matters.

It shall come into force on the 1st day of July, 2003 and apply to every company including a foreign company as defined in section 591 of the act. However, it shall not apply to the following :

• A Banking Company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949;
  
• An Insurance company as defined in clause (21) of section 2 of the Act;
• A company licensed to operate under section 25 of the Act; and

• A private limited company with a paid up capital and reserves not more than fifty lakh rupees and has not accepted any public deposit and does not have loan outstanding of ten lakh rupees or more from any bank or financial institution and does not have a turnover exceeding five crore rupees.

Explanation of different types of Companies : -

i.) "Chit fund company", "nidhi company" or "mutual benefit company" - A company engaged in the business of managing, conducting or supervising as a foreman or agent of any transaction or arrangement by which it enters into an agreement with a number of subscribers that every one of them shall subscribe to a certain sum of instalments for a definite period and that eachsubscriber, in his turn, as determinded by lot or by auction or by tender or in such other manner as may be provided for in the agreement, shall be entitled to a prize amount. It also includes companies whose principal business is accepting fixed deposits from, and lending money to, members.

ii.) "Finance company" - A company engaged in the business of financing, whether by making loans or advances or otherwise, of any industry, commerce or agriculture. It also includes any company engaged in the business of hire-purchase, lease financing and financing of housing.

iii.) "Investment company" - A company engaged in the business of acquisition and holding of, or dealing in, shares, stocks, bonds, debentures, debenture stocks, including securities issued by the Central or any State Government or by any local authority, or in other marketable securities of a like nature.

iv.) "Manufacturing company" - A company engaged in any manufacturing process as defined in the Factories Act, 1948 (63 of 1948).

v.) "Mining company" - A company owning a mine. It also includes a company which carries on the business of a mine either as a lessee or occupier thereof.

vi.) "Processing company" - A company engaged in the business of processing materials with a view to their use, a sale, delivery or disposal.

vii.) "Service company" - A company engaged in the business of supplying, providing, maintaining and operating any services, facilities, conveniences, bureaux and the like for the benefit of others.

viii.) "Trading company" - A company engaged in the business of buying and selling goods.

The CARO, 2003 has also specified the matters to be included in the auditor's report of various companies. The auditor's report on the account of a company to which this Order applies shall include a statement on the matters, as specified in paragraph 4 and 5 of CARO, 2003.