- Introduction to CARO 2020:
- Replaced the Companies (Auditor’s Report) Order, 2016.
- Aims to enhance the quality of reporting by company auditors.
- Additional reporting requirements introduced after consultations with the National Financial Reporting Authority (NFRA).
- Applicability of CARO 2020:
- Applicable for statutory audits commencing on or after April 1, 2021, for the financial year 2020-21.
- Covers all companies previously under CARO 2016, including foreign companies.
- Exemptions include one-person companies, small companies, banking companies, charitable organizations, and insurance companies, among others.
- Reporting Requirements Under CARO 2020:
- Detailed reporting on various aspects such as tangible and intangible assets, inventory, working capital, investments, loans, compliance with legal provisions, fraud, compliance by Nidhi companies, etc.
- Auditor’s report to include statements on matters like non-compliance, defaults, fraud, and internal audit systems, among others.
- Detailed Reporting Under Each Clause:
- Provides a breakdown of reporting requirements under each clause, covering aspects such as asset details, inventory, loans, compliance, fraud, internal audit systems, and non-cash transactions, among others.
- Material Uncertainty and Qualifications:
- Mandates reporting on material uncertainties regarding financial liabilities and compliance with Corporate Social Responsibility (CSR) obligations.
- Requires disclosure of qualifications or adverse remarks in the audit reports of group companies.
- Impact on Audits:
- Affects the process and scope of statutory audits, emphasizing thorough scrutiny and reporting by auditors.
- Ensures greater transparency, accountability, and compliance with legal and regulatory provisions in financial reporting.
- Conclusion:
- CARO 2020 signifies a significant step towards enhancing corporate governance and financial transparency in Indian companies.
- Requires auditors to adhere to stringent reporting standards, contributing to the overall integrity and reliability of financial statements.
Monday, December 23, 2024
Decoding CARO 2020: Auditor’s Report Order Explained
Insights into the New Audit Format and Reporting Requirements
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