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 NFRA.** The aim of CARO 2020 is to enhance the overall quality of reporting by the company auditors. 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.
** NFRA National Financial Reporting Authority is an independent regulatory body for regulating the audit and accounting profession in India.
Applicability of CARO 2020
CARO 2020 is applicable on all the companies except the following companies specifically excluded from the purview of CARO.
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. For E.g. Description of property, Gross Carrying Value, Held in name of, Whether Promoter director or relative or employee, Period held, Reason for not being held in Name of company
2. Whether physical verification has been conducted at reasonable interval.
3. Whether during the year the company has made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties.
4. In respect of loans, investments, guarantees, and security, whether provisions of sections 185 and 186 of the Companies Act 2013.
5. In respect of deposits accepted by the company or amounts which are deemed to be deposits, as per the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act
6. whether maintenance of cost records has been specified by the Central Government under subsection (1) of section 148 of the Companies Act
7. Whether the company is regular in depositing undisputed statutory dues including Goods and Services Tax, provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities
8. Whether any transactions not recorded in the books of account have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961
9. Whether the company has defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender
10. Whether moneys raised by way of initial public offer or further public offer (including debt instruments) during the year were applied for the purposes for which those are raised and reported.
11. Whether any fraud by the company or any fraud on the company has been noticed or reported.
12. Reporting about the Nidhi Companies
13. Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act 2013.
14. Reporting about Internal Audit System
15. Reporting about non cash transaction with directors or any other person.
16. Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.
17. Whether the company has incurred cash losses in the financial year and in the immediately preceding financial year, if so, state the amount of cash losses;
18. Whether there has been any resignation of the statutory auditors during the year, if so, whether the auditor has taken into consideration the issues, objections or concerns raised by the outgoing auditors
19. On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, the auditor’s knowledge of the Board of Directors and management plans, whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report.
20. 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 2013.
21. Whether there have been any qualifications or adverse remarks by the respective auditors in the Companies (Auditor’s Report) Order (CARO) reports of the companies included in the consolidated financial statements, if yes, indicate the details of the companies and the paragraph numbers of the CARO report containing the qualifications or adverse remarks.