CARO 2020 Companies for FY 2019-20


CARO 2020 Companies for FY 2019-20: CARO 2020 applicable w.e.f 01.04.2020


In order to bring more transparency & faith in Financials statements of companies, The ministry of corporate affairs introduce the new set of Companies (Auditor’s Report) Order, 2020.
In contrast with CARO 2016, Now the Auditor have to report more disclosures on core aspects of financials statement such as: loan defaults, cash losses, Immovable properties etc. Moreover, the CARO 2020 is applicable for the eligible companies for the financial year commencing on or after the 1st April 2019.
Earlier, there was 16 clauses to which auditor have to report while doing statutory audit of company. Now CARO 2020 notified 21 clauses out of which at least 10 new clauses are there.
To Ease compliance under Companies Act 2013, applicability of Companies (Auditor’s Report) Order, 2020 has been deffered to the financial year 2020-2021 instead of from 2019-2020 notified earlier.
CARO 2020 is a new format for issue of audit reports in case of statutory audits of companies under Companies Act, 2013. CARO 2020 has included additional reporting requirements after consultations with the National Financial Reporting Authority (NFRA). NFRA is an independent regulatory body for regulating the audit and accounting profession in India. The aim of CARO 2020 is to enhance the overall quality of reporting by the company auditors.
This step has been taken to ease the burden on companies & their auditors for the year 2019-20 amid COVID-19.
This has been notified by Ministry of Corporate Affairs. Notification of Ministry of Corporate Affairs number S.O. 849(E), dated the 25th February, 2020, published in the Gazette of India , Extraordinary, Part II, Section 3, Sub-section (ii), dated the 25th February, 2020, in paragraph has now been amended.
CARO 2020 is applicable for all statutory audits commencing on or after 1 April 2020 corresponding to the financial year 2019-20. The order is applicable to all companies which were covered by CARO 2016. Accordingly, the order applies to all the companies except the following companies specifically excluded from its purview:
  • One person company
  • Small companies (Companies with paid up capital less than/equal to Rs 50 lakh and with a last reported turnover which is less than/equal to Rs 2 crore)
  • Banking companies
  • Companies registered for charitable purposes
  • Insurance companies
  • The following private companies are also exempt from the requirements of CARO, 2020:
    – Whose gross receipts or revenue (including revenue from discontinuing operations) is less than or equal to Rs 10 crore in the financial year
    – Whose paid up share capital plus reserves is less than or equal to Rs 1 crore as on the balance sheet date (i.e. usually at the end of the FY)
    – Not a holding or subsidiary of a Public company
    – Whose borrowings is less than or equal to Rs 1 crore at any time during the FY
“2. Auditor’s report to contain matters specified in paragraphs 3 and 4”, for the words and figures “1st April, 2019“, the words and figures “1st April, 2020” shall be substituted.
Reporting Requirements Under CARO 2020

The auditor’s report (CARO 2020) shall include a statement on the following matters, namely:
  1. Details of tangible and intangible assets
  2. Details of inventory and working capital
  3. Details of investments, any guarantee or security or advances or loans given
  4. Compliance in respect of a loan to directors
  5. Compliance in respect of deposits accepted
  6. Maintenance of costing records
  7. Deposit of statutory liabilities
  8. Unrecorded income
  9. Default in repayment of borrowings
  10. Funds raised and utilisation
  11. Fraud and whistle-blower complaints
  12. Compliance by a Nidhi
  13. Compliance on transactions with related parties
  14. Internal audit system
  15. Non-cash dealings with directors
  16. Registration under section 45-IA of RBI Act, 1934
  17. Cash losses
  18. Resignation of statutory auditors
  19. Material uncertainty on meeting liabilities
  20. Transfer to fund specified under Schedule VII of Companies Act, 2013
  21. Qualifications or adverse auditor remarks in other group companies
In a case where the auditor’s answer to any of the requirements mentioned above is unfavourable or negative, then the auditor’s report shall also state the basis for such unfavourable or qualified answer.
Also, in a case where the auditor is unable to express any opinion on any specified matter, the report shall indicate such fact along with the reasons as to why it is not possible for the auditor to give an opinion on the same.

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