NEW ADDITIONAL REQUIREMENTS INCLUDING IN THE CARO 2020 REPORTING AFTER ON CONSULTING ON WITH THE NFRA
CARO, 2020 (Applicable from FY 2019-20)-Changes made
- Fixed Assets/ Property, Plant and Equipment
# Reporting over maintenance of records of Intangible assets have been specifically added.
# Leased Immovable property is specifically excluded from the reporting over the holding of title deeds in the Company’s name. If owned Immovable property is not held in the Company’s name, Dispute status and details of the registered owner need to be reported.
# In the case of EPP revaluation, the auditor must determine that the same has been achieved on the basis of the Reported Interest survey. Changes ought to be recorded if 10% or more of the adjustments are made in the WDV.
# Inconsistencies recognized by management with an effect of 10% or more of the inventory value need to be reported.
# In the case that the Corporation has a working capital limit of more than INR 5 Crores depending on the security of the current assets (e.g. Stock, Debtors), the auditor must report that the regular filings (e.g. Financial Accounts, Debtors Listing) made with the lender are in compliance with the books.
- Undisclosed Income:
# The auditor must disclose whether or not any income has been returned under the Income Tax Act, 1961 and the same has been duly accounted for in the books of accounts.
- Default in repayment of loans
# The auditor must determine that the company is considered to be a “Willful defaulter.”
# Information on the removal of term loans from allowable use needs to be published.
# Data has been given on how short-term loans have been used for long-term purposes.
# The auditor must comment on all money taken to meet the commitments of the community business.
# Reporting on loans received by the Firm was made on the basis of the commitment of shares issued by the Firm to shareholders, Joint ventures and associates.
- Fraud reporting
# Fraud reporting has been extended to fraud against the Company by any person rather than by officers or employees in the past.
# The fraud report issued by the auditors in the form ADT-4 to CG should be reported.
# The auditor has to record his evaluation of “Whistle Blower” allegations.
# The auditor must report whether the internal audit system exists within the company and whether or not the internal audit reports have been considered.
# The particulars of the proceedings (pending/initiated) under the Benami Law need to be published.
- Consolidated Financial Statements
# Details of consolidated companies with qualifications or adverse reactions in the CARO report must be reported along with Paragraph Number of the auditor with audit report on Consolidated Financial Activities.
- Non-Banking Financial Activities
# The auditor must report on the conduct of financial activities of an NBFC nature by the company without valid Certificates and reporting.
- Cash Losses
# The auditor will document whether the Company has suffered CASH LOSS during the current AND preceding financial year and the volume of such cash loss.
# The resignation of the statutory auditor and the causes, problems with him duly considered by the incoming auditor or not; must be published.
- Financial Ratios
# The goals of the Organization to meet its Existing Obligations on the basis of percentages, maturity and plans for execution must be stated.
- Corporate Social Responsibility:
# The Auditor will disclose that the unexpended amount has been allocated to the designated fund within 6 months of the end of the fiscal year and whether or not the pending project balance has been moved to a special account. (Amendment itself under the Corporations Act, not yet told in 2013).
APPLICABILITY OF ANNEXES TO THE AUDITOR’S REPORT:
- Annexure of the CARO Report is not needed in the case of Small Business, Banking Firm, Insurance Company, Section 8 Company, One Person Company, and any private company having paid-up capital and free assets to INR 1 crores as at the balance sheet date and borrowing up to INR 1 crores at any time during the year and revenue up to INR 10 crores as per the financial reporting of the year mentioned.
- Annexure of the Internal Financial Control Report is not required in the case of Small Company, One Person Company, AND any Private Company with Turnover up to INR 50 Crores as per the financial statements of the year concerned and borrowing up to INR 25 Crores at any time during the year.
The CARO 2020 is supposed to substantially increase the overall standard of the audit reports on the company’s financial statements and thereby contribute to greater accountability and confidence in the company’s financial affairs. It is inevitably expected to increase the inflow of investment by and in Indian companies.