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Audit 2023-1

The Companies (Auditor's Report) Order, 2020 (CARO 2020) introduces a new format for statutory audit reports under the Companies Act, 2013, replacing the previous CARO 2016. Effective from April 1, 2021, CARO 2020 applies to most companies, with specific exemptions for small companies, banking, charitable, and insurance entities. The order mandates additional reporting requirements to enhance audit quality, including details on assets, compliance, and potential financial irregularities.

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4 views2 pages

Audit 2023-1

The Companies (Auditor's Report) Order, 2020 (CARO 2020) introduces a new format for statutory audit reports under the Companies Act, 2013, replacing the previous CARO 2016. Effective from April 1, 2021, CARO 2020 applies to most companies, with specific exemptions for small companies, banking, charitable, and insurance entities. The order mandates additional reporting requirements to enhance audit quality, including details on assets, compliance, and potential financial irregularities.

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kurreymayank04
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Companies (Auditor's Report) Order, 2020

The Ministry of Corporate Affairs (MCA) has announced a new format of statutory audits of companies. The MCA
has no fied Companies (Auditor’s Report) Order, 2020 on 25 February 2020 (CARO 2020). The order (CARO 2020)
replaces the earlier order under Companies (Auditor’s Report) Order, 2016.
Introduc on to CARO 2020

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 addi onal repor ng requirements a er consulta ons with
the National Financial Reporting Authority (NFRA). NFRA is an independent regulatory body for regula ng the
audit and accoun ng profession in India. The aim of CARO 2020 is to enhance the overall quality of repor ng by the
company auditors.

Applicability of CARO 2020

CARO 2020 is applicable for all statutory audits commencing on or after 1 April 2021 corresponding
to the financial year 2020-21. The order is applicable to all companies which were covered by CARO 2016. Thus,
CARO 2020 applies to all the companies currently, except the following companies:
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 discon nuing opera ons) 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 me during the FY.

Repor ng Requirements Under CARO 2020

The auditor’s report (CARO 2020) shall include a statement on the following matters, namely:
Details of tangible and intangible assets.
Details of inventory and working capital.
Details of investments, any guarantee or security or advances or loans given.
Compliance in respect of a loan to directors.
Compliance in respect of deposits accepted.
Maintenance of cos ng records.
Deposit of statutory liabili es.
Unrecorded income.
Default in repayment of borrowings.
Funds raised and u lisa on.
Fraud and whistle-blower complaints.
Compliance by a Nidhi.
Compliance on transac ons with related par es.
Internal audit system.
Non-cash dealings with directors.
Registra on under sec on 45-IA of RBI Act, 1934.
Cash losses.
Resigna on of statutory auditors.
Material uncertainty on mee ng liabili es.
Transfer to fund specified under Schedule VII of Companies Act, 2013.
Qualifica ons or adverse auditor remarks in other group companies.
In a case where the auditor’s answer to any of the requirements men oned above is unfavourable or nega ve,
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 specific ma er, 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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