Companies (Auditor’s Report) Order, 2020 (CARO 2020)

Clause No

Clause Name

CARO,2016

Changes in CARO, 2020

1

Non –current assets

• Maintenance of proper records including details of quantity and situation of FA

• Physical verification at regular intervals by the management

• Material discrepancies accounted for in the books of account

• Title deeds of immovable property, if not held in the​​ name of the company

• 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

• Revaluation of PPE if done by a Registered Valuer; and if the amount of change is >= 10% of net carrying value

2

Inventory and other current assets

• Physical verification at regular intervals by the management

• Material discrepancies accounted for in the books of account

• Physical verification at regular intervals by the​​ management & whether any discrepancies of 10% or more is noticed & proper dealt in books of accounts

• In case of working capital based on current assets in excess of 5 crore rupees is sanctioned from the financial institutions, the quarterly returns or statements filed by the company are in agreement with the books of accounts, if not, give details thereof

3

Investments, loans or advances by company

• The terms and conditions of loans are not prejudicial to the interests of company

• Whether the repayment is in order

• Loans outstanding for more than 90 days and their recovery position

• Whether Sections 185 and 186 of the Companies Act have been complied with

• In case of any investments, provision of loans or advances in the nature of loans, or stood guarantee, or​​ provided security, indicate the aggregate amount during the year, and balance outstanding at the balance sheet date to subsidiaries, joint ventures and associates to parties other than subsidiaries, joint ventures and associates

• In case of provision of loans or advances in the nature of loans repayable on demand, without the any terms or period of payment, then specify the amount of such loans or advances given to the promoters, related parties

8

Loans or other borrowings

• The details of period and amount​​ of default in respect of repayment of loans or borrowings to banks, financial institutions, Government or debenture holders

• Specified the format for reporting the details of the default in repayment of loans or other borrowings (lender wise)

• Whether the company is a declared willful defaulter.

• whether funds raised on short term basis have been utilized for long term purposes

• whether the company has taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures

• whether the company has raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies

9

Money raised by IPOs, FPOs

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

10

Fraud

• Any fraud by the company or its officers/employees which has been noticed during the FY

• The nature and amount of fraud involved

• 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

12

Nidhi Company

• Maintenance of net owned funds to deposits in the ratio of 1:20 to meet out the liability

• Maintenance​​ of 10% unencumbered term deposits as specified in Nidhi Rules

• Whether there is any default in payment of interest on deposits or repayment thereof

16

NBFC

• Whether registration has been obtained by NBFCs liable to be registered under the RBI Act

• company​​ has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the RBI

• Whether the company qualifies for a Core Investment Company (CIC)

• The number of CICs if the group has more than one CI

Clause No

Clause Name

Changes in CARO, 2020

8

Disclosure of undisclosed transactions

• 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, if so, whether the previously unrecorded income has been properly recorded in the books of account

14

Internal Audit System

• 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;

17

Cash losses

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

18

Consideration of outgoing auditor

• 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;

19

 Material uncertainty in relation to​​ realisation of financial assets and payment of financial liabilities

• 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;

20

Compliance of CSR

• The company has transferred unspent amount in respect of other than ongoing projects and ongoing projects to specified funds/accounts as​​ per sec 135(5) and (6) respectively

• New concept:

• 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 6 (six) months 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 thirty (30) days from the end of the financial year.

• The amount that has been carry forwarded to the Unspent CSR Account must be spent in consonance with the CSR policy within the stipulated time period of three (3) financial years from the date of such transfer. On failure to do the same, the company should transfer this unspent amount to a fund specified under Schedule VII of the Act

21

Qualifications or adverse remarks in​​ the consolidated financial statements

• In case of any qualifications or adverse remarks by the auditors in the CARO reports of the companies included in the consolidated financial statements, if yes, indicate the details of the companies and the clauses of​​ the CARO report containing the qualifications or adverse remarks