Short overview of the CARO 2020- What it covers?

 

CARO 2020 is a new format for the issue of audit reports in case of statutory audits of companies under Companies Act, 2013. Non compliance has resulted in the penalty and fine on the auditor. The Government has come heavily on the auditor in the recent past.

CARO 2020 has included additional reporting requirements after consultations with the National Financial Reporting Authority (NFRA).

The aim of CARO 2020 is to enhance the overall quality of reporting by the company auditors.

Reporting Requirements Under CARO 2020
The auditor’s report (CARO 2020) shall include a statement on the following matters, namely:

1) Details of tangible and intangible assets.
2) Details of inventory and working capital.
3) Details of investments, any guarantee or security or advances or loans given.
4) Compliance in respect of a loan to directors.
5) Compliance in respect of deposits accepted.
6) Maintenance of costing records.
7) Deposit of statutory liabilities.
8) Unrecorded income.
9) Default in repayment of borrowings.
10) Funds raised and utilization.
11) Fraud and whistle-blower complaints.
12) Compliance by a Nidhi.
13) Compliance on transactions with related parties.
15) Internal audit system.
15) Non-cash dealings with directors.
16) Registration under section 45-IA of RBI Act, 1934.
17) Cash losses.
18) Resignation of statutory auditors.
19) Material uncertainty on meeting liabilities.
20) Transfer to fund specified under Schedule VII of Companies Act, 2013.
21) Qualifications or adverse auditor remarks in other group companies.

Auditor must ensure the due reporting and compliances so as to avoid the penal consequences on them. One of the sector where large scale violation prevails is with regard to accounting software with audit trail. The non compliance in reporting by the auditor would be detrimental to their interest.