Companies (Auditor's Report) Order, 2020
Ministry of
Corporate Affairs (MCA) has issued order in supersession of the Companies (Auditor's Report) Order, 2016 as published in the Gazette of India make the Companies (Auditor's Report) Order, 2020 on dated the 25th February, 2020.
Applicability:
Every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013
Exception:
The Companies (Auditor's Report) Order, 2020 shall not be applicable on:
(i) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(ii) an insurance company as defined under the Insurance Act,1938 (4 of 1938);
(iii) a company licensed to operate under section 8 of the Companies Act;
(iv) a One Person Company as defined in clause (62) of section 2 of the Companies Act and a small company as defined in clause (85) of section 2 of the Companies Act; and
(v) a private limited company, not being a subsidiary or holding company of a public company, having a paid up capital and reserves and surplus not more than one crore rupees as on the balance sheet date and which does not have total borrowings exceeding one crore rupees from any bank or financial institution at any point of time during the financial year and which does not have a total revenue as disclosed in Scheduled III to the Companies Act (including revenue from discontinuing operations) exceeding ten crore rupees during the financial year as per the financial statements.
Effective Date / Applicability:
The Companies (Auditor's Report) Order, 2020 (Link of the Order) shall come into force on the date of its publication in the Official Gazette, ie. 25th February, 2020
Comparison of Companies (Auditor's Report) Order, 2020 from Companies (Auditor's Report) Order, 2016
CARO 2016
|
CARO 2020
|
Nature
of Change
|
||||
Clause
No
|
Matter
|
Clause
No
|
Matter
|
|||
i (a)
|
Whether the company is maintaining proper records showing
full particulars,
including quantitative details and situation of fixed assets
|
i (a) (A)
|
Whether the company is
maintaining proper records showing full particulars, including
quantitative details and situation of Property, Plant and Equipment;
|
No Change
|
||
-
|
-
|
i (a) (B)
|
Whether the company
is maintaining proper records showing full particulars of
intangible assets;
|
New Sub Clause Added
|
||
i (b)
|
Whether these fixed assets have been
physically verified by the management at reasonable intervals; whether any
material discrepancies were noticed on such verification and if so, whether
the same have been properly dealt with in the books
of account;
|
i (b)
|
Whether these Property, Plant and Equipment have
been physically verified by the management at reasonable intervals; whether
any material discrepancies were noticed on such verification and if so,
whether the same have been properly dealt with in the
books of account;
|
No Change
|
||
i (c)
|
Whether the title deeds of immovable properties are held in the name of
the company. If not, provide the details thereof;
|
i (c)
|
Whether the title deeds of all the immovable
properties (other than properties where the company
is the lessee and the lease agreements are duly executed in favour of the
lessee) disclosed in the financial statements are held in the name of
the company, if not,
provide the details thereof
|
Clarification given
for Non Disclosure of Properties taken on Lease by the Lessee
|
||
-
|
-
|
i (d)
|
Whether the company has revalued its
Property, Plant and Equipment (including Right of Use assets) or intangible
assets or both during the year and, if so, whether the revaluation is based
on the valuation by a Registered Valuer; specify the amount of change, if
change is 10% or more in the aggregate of the net carrying value of each
class of Property, Plant and Equipment or intangible assets;
|
New Sub Clause Added
|
||
-
|
-
|
i (e)
|
Whether any proceedings have been initiated or
are pending against the company for holding any benami property under the
Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made
thereunder, if so, whether the company has appropriately disclosed the
details in its financial statements;
|
New Sub Clause Added
|
||
ii
|
Whether physical verification of
inventory has been conducted at reasonable intervals by the management and
whether any material discrepancies were noticed and if so, whether they have
been properly dealt with in the books of account;
|
ii (a)
|
Whether physical verification of inventory has been
conducted at reasonable intervals by
the management and whether, in the opinion of the
auditor, the coverage and procedure of such verification by the management is
appropriate; whether any discrepancies of 10% or more in the aggregate for
each class of inventory were noticed and if so, whether they have been
properly dealt with in the books of account;
|
Auditor has to
specifically comment on coverage and procedure adopted. Also Materiality has
been defined as 10% or more in each class of
Inventory
|
||
-
|
-
|
ii (b)
|
Whether during any point of time of the
year, the company has been sanctioned working
capital limits in excess of five crore rupees, in aggregate, from banks or
financial institutions on the basis of security of current assets; whether
the quarterly returns or 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;
|
New Sub Clause Added
|
||
iii
|
Whether the company has granted any
loans, secured or unsecured to companies, firms, Limited Liability Partnerships
or other parties covered in the register maintained under section 189 of the
Companies Act, 2013. If so,
|
iii
|
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, if so,-
|
|||
-
|
-
|
(a)
|
whether during the year the
company has provided loans or provided advances in the nature of loans, or
stood guarantee, or provided security to any other entity [not applicable to
companies whose principal business is to give loans], if so, indicate-
|
New Sub Clause Added
|
||
-
|
-
|
A
|
The aggregate amount during the year, and balance
outstanding at the balance sheet date with respect
to such loans or advances and guarantees or security to subsidiaries,
joint ventures and associates;
|
New Sub Clause Added
|
||
-
|
-
|
B
|
The aggregate amount during the year, and balance
outstanding at the balance sheet date with respect to such loans or advances
and guarantees or security to parties other
than subsidiaries, joint ventures and
associates;
|
New Sub Clause Added
|
||
(a)
|
Whether the terms and conditions of the grant of such loans are not
prejudicial to the company’s interest;
|
(b)
|
Whether the investments made, guarantees
provided, security given and the terms and conditions of the grant of
all loans and advances in the nature of loans and guarantees
provided are not prejudicial to the company’s
interest;
|
Investment, Guarantee &
Security Given has been covered now
|
||
(b)
|
Whether the schedule of repayment of principal and payment of interest
has been stipulated and whether the repayments or receipts are regular;
|
(c)
|
In respect of loans and advances in the nature of loans, whether the
schedule of repayment of principal and payment of interest has been
stipulated and whether the
repayments or receipts are regular;
|
No Change
|
||
(c)
|
If the amount is overdue, state the total amount overdue for more than
ninety days, and whether
reasonable steps have been taken
by the company for recovery
of the principal and interest;
|
(d)
|
If the amount is overdue, state the total amount overdue for more than
ninety days, and whether reasonable steps have been taken by the company for
recovery of the principal
and interest;
|
No Change
|
||
-
|
-
|
(e)
|
Whether any loan or advance in the nature
of loan granted which has fallen due during the year, has been renewed or
extended or fresh loans granted to settle the overdues of existing loans
given to the same parties, if so, specify the aggregate amount of such dues
renewed or extended or settled by fresh loans and the percentage of the
aggregate to the total loans or advances in the nature of loans granted
during the year [not applicable to companies whose principal business is to
give loans];
|
New Sub Clause Added
|
||
-
|
-
|
(f)
|
Whether the company has granted any loans
or advances in the nature of loans either repayable on demand or without
specifying any terms or period of repayment, if so, specify the aggregate
amount, percentage thereof to the total loans granted, aggregate amount of
loans granted to Promoters, related parties as defined in clause (76) of
section 2 of the Companies Act, 2013;
|
New Sub Clause Added
|
||
iv
|
In
respect of loans, investments, guarantees, and security whether provisions of
section
185 and 186 of the Companies Act, 2013 have been complied with. If not,
provide the details thereof.
|
iv
|
In respect of loans,
investments, guarantees, and security, whether provisions of
sections
185 and 186 of the Companies Act have been complied with, if not, provide the
details thereof;
|
No Change
|
||
v
|
In case, the company has accepted deposits, whether
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, 2013
and the rules framed thereunder, where applicable, have been complied with?
If not, the nature of such contraventions be stated; If an order has been
passed by Company Law Board or National Company Law Tribunal or Reserve Bank
of India or any court or any other tribunal, whether the same has been
complied with or not?
|
v
|
In respect of deposits accepted by the company or amounts which are deemed to be deposits, whether 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 and the rules
made thereunder, where applicable, have been complied with, if not, the
nature of such contraventions be stated; if an order has been passed by
Company Law Board or National Company Law Tribunal or Reserve Bank of India or
any court or any other tribunal, whether the same has been complied with or not;
|
Reporting on Deemed Deposits
covered now
|
||
vi
|
Whether maintenance of cost records has been
specified by the Central Government under sub-section (1) of section 148 of
the Companies Act, 2013 and whether such accounts and records have been so
made and maintained.
|
vi
|
Whether maintenance of cost records has
been specified by the Central Government under sub-section (1) of section 148
of the Companies Act and whether such accounts and records have been so made
and maintained;
|
No Change
|
||
vii (a)
|
Whether the company is regular in
depositing undisputed statutory dues including 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 and if not, the extent of the arrears of outstanding statutory
dues as on the last day of the financial year concerned for a period of more
than six months from the date they became payable, shall be indicated;
|
vii (a)
|
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 and if not, the extent of the arrears of
outstanding statutory dues as on the last day of the financial year concerned
for a period of more than six months from the date they became payable, shall
be indicated;
|
No Change
|
||
vii (b)
|
Where dues of income tax or sales tax or service
tax or duty of customs or duty of excise or value added tax have not been
deposited on account of any dispute, then the amounts involved and the forum
where dispute is pending shall be mentioned.
|
vii (b)
|
Where statutory dues referred to in
sub-clause (a) have not been deposited on account of any dispute, then the
amounts involved and the forum where dispute is pending shall be mentioned
|
No Change
|
||
-
|
-
|
viii
|
Whether any transactions not
recorded in the books of account have been surrendered of disclosed as income
during the year in the tax assessments under the Income Tax Act, 1961, if so,
whether the previously unrecorded income has been properly recorded in
the books of account during the year;
|
New Clause Added
|
||
viii
|
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 (in case of defaults to banks, financial institutions, and
Government, lender wise details to be provided).
|
ix (a)
|
Whether the company has defaulted in repayment of
loans or other borrowings or in the payment of interest thereon to any lender, if yes, the period and the amount of
default to be reported in the format given
|
Word
Any Lender has been substituted in place of financial institution, bank,
Government or dues to debenture holders
|
||
-
|
-
|
ix (b)
|
Whether the company
is a declared wilful defaulter by any bank or financial institution
or other lender;
|
New Sub Clause Added
|
||
-
|
-
|
ix (c)
|
Whether term loans were
applied for the purpose for which the loans were obtained; if
not,
the amount of loan so diverted and the purpose for which it is used may be
reported;
|
Term Loan removed from Old Clause
ix and added here in form of Sub Clause
|
||
-
|
-
|
ix (d)
|
Whether funds raised
on short term basis have been utilised for long term purposes, if
yes, the nature and amount to be indicated;
|
New Sub Clause Added
|
||
-
|
-
|
ix (e)
|
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, if so,
details thereof with nature of such transactions and the amount in each case;
|
New Sub Clause Added
|
||
-
|
-
|
ix (f)
|
Whether the company has raised loans
during the year on the pledge of securities held in its subsidiaries, joint
ventures or associate companies, if so, give details thereof and also report
if the company has defaulted in repayment of such loans raised;
|
New Sub Clause Added
|
||
ix
|
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. If not, the
details together with delays or default and subsequent rectification, if any,
as may be applicable, be reported;
|
x (a)
|
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, if not, the details
together with delays or default and subsequent rectification, if any, as may
be applicable, be reported;
|
Term Loan removed from here and covered
in Para ix (c)
|
||
-
|
-
|
x (b)
|
Whether the company has made any
preferential allotment or private placement of shares or convertible
debentures (fully, partially or optionally convertible) during the year and
if so, whether the requirements of section 42 and section 62 of the Companies
Act, 2013 have been complied with and the funds raised have been used for the
purposes for which the funds were raised, if not, provide details in respect
of amount involved and nature of non-compliance;
|
Shifted from Clause xiv of CARO 2016 to
Clause x(b) of CARO 2020
|
||
x
|
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;
|
xi (a)
|
Whether any fraud by the company or any fraud on the company has been
noticed or reported during the year, if yes, the nature and the amount
involved is to be indicated;
|
Word by its officers or
employees has bee removed
|
||
-
|
-
|
xi (b)
|
Whether any report
under sub-section (12) of Section 143 of the Companies Act has
been filed by the auditors in Form ADT-4 as prescribed under rule 13 of
Companies (Audit and Auditors) Rules, 2014 with the Central Government;
|
New Sub Clause Added
|
||
-
|
-
|
xi (c)
|
Whether the auditor
has considered whistle-blower complaints, if any, received during
the year by the company;
|
New Sub Clause Added
|
||
xi
|
Whether managerial remuneration has been paid or
provided in accordance with the requisite approvals mandated by the
provisions of section 197 read with Schedule V to the Companies Act? If not,
state the amount involved and steps
taken by the company for securing refund of the same;
|
-
|
-
|
Clause Deleted
|
||
xii (a)
|
Whether the Nidhi Company
has complied with the Net Owned Funds
to Deposits
in the ratio of 1: 20 to meet out the liability;
|
xii (a)
|
Whether the Nidhi Company has
complied with the Net Owned Funds to Deposits in the
ratio of 1: 20 to meet out the liability;
|
No Change
|
||
xii (b)
|
Whether the Nidhi Company is maintaining ten per cent. unencumbered
term deposits as specified in the Nidhi Rules, 2014 to meet out the
liability;
|
xii (b)
|
Whether the Nidhi Company is maintaining ten per cent. unencumbered
term deposits as specified in the Nidhi Rules, 2014 to meet out the liability;
|
No Change
|
||
-
|
-
|
xii (c)
|
Whether there has
been any default in payment of interest on deposits or repayment
thereof for any period and if so, the details thereof;
|
New Sub Clause Added
|
||
xiii
|
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;
|
xiii
|
Whether all transactions with the
related parties are in compliance with
sections 177 and 188 of Companies Act where applicable and the details have
been disclosed in the financial statements, etc., as required by the
applicable accounting standards;
|
No Change
|
||
xiv
|
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 theCompanies Act,
2013 have been complied with and the amount raised have been used for the
purposes for which the funds were raised. If not, provide the details in
respect of the amount involved and nature of
non-compliance;
|
-
|
-
|
Shifted to Clause x(b) of
CARO 2020 from Clause xiv of CARO 2016
|
||
-
|
-
|
xiv (a)
|
Whether the company
has an internal audit system commensurate with the size and
nature of its business;
|
New Clause Added
|
||
-
|
-
|
xiv (b)
|
Whether the reports
of the Internal Auditors for the period under audit were considered
by the statutory auditor;
|
New Clause Added
|
||
xv
|
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;
|
xv
|
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 have been complied with;
|
No Change
|
||
xvi
|
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.
|
xvi (a)
|
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;
|
No Change
|
||
-
|
-
|
xvi (b)
|
Whethe the company has conducted any Non-Banking
Financial of Housing Finance activities without a valid Certificate of
Registration (CoR) from the Reserve Bank of India
as per the Reserve Bank of India Act
1934;
|
New Sub Clause Added
|
||
-
|
-
|
xvi (c)
|
Whether the company is a Core
Investment Company (CIC) as defined in the regulations made by the Reserve
Bank of India, if so, whether it continues to fulfil the criteria of a CIC,
and in case the company is an exempted or unregistered CIC, whether it
continues
to fulfil such criteria;
|
New Sub Clause Added
|
||
-
|
-
|
xvi (d)
|
Whether the Group
has more than one CIC as part of the Group, if yes, indicate the
number of CICs which are part of the Group;
|
New Sub Clause Added
|
||
-
|
-
|
xvii
|
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;
|
New Clause Added
|
||
-
|
-
|
xviii
|
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;
|
New Clause Added
|
||
-
|
-
|
xix
|
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 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;
|
New Clause Added
|
||
-
|
-
|
xx (a)
|
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 within a
period of six months of the expiry of the financial year in compliance
with second proviso to sub-section (5) of section 135 of the said Act;
|
New Clause Added
|
||
-
|
-
|
xx (b)
|
Whether any amount remaining unspent
under sub-section (5) of section 135 of the Companies Act, pursuant to any
ongoing project, has been transferred to special account in compliance with the provision of sub-section (6)
of section 135 of the said
Act;
|
New Clause Added
|
||
-
|
-
|
xxi
|
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.
|
New Clause Added
|
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