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CARO 2020 is a new format for issue of audit reports in case of statutory audits of companies under Companies Act, 2013. CARO 2020 includes additional reporting requirements after consultations with the National Financial Reporting Authority (NFRA). NFRA is an independent regulatory body to regulate the audit and accounting profession in India.
The main motive of CARO 2020 is to enhance the overall quality of reporting by the company auditors.
Company Auditor’s Report Order (CARO) 2020 is applicable for reporting for the Financial Years starting from April 1st, 2020.
List of Amendments
There are no changes in the applicability of CARO 2020. CARO 2020 now has overall 21 clauses against 16 clauses in CARO 2016. 7 new clauses have been entered, 1 clause has been merged and 1 deleted.
Mentioned below are the amendments / changes that have been made in CARO 2020:
|
List of Clauses |
Alterations in CARO, 2020 |
| I. Non –current Assets | Amended Laws- Words “Fixed Assets” not replaced with Property, Plant, Equipment and Intangible Assets (PPEIA).
If Title deeds of the immovable properties not in the name of Company, then report all such instances. Any Benami Proceedings initiated to be reported. Revaluation of property, plant or equipment or intangible property to be reported. |
| II. Inventory and Other Current Assets | Amended Laws- If the current working capital on assets is more than Rs. 5 Crore (sanctioned by any financial institution(s)) and the quarterly returns by the company should be in agreement with the books of accounts. If the same is not followed then details of the same are to be declared here. |
| III. Investments, Loans or Advances by Company | Amended Laws- Reporting of Investments in, provided any guarantee or security or granted any loans or advances in the nature of loan to subsidiaries, joint ventures, associates and also to parties other than subsidiaries, joint ventures and associates amount outstanding as at the balance sheet date
Any loan or advance in the nature of loan granted which has fallen due during the year, has been renewed or extended or fresh loans granted to settle the overdue of existing loans given to the same parties, then to specify the aggregate amount of such dues renewed or extended or settled by fresh loans and the percentage of the aggregate to the total loans or advances in the nature of loans granted during the year. Where there are loan and advances in the nature of repayable on demand, without any terms or period of payments then to specify the amount of loans or advances given to promoters and related parties. |
| IV. Loan to Directors and Investment by the Company | No change, Similar to CARO 2016 |
| V. Deposits Accepted by the Company | No change, Similar to CARO 2016 |
| VI. Maintenance of Cost Records | No change, Similar to CARO 2016 |
| VII. Statutory Dues | No change, Similar to CARO 2016 |
| VIII. Disclosure of Undisclosed Transactions | Newly entered provisions- Auditor needs to report on: a) Transaction not recorded in books but disclosed in the income tax assessment. b) Whether or not the unrecorded income has been disclosed in the books of accounts. |
| IX. Loans or Other Borrowings | § Details of Funds borrowed by holding company for the purpose of discharging obligations of group entities. Usage of long term and short term funds
§ Details of Funds borrowed by pledging the securities held in its group entities and defaults in its repayment § Whether the company is a declared willful defaulter, diversion of loan taken for some other purpose. |
| X. Money Raised by IPOs, FPOs | Amended Laws Merged clause (xiv) of CARO 2016 – compliance in relation to preferential allotment or private placement of shares. |
| XI. Fraud | Amended Laws Any fraud report is filed by the Auditor in ADT 4 u/s 143(12) to the Central Government or any complaints from the informers considered by the auditors while submitting the reports. |
| XII. Nidhi Company | Similar to CARO 2016 |
| XIII. Related Party Transactions | Similar to CARO 2016 |
| XIV. Internal Audit System | Newly entered Provisions If the company has the audit system equivalent to the size and nature of its business. Reports by the Internal Auditors for audit period were duly considered by the statutory auditor. |
| XV. Non-cash Transactions | Similar to CARO 2016 |
| XVI. RBI Registration | Similar to CARO 2016 |
| XVII. Cash Losses | All newly entered Provisions Reported are the cash losses. In case there are any cash losses in the current financial year or preceding financial year. |
| XVIII. Consideration of Outgoing Auditor | Newly entered Provisions If at the time of departure of the statutory auditor, he has taken into consideration the issues, objections or concerns raised by the outgoing auditors. |
| XIX. Material uncertainty in relation to realization of financial assets and payment of financial liabilities | Newly entered Provisions whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report that company is capable of meeting its all liabilities existing as at the date of the balance sheet as and when they will fall due within a period of 1 year from the date of balance sheet. |
| XX. Compliance of CSR | Newly entered Provisions. a) Whether, in respect of other than ongoing projects, the company has transferred unspent amount to a Fund specified in Schedule VII to the Companies Act within a period of six months of the expiry of the financial year in compliance with second proviso to sub-section (5) of section 135 of the said Act; b) Whether any amount remaining unspent under sub-section (5) of section 135 of the Companies Act, pursuant to any ongoing project, has been transferred to special account in compliance with the provision of sub-section (6) of section 135 of the said Act. |
| XXI. Qualifications or adverse remarks in the consolidated financial statements | Newly entered Provisions Inserted If there are any qualifications or adverse remarks in the consolidated financial statements of a particular firm given by the auditors. If yes then mention the details of the company and the clauses of the CARO report having qualifications. |
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