Companies (Auditor’s Report) Order, 2020
With the intent of replacing the existing Companies (Auditor’s Report) Order, 2016 (CARO 2016), the MCA vide Order no. S.O. 849(E). dtd. 25th February, 2020, notified Companies (Auditor’s Report) Order, 2020. The Order was made by the Central Government, after consultation with the National Financial Reporting Authority constituted under Section 132 of the Companies Act, 2013.
The Order was ought to come into force as on the date of its publication in the Official Gazette and was applicable for the financial years commencing on or after 1st April, 2019. However, subsequently, the date of applicability got deferred from time to time.
Now, let’s have a look at the developments:
1. Order no. S.O. 849(E). dtd. 25th February, 2020: The provision of applicability was provided under Paragraph 2 as follows:
“Auditor’s report to contain matters specified in paragraphs 3 and 4–
Every report made by the auditor under section 143 of the Companies Act on the accounts of every company audited by him, to which this Order applies, for the financial years commencing on or after the 1st April, 2019, shall in addition, contain the matters specified in paragraphs 3 and 4, as may be applicable:
Provided this Order shall not apply to the auditor’s report on consolidated financial statements except clause (xxi) of paragraph 3.”
2. Order no. S.O. 1219(E). dtd. 24th March, 2020: Substitution of words and figures “1st April, 2019” with words and figures “1st April, 2020”.
3. Order no. S.O. 4588(E). dtd. 17th December, 2020: Substitution of words and figures “1st April, 2020” with words and figures “1st April, 2021”.
CONCLUSION: It can be clearly noted from the above-mentioned developments that, even though the CARO 2020 was supposed to apply to F.Ys. commencing on or after 1st April, 2019, the same got deferred from time to time and keeping in view the latest development of 17th December, 2020, it can be concluded that CARO 2020 is applicable on Auditor’s Report which is to be prepared for F.Y. 2021-22.
SCHEDULE- III
The amendments to Schedule-III are so much so, that it demands a separate article for deep discussion, therefore, in this article we are not going to have a look at the same, rather we will only talk about its applicability on Financial Statements prepared for the F.Y. 2021-22.
The MCA vide its Notification No. G.S.R. 207(E), dtd. 24th March, 2021 amended Schedule III of the Companies Act, 2013. The said notification came into force w.e.f. 1st April, 2021.
Division I – Financial Statements for a company whose Financial Statements are required to comply with the Companies (Accounting Standards) Rules, 2006.
Division II – Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.
Division III – Financial Statements for a Non-Banking Financial Company (NBFC) whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.
In recent years, there have been substantial changes in the reporting requirement by the auditors, but no such corresponding amendments were made in Schedule III for the preparation of the financial statements. Thus, to align the Company’s financial statements in accordance with the auditor’s reporting requirements, these amendments are introduced. Majority of the amendments to Schedule III to the Companies Act, 2013 have been undertaken in response to the amendments covered in the newly issued Companies (Auditor’s Report) Order, 2020 and the Companies (Indian Accounting Standards) Amendment Rules, 2020.
CONCLUSION: As it is very clear from the wordings of the notification itself, that it shall come into force w.e.f. 1st April, 2021. Therefore, we can conclude that the provisions of the amended Schedule-III are applicable to the Financial Statements for the F.Y. 2021-22.
****
The author can also be reached at cstanveersaluja@gmail.com.
Author Bio
