Companies Auditors Reporting Order (CARO) 2020

• Recent Amendments under CARO
• Companies covered under CARO 2020
• Matters to be included in auditor’s report
• Comparison between CARO 2016 and CARO 2020

• Whether the company is maintain proper records showing full particulars including quantitative details and situation of fixed asset.
• Whether these fixed asset have been physically verified by management at reasonable interval.
• Whether the title deeds of immovable property are held in the name of the Company. If not provide the detail thereof

• Verification of the title deeds of the immovable properties and it’s disclosure in financial statements
• Specified the format for maintaining the details of the fixed asset
• In case of revaluation of Property, Plant and Equipment (PPE) or intangible assets, by a Registered Value if the change is 10% or more of the net carrying value.

• Whether physical verification of inventory has been conducted by the management at reasonable interval. And if discrepancies have been noticed on such verification whether the same has been properly dealt with in the books of account.

• If, the Company has been sanctioned working capital (cash credit) limits exceeds Rs.5 crores, in aggregate, from banks or financial institutions on the basis of security of current assets the auditor is required to provide specific details as to whether the quarterly returns/statements filed by the Company with such banks or financial institutions are in agreement with the books of account of the Company. If not, give details.

• CARO 2016 focused only on loan that whether the company has granted any loans, secured or unsecured to companies, firms, LLP or other parties covered in the registered maintained under section 189 of the Companies Act 2013. If so, whether terms and conditions of the grant of such loan are not prejudicial to the company’s interest.

• CARO 2020 includes investments also in this clause that whether the company has granted any loans, investments guarantee and securities to companies, firms, LLP or other parties covered in the registered maintained under section 189 of the Companies Act 2013. If so, whether terms and conditions of the grant of such loan are not prejudicial to the company’s interest.
• If company grant loans or advances in the nature of repayable on demand or without the any terms or period of payment, given to related party and promoters then specify the amount and percentage of such loans or advances and given to the promoters, related parties.

• In respect of loan, investment, guarantees and security whether provision of section 185 and 186 of the Companies act 2013 has been complied with. If not, provide the details thereof.

• In case, the company has accepted deposits, whether the following has been complied with
• The Directives issued by the reserve bank of India.
• The provision of sec 73 to 76 or any other relevant provision of companies act 2013 and the rules framed there under.
• If the order has been passed by company law board (CLB) or National company law tribunal (NCLT) or RBI or any court or any other tribunal.

And if not, the nature of contraventions should be stated.

• Central government has specified maintenance of cost records under sec 148(1) of companies act 2013 whether such accounts and records have been made and maintained.

• Whether the company is regular in depositing undisputed statutory dues with the appropriate authorities. If not,  the extent of arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they become payable, shall be indicated by the auditor. The amount of dues which shall not be paid should disclose by the auditor.

• In case of any transactions not recorded in the books of account have been surrendered or disclosed as income during the year in the tax assessments, has been properly recorded in the books of account.

• Whether the company has defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to debenture holders. If yes, the period and the amount of default to be reported

• Specific format for reporting the details of the default in repayment of loans or other borrowings (lender wise) is given.
• Various reporting clauses of section 143 of Companies Act 2013 is inserted as a part of this clause in respect of term loans, short term loans, funds raised to meet the obligations of subsidiaries.

• Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised.
• And according to clause (xiv) of CARO 2016 Whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of section 42 of the Companies Act, 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised
• If not, the details in respect of the amount of delays or default should mention and subsequent rectification, if any, as may be applicable, be reported;

• Merged clause (xiv) of CARO 2016 – compliance in relation to preferential allotment or private placement of shares.

• Whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year. If yes, the nature and the amount involved is to be indicated.

• Any report in ADT-4 in relation to fraud is filed by auditor to the central government u/s 143(12) and any complaints from whistle-blowers is considered by the auditor while submitting such report

• Whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining 10 per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability.

• Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards;

• whether the company has an internal audit system commensurate with the size and nature of its business
• whether the reports of the Internal Auditors for the period under audit were considered by the statutory auditor;

• Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions of section 192 of Companies Act, 2013 have been complied with.

• Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained.

• State the amount of cash losses, in case of cash losses incurred in the financial year and in the immediately preceding financial year.

• In case of 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

• 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 liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date

• If there is any amount left unspent whether the company has transferred this unspent amount in respect of other than ongoing projects and ongoing projects to specified funds/accounts as per sec 135(5) and (6) respectively.
• 135(5): If the unspent amount does not relate to an ongoing CSR project, such unspent amount should be directly transferred to the fund mentioned in Schedule VII of the Act, within 6months from the end of the relevant financial year.
• 135(6): Any unspent amount from the total allocated amount for CSR remains, pursuant to any ongoing CSR project in accordance with its CSR policy, the company is then required to transfer such unspent amount to a special account called Unspent Corporate Social Responsibility Account within a period of 30days from the end of the financial year.

• The auditor of the parent company is now required to indicate the details if the auditor of subsidiary companies gives any qualifications/adverse remark under CARO 2020 of the subsidiary companies and include such remark in the consolidated financial statements