Caro 2020 applicability
Ministry of corporate affairs notify CARO 2020 through order F.No. 17/45/2015-CL-V Part 1 dated 25th February 2020. Companies Auditor’s Report Order (CARO), 2020 is applicable from financial year 2021-22.
Para 1 of CARO 2020– Caro 2020 applicability:
CARO 2020 is applicable to every company including a foreign company. However, the order is specifically exempting the following classes of companies:
1. Banking company
2. Insurance Company
3. Section 8 company (Non-Profit Organization)
4. One Person Company – OPC is defined under section 2(62) of the company Act.
5. A Small Company – Small Company is defined under section 2(85) of the company act.
6. Private Limited Company, not being a subsidiary or holding of a public company, fulfils the following conditions:
| S. No. | Particular | Condition | Fulfilment |
| 1. | Paid up Capital and reserve & Surplus | Not more than INR 1 Crore | As on Balance Sheet Date |
| 2. | Total Borrowing (From Bank or Financial Institution) | Not Exceeding INR 1 Crore | At any point of time during the year |
| 3. | Total Revenue | Not Exceeding INR 10 Crore | During the year as per Financial Statements. |
All of the above conditions should be fulfilled by private limited company for exemption from CARO 2020.
Also See, “Revised Form 3CD in Excel Format“
Para 2 of Caro order 2020 – Every report made by the auditor under section 143 of company act on which Caro order 2020 applicable, should include the matters specified in clause 3 and clause 4 of CARO 2020 order.
Caro Order 2020 shall not apply to the auditor’s reports on consolidated financial statement except paragraph 3 clause (xxi).
Continuous read – Caro 2020 applicability
Para 3 of Caro order 2020 – Matters to be included in the auditor’s report:
(i) (a) (A) Maintenance of proper records showing full particulars, including quantitative details and situation of Property, Plant & Equipment (PPE);
(a) (B) Maintenance of proper records of intangible assets;
(b) Physically verification of PPE (Property, Plant and Equipment) by management at reasonable intervals; whether material discrepancies were noticed and how the same have been dealt in book of account;
(c) Title deeds of immovable properties should be held in the name of the company, if not, provide the details in the format below: –
| Description of Property | Gross carrying value | Held in name of | Whether promoter, director or relative or employee | Period held – indicate range, where appropriate | Reason for not being held of company |
(d) Revaluation of its PPE (including Right of Use assets) or intangible assets should be based on the valuation by a Registered Valuer; specify the amount of change, if change is 10% or more;
(e) Proceedings relating for holding any benami property under Benami Transactions (Prohibition) Act, 1988 should be disclosed in financial statement;
(ii) (a) Physical verification of inventory at reasonable intervals by management and whether, in the opinion of the auditor, the coverage and procedure are appropriate; discrepancies of 10% or more were noticed and if so, whether they have been properly dealt with in the book of account;
(b) Sanction of working capital limits in excess of 5 crore rupees, from banks or financial institutions on the basis of security of current assets; whether the quarterly returns or statements filed by company with such banks or financial institutions are in agreement with the books of account, if not, give details;
(iii) Company had made Investments/guarantee/security or grant of loans/advances in the nature of loans, to companies, firms, LLP or any other parties, if so,
(a) Whether the company has provided loans or provided advances in the nature of loans, or provided security to any entity, if so, indicate (not applicable to companies whose principal business is to give loans)
(a) (A) The amount and balance outstanding at balance sheet date with respect to such loans or advances and guarantees or security to subsidiaries, joint ventures and associates;
(a) (B) The amount and balance outstanding at balance sheet date with respect to such loans or advances and guarantees or security to parties other than subsidiaries, joint ventures and associates;
(b) Investment made, Security given or guarantees provided and the terms and conditions of the grants of all loans and advances are not prejudicial to the company’s interest;
(c) Loans and advances in the nature of loans, schedule of repayment of principal and interest are stipulated and repayments or receipts are regular;
(d) If the amount is overdue, state total amount overdue for more than 90 days, and whether reasonable steps have been taken for recovery;
(e) Loan or advance in the nature of loan granted which has fallen due during the year, has been renewed or extended or fresh loans granted to settle the overdue of exiting loans, if so, specify amount of such dues renewed or extended or settled by fresh loans and the percentage to total loans or advances granted during the year; (Not applicable to companies whose principal business is to give loans)
(f) Loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment, if so, specify amount, percentage, and amount of loans granted to Promoters or related parties as defined in company act 2013;
Continuous read – Caro 2020 applicability
(iv) Provision of section 185 & 186 of the Companies Act relating to loans, investments, guarantees and securities have been complied or not;
(v) In respect of deposits or deemed deposits accepted by the company, whether directions issued by RBI and section 73 to 76 of the Companies Act should be complied, if not, the nature of such contraventions be stated; if an order passed by company law board or NCLT or RBI or any other court has been complied with or not;
(vi) Maintenance of cost records and whether such accounts and records have been so made and maintained;
(vii) (a) Company is regular in depositing undisputed statutory dues including GST, PF, ESIC, income-tax, sales-tax, service tax, duty of customs, duty of excise, VAT, cess and any other dues to the authorities and if not, the extent of the arrears as on the last day of the financial year concerned for a period of more than 6 months from the date they became payable, shall be indicated;
(b) Statutory dues referred to in sub-clause (a) not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned (a mere representation to such department shall not be treated as a dispute);
(viii) Transactions not recorded in accounts have been surrendered or disclosed as income during the year in the tax assessments under the Income tax Act 1961, if so, whether unrecorded income has been properly recorded;
Continuous read – Caro 2020 applicability
(ix) (a) Default in repayment of loans or borrowings or payment of interest, to be reported in the format below: –
| Nature of borrowing | Name of Lander | Amount not paid on due date | Whether principal or interest | No. of days delay | Remarks if any |
(b) Whether the company is a declared willful defaulter by bank or financial institution or lender;
(c) Term loans should be applied for the purpose for which they were obtained; if not, the amount so diverted and the purpose for which it is used to be reported;
(d) Funds raised on short term basis have been utilised for long term purposes, if yes, the nature and amount to be indicated;
(e) Company has taken any funds from any entity or person to meet the obligations of its subsidiaries, associates or joint ventures, if so, details thereof with nature of transaction and amount in each case;
(f) Whether the company has raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies, if so, give details thereof and report if defaulted in repayment of such loan raised;
(x) (a) Moneys raised by way of IPO or FPO (including debt instruments) were applied for the purposes for which those are raised, if not, the details together with delays or default and subsequent rectification be reported;
(b) Fund raised through any preferential allotment or private placement or convertible debentures are as per section 42 and section 62 of company act and have been used for the purposes for which funds were raised, if not, provide details of non-compliance;
(xi) (a) Any fraud by the company or any fraud on the company has been noticed or reported, if yes, the nature and the amount involved is to be indicated;
(b) Any report relating to fraud has been filed by the auditors in Form ADT-4;
(c) Auditor has considered whistle-blower complaints, if any, received during the year;
Continuous read – Caro 2020 applicability
(xii) (a) Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20;
(b) Nidhi Company should maintain 10% unencumbered term deposits to meet out liability;
(c) Default in payment of interest on deposits or repayment thereof be reported;
(xiii) Related parties transactions are in compliance with sections 177 and 188 of Companies Act and details have been disclosed in the financial statements;
(xiv) (a) Whether the company has an internal audit system with respect of size and nature of its business;
(b) Reports of the Internal Auditors for the period under audit were considered by the statutory auditor;
(xv) Company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions relating to non-cash transactions have been complied with;
(xvi) (a) Company is required to take registration under section 45-IA of RBI Act, 1934 and if so, whether the registration has been obtained;
(b) Company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration;
(c) Whether the company is a Core Investment Company (CIC), if so, whether it continues to fulfil the criteria, and in case the company is an exempted or unregistered CIC, whether it continues to fulfil criteria;
(d) Whether the Group has more than one CIC as part of the Group, if yes, indicate the number of CICs which are part of the Group;
(xvii) Cash losses in Financial year and in the immediately preceding Financial Year, if so, state the amount;
(xviii) Resignation of the statutory auditors during the year, if so, whether the new auditor has taken into consideration the issues, objections or concerns raised by the outgoing auditors;
(xix) On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report regarding capabilities of company of payment of its liabilities and when they fall due within a period of one year from the balance sheet date;
(xx) (a) Unspent amount of CSR Expenditure to be transfer to a Fund specified within a period of 6 months of the expiry of the Financial year;
(b) Amount remaining unspent, pursuant to any ongoing project, to be transferred to special account;
(xxi) Any qualifications or adverse remarks by auditors in CARO included in the consolidated financial statements, if yes, indicate the details of the companies and the paragraph numbers of the CARO.
Para 4 of Caro order 2020: 1. If there is unfavorable or qualified answer for any of question mentioned in para 3, then auditor’s report shall also mention the basis of such unfavorable or qualified answer.
2. If auditor unable to express any opinion on any specified matter then his report shall indicate such fact and reason for same.
Also see, “Guidance Note of CARO 2020
Caro 2020 word format –
Also see, “Revised Form 3CD in Excel Format“
Also see, “How to file TDS Return”
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