Executive Summary of CARO 2020
CARO (Company Auditor's Report Order) 2016 was replaced by CARO 2020 for the statutory audits commencing on or after 1 April 2020. However, due to the pandemic, CARO was deferred and now applicable to all statutory audits on or after 1 April 2021. Reporting under CARO 2016 encompassed 16 clauses with 21 sub-clauses. Under CARO 2020, reporting requirements have been enhanced to focus on transparent reporting comprehensively. With 21 clauses comprising 50 sub-clauses, CARO 2020 is a substantial value addition to the readers of the Auditor’s report compared to the erstwhile version. The increased reporting requirements of CARO 2020 put an onus on the management of the auditee entity to ensure comprehensive disclosures and provision of additional details. On the other hand, the Auditor is tasked with stringent reporting requirements and checking.
This article presents a summary of new reporting requirements and modifications that have been introduced under CARO 2020. Here is the link to a webinar on CARO 2020, which deep dives into the novel reporting requirements, modifications, clauses carried forward, and deletions and provides insights both from the perspective of the reporting entity and the Statutory Auditor.
New Reporting Requirements
Modifications
New Reporting Requirements
Modifications
New Reporting Requirements
Auditor to report:
New Reporting Requirements
Modifications
Modifications
New Reporting Requirement
New Reporting Requirement
Auditor to report:
New Reporting Requirement
Whistle-blower Mechanism:
Modifications
New Reporting Requirement
New Reporting Requirement
The auditor will be required to:
New Reporting Requirements
Auditors of Non-Banking Financial Companies (NBFCs) will have to report:
New Reporting Requirements
New Reporting Requirements
New Reporting Requirement
New Reporting Requirement
The auditor is required to report:
New Reporting Requirement
The reporting requirements under CARO 2020 for the following areas have been carried forward as they were from CARO 2016:
Clause under CARO 2020 | Reporting Requirements for |
---|---|
Clause 3(iv) | Compliance with Sections 185 and 186 of the Companies Act, 2013 |
Clause 3(vi) | Maintenance of cost records |
Clause 3 (x) | Application money raised by issue of own securities |
Clause 3(xii) (a), (b) | Nidhi Company |
Clause 3(xiii) | Reporting for related parties |
Clause 3(xv) | Non-cash transactions |
Clause 3(xvi)(a) | Registration under Section 45-IA of the RBI Act |
Managerial Remuneration
Amendments to the Companies Act, 2013 in September 2018 resulted in reporting for the above clause being covered under “Other Legal and Regulatory Requirements” section of the audit report. Hence, reporting for clause under CARO led to duplicity and the same has been removed in CARO 2020.
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