The Ministry of Corporate Affairs (MCA) has announced a new format of statutory audits of companies. The MCA has notified Companies (Auditor’s Report) Order, 2020 on 25 February 2020 (CARO 2020). The Company Auditor’s Report Order (CARO) is the list of reporting requirements that are needed from the Auditor who audits a company/business. CARO 2020 has included additional reporting requirements after consultations with the National Financial Reporting Authority (NFRA). It aim is to enhance the overall quality of reporting by the company auditors.

CARO 2020 is applicable for reporting the financial statements of liable firms for the Financial Years staring from 1st April 2019. The order is applicable to all companies which were covered by CARO 2016.


List of Modifications


CARO 2020 comprises of overall 21 clauses against 16 clauses in 2016. 7 new clauses were entered, 1 clause merged with other and 1 deleted.

Mentioned below are the amendments that are made in CARO 2020 with regards to CARO 2016:

List of Clause Alterations in CARO, 2020
I. Details of tangible and intangible assets Amended Laws
– Title deeds of the immovable properties need validation and should be mentioned in the financial statement.
– A pre-set format for maintaining the details of the fixed assets.
– The revaluation of property, plant or equipment or intangible property is based on the valuation by a Registered Valuer or not and to specify the actual amount of change, if the change is 10% or more of the net carrying value.
– Details of benami property held by the Company against which any proceedings or litigation has been initiated or pending.
II. Details of Inventory and Other Current Assets Amended Laws
If the current working capital on assets is more than Rs. 5 Crore (sanctioned by any bank(s) or financial institution(s)) and the quarterly returns by the company should be in agreement with the books of accounts. If not then details of the same are to be mentioned here.
III. Details of investments, any guarantee or security or advances or loans given by Company Amended Laws
– If there are any investments, supply of loans or advances in the form of a loan grant, or stood guarantee, or provided security, indicate the aggregate amount given during the year, and balance outstanding at the balance sheet date with respect to loans or advances to subsidiaries, joint ventures and/or associates or third parties other than subsidiaries, joint ventures and/or associates.
– In case any loan or advance which is due for repayment during the year and has been renewed or extended or fresh loans granted to settled the overdues, specify the total amount of such dues renewed or extended or settled by fresh loans and aggregate percentage to total loans or advances.

– In case of loans or advances in the form of loan repayable on demand or without any terms or period of repayment, specify the total amount, percentage thereof to the total loans granted, the total amount of loans granted to promoters, related parties.

IV. Loan to Directors and Investment by the Company Similar to CARO 2016
V. Deposits Accepted by the Company Similar to CARO 2016
VI. Maintenance of Cost Records Similar to CARO 2016
VII. Statutory Dues Similar to CARO 2016
VIII. Disclosure of Undisclosed Transactions Newly entered Provisions

– Transactions that are not reported in the Books of Accounts and have been surrendered or disclosed in the books of accounts as income during the year in the tax assessments.

– Whether the unrecorded income is disclosed in the books of accounts.

IX. Loans or Other Borrowings Amended Laws

Mentioned here is the format of reporting the information related to the repayment of loans or other liabilities (lender wise). The reporting clause of section 143 is inserted here as part of the CARO related to term loans, short term loans, funds raised to meet the obligations of the subsidiaries.

X. Funds raised and utilisation Amended Laws

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

XI. Fraud Amended Laws

Any fraud report is filed by the Auditor in ADT 4 u/s 143(12) to the Central Government or any complaints from the informers considered by the auditors while submitting the reports.

XII. Nidhi Company Similar to CARO 2016
XIII. Related Party Transactions Similar to CARO 2016
XIV. Internal Audit System Newly entered Provisions

– Whether the company has the Audit System in accordance with its size and nature of its business activities.
– Reports by the Internal Auditors for Audit Period were duly considered by the statutory auditor.

XV. Non-cash Transactions Similar to CARO 2016
XVI. RBI Registration Similar to CARO 2016
XVII. Cash Losses Newly entered Provisions

Reported are the cash losses. In case there are any cash losses in the current financial year or the immediately preceding financial year.

XVIII. Consideration of Outgoing Auditor (Resignation) Newly entered Provisions

If, during the year, there is any resignation of the statutory auditor, the auditor has taken into consideration the issues, objections or concerns raised by the outgoing auditors.

XIX. Material uncertainty in relation to realisation of financial assets and payment of financial liabilities Newly entered Provisions

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 the balance sheet as and when they fall due within a period of one year from the balance sheet date

XX. Compliance of CSR Newly entered Provisions
– With respect to obligations under Corporate Social Responsibility, the company required to transfer the unspent amount to a Fund specified in Schedule VII to the Companies Act within a period of 6 months from the expiry of the financial year in case such amount is not related to ongoing CSR activity [Section 135(5)] or within a period of 30 days from the expiry of the financial year in case such amount was earlier allotted to the ongoing CSR projects in accordance with its CSR policy [Section 135(6)]
– The value that is amounted in the CSR account is required to be spent in accordance with the CSR policy within the designated time period of 3 financial years starting from the date of transfer. If failed to do so then the company should transfer this unspent amount to a fund specified under Schedule VII of the Act.
XXI. Qualifications or adverse remarks in the consolidated financial statements Newly entered Provisions

If there are any qualifications or adverse remarks in the consolidated financial statements of a particular firm given by the auditors. If yes then mentions the details of the company here and the clauses of the CARO report having qualifications or adverse remarks.

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