What is MAOCARO and its purpose? State the types of companies to which this order is applicable.


In exercise of the powers conferred by Section 227(4A) of the Companies Act, 1956 the Central Government issued the MANUFACTURING AND OTHER COMPANIES (AUDITORS REPORT) ORDER, 1988. The order applies to the auditor’s report of specific classes of companies. It applies to every company engaged in one or more of the following activities:

  • Manufacturing, Mining or Processing.
  • Supplying and rendering services.
  • Trading.
  • The business of financing investment, chit fund, nidhi or mutual benefits societies.

It requires that the report should include a statement on such matters which have been incorporated in the order. It should state the following relevant points:

  • Whether the company is maintaining proper records showing full particulars.
  • Whether any of the fixed assets have been revalued during the year.
  • Whether physical verification has been conducted by the management at reasonable intervals.
  • Whether physical verification of stock followed by the management is reasonable and adequate in relation to the size of the company and the nature of the business.
  • Whether any material discrepancies have been noticed on physical verification of stock.
  • Whether the auditor, on the basis of his examination of stock is satisfied that such valuation is fair and proper.
  • If the internal control system is in accordance with the size of the company and the nature of its business.
  • In case the company has accepted the deposits from the public, whether the relevant rules and regulations have been complied with.
  • Is the company maintaining reasonable records for the sale or disposal of realizable by products and scraps?
  • If the internal audit system is in accordance with the size of the company and the nature of its business.
  • Where maintenance of cost records has been prescribed by the Central Government, whether such accounts and records are being maintained or not.
  • Is the company regular in depositing the Provident Fund and Employees State Insurance Dues with the appropriate authority?
  • Whether any undisputed amount payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty etc are outstanding.
  • Whether the personal expenses are charged to revenue account.

In case of Service Company, all the matters specified in Clause (A) to the extent to which they are applicable, whether the company has reasonable system of recording receipts, issues and consumption of materials, stores and allocating materials consumed to the relative jobs are in accordance with the nature and size of the business.

Whether the company has a reasonable system of allocating man-hours utilized to the relative jobs, are in accordance with the nature and size of the business, whether there is a reasonable system of authorization at proper levels, and an adequate system of internal control as per the size and nature of the business.

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