1. CARO 2020 is a new format for issue of audit reports in case of statutory audits of companies under Companies Act, 2013.
2. CARO 2020 has included additional reporting requirements after consultations with the National Financial Reporting Authority (NFRA).
3. The aim of CARO 2020 is to enhance the overall quality of reporting by the company auditors.
4. 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.
5. CARO, 2020 shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013, except–
- a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949;
- an insurance company as defined under the Insurance Act,1938;
- a company licensed to operate under section 8 of the Companies Act;
- 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
- 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.
6. The auditor’s report (CARO 2020) shall include a statement on the following matters:
- 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 costing records.
- Deposit of statutory liabilities.
- Unrecorded income.
- Default in repayment of borrowings.
- Funds raised and utilisation.
- Fraud and whistle-blower complaints.
- Compliance by a Nidhi.
- Compliance on transactions with related parties.
- Internal audit system.
- Non-cash dealings with directors.
- Registration under section 45-IA of RBI Act, 1934.
- Cash losses.
- Resignation of statutory auditors.
- Material uncertainty on meeting liabilities.
- Transfer to fund specified under Schedule VII of Companies Act, 2013.
- Qualifications or adverse auditor remarks in other group companies