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The Guidance Note has been revised to provide guidance on the corresponding disclosure requirements of Schedule III to the Companies Act, 2013 which pertain to the clauses of CARO 2020
Guidance Note is developed to provide detailed guidance on various clauses of CARO 2020 and various issues involved therein in an easy to understand language.
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- Guidance Note on the Companies (Auditor's Report) Order, 2020 (Revised 2022 Edition)
- Guidance Note on the Companies (Auditor’s Report) Order, 2020.
- Guidance Note on Audit of Consolidated Financial Statements (Revised 2016)
- Guidance Note on Reports or Certificates for Special Purposes (Revised 2016)
Jul 16, 2022 · The Institute of Chartered Accountants of India (ICAI) provides detailed guidance on the Companies (Auditor’s Report) Order, 2020 (CARO 2020) and its amendments. The Guidance Note covers various clauses of CARO 2020 and their corresponding disclosure requirements in financial statements.
- References
- Guidance by ICAI
- Guidance by ICAI
- Disclosures under Schedule III to the 2013 Act (New disclosure)
- Reasonable intervaI
- Appropriate coverage and procedure of verification
- Guidance by ICAI
- Quarterly returns/statements filed with banks and financial institutions
- Disclosures under Schedule III to the 2013 Act (New disclosure)
- Guidance by ICAI
- Guidance by ICAI
- Guidance by ICAI
- Wilful defaulter
- Guidance by ICAI
- Disclosures under Schedule III to the 2013 Act (New disclosure)
- Guidance by ICAI
- Key considerations
- Guidance by ICAI
- Period of default and amounts payable
- Disputed statutory dues
- Scope of reporting
- Separate reporting on fraud ‘on’ or ‘by’ the company
- Other considerations
- Guidance by ICAI
- Disclosures under Schedule III to the 2013 Act (New disclosure)
- Exemption from approval
- Transactions entered into by a director or an employee
- Non-cash transactions
- Guidance by ICAI
- Company’s ability to meet its liabilities
- Basis of opinion
- Disclosures under Schedule III to the 2013 Act (New disclosure)
- Key considerations
- Guidance by ICAI
- Conduct of a business and registration as an NBFC, HFC and/or CIC and compliances by a Nidhi company
- Guidance by ICAI
- Companies in a group
- Guidance by ICAI
- Guidance by ICAI
- Guidance by ICAI
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References to relevant guidance and abbreviations, when used, are defined within the text of this publication.
For the purpose of reporting under this clause, reasonable and suficient description of the asset to facilitate identification should be made available by the company. Additional information that needs to be recorded should include, location of the asset, original cost details, date on which the asset becomes available for use by the company with d...
The reporting under this clause would require ascertainment of whether proceedings have been initiated under the Benami Property Act by the Initiating Oficer3 during the year and/or any proceedings are pending against the company before the Initiating Oficer/Adjudicating Authority/ Appellate Tribunal/High Court/Supreme Court during any of the prece...
Notes to balance sheet - As part of additional regulatory information A company is required to provide the details of all the immovable property (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held in the name of the company in the given format. Whe...
As per the guidance note, what constitutes ‘reasonable interval’ would depend on circumstances of each case. The periodicity of the physical verification of inventories depends upon the nature
Though physical verification of inventories is primarily the duty of the management, an auditor is expected to examine the methods, procedures and the coverage of such verification. What constitutes ‘appropriate’ while determining coverage and procedure of verification is a matter of professional judgement. The coverage and procedure of such verifi...
Reporting under this clause would not cover: Unsecured working capital, if any sanctioned Working capital sanctioned on the basis of assets, other than current assets Utilisation of working capital sanctioned.
Management is required to submit certain quarterly returns/statements to banks and financial institutions. These would include - stock statements, book debt statements, credit monitoring arrangement reports, statements on ageing analysis of the debtors/other receivables, and other financial information submitted in a stipulated format to lenders. O...
Additional regulatory information - Notes to the balance sheet Where a company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose the following: a. Whether quarterly returns or statements of current assets filed by the company with banks or financial institutions are in agreement with t...
An auditor is required to comment on each of the sub-clause and in respect of all loans/advances in nature of loans granted, guarantee or security provided to companies, firms, LLPs or any other parties. Further, all kind of loans i.e., long-term/short-term, in cash or in kind given by the company to any party would be covered.
Reporting under this clause would be applicable to all companies and would cover: Loans and advances in nature of loans granted during the year Loans and advances in nature of loans with opening balances and Advances in nature of loans which do not contain the schedule of repayment and payment of interest. The clause requires examination of loan...
In respect of loan or related guarantee/security given by a company to its directors, the nature of the non-compliance, the maximum amount outstanding during the year and the amount outstanding as at the balance sheet date would be reported in respect of: Directors and Any person in whom any of the director of the company is interested (specifying ...
CARO 2020 introduces a new reporting requirement relating to whether the company has been declared as a wilful defaulter by any bank or financial institution or other lender. The clause covers defaults in payment of loans or other borrowings (including principal and interest) to any lender. It also covers rescheduled/restructured loans, disputed lo...
As per the guidance note, reporting under this clause would be restricted to the relevant financial year under audit till the date of auditor’s report. The term ‘wilful default’ has been defined by RBI in its circular on wilful defaulters10 which, inter alia, includes occurrence of any of the following events as a wilful default: The unit has def...
Term loans generally carry a repayment period of more than 36 months. Therefore, term loans would not cover cash credit, overdraft and call money accounts/deposits. As per the guidance note, terms loans obtained from entities/persons other than banks/financial institutions would also be covered for the purpose of reporting under this clause. The RB...
The underlying principle for the requirement is to assess financial health of an entity. For the purpose of reporting under this clause, long-term sources of funds along with their long-term application by a company would be determined using the data contained in the financial statements. Long-term sources of funds would include share capital, rese...
Schedule III disclosures and CARO 2020 with its new bundle of clauses aims to provide a comprehensive position of the loans and advances taken or given by a company. Some of the key reporting requirements introduced relate to: Loans or advances in the nature of loans which are either repayable on demand or do not specify any terms or period of repa...
Regularity of payment of addition to the ones specifically listed from time to time upon occurrence b. Dividend payment to shareholders statutory dues under the clause. or non-occurrence of certain events under the 2013 Act as the same is and therefore, are not required to be on account of contractual obligation As per the guidance note, the term A...
Reporting under this clause would cover all such cases where the company has been in default in depositing the statutory dues anytime during the year, irrespective of the fact that there are no arrears on the balance sheet date. For the purpose of reporting, statutory dues would be considered as payable: As at the date of the expiry of the stay g...
In case of non-payment of any statutory due on account of any dispute, an auditor is required to state the amounts involved irrespective of the treatment of such disputed amounts in books of accounts along with the forum where the dispute is pending. The reporting would cover minor amounts as well. As per the guidance note, a matter would be consid...
As per the guidance note, detection of fraud that have an intent to injure the interests of the company or cause wrongful gain or wrongful loss might not be possible for an auditor unless the financial effects of such acts are reflected in the books of account/ financial statements of the company. For instance, pay-offs received by an employee for ...
An auditor is required to report separately on the nature and amount involved with respect to: Fraud on the company i.e., fraud committed by the employees or third parties Fraud by the company i.e., fraud involving one or more members of management or those charged with governance.
Two types of intentional misstatements that are relevant to the auditor’s consideration of fraud are: Misstatements resulting from fraudulent financial reporting: It involves intentional misstatements or omissions of amounts/ disclosures in financial statements to deceive financial statement users Misstatements resulting from misappropriation of ...
The term ‘surrendered or disclosed’ implies that the company must have voluntarily admitted to the addition of such income, which can be demonstrated on the basis of the returns filed by the company. Therefore, reporting under this clause would not cover situations, for instance, where additions have been made by income tax authorities and the comp...
Notes to the statement of profit and loss – Additional information A company is required to give details of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the IT Act (such as, search or survey or any other relevant provisions of the IT Act), unless ...
Approval of shareholders and audit committee is not required for transactions entered into between a holding company and its wholly-owned subsidiary.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
A publication that explains the new reporting requirements under CARO 2020 and Schedule III for auditors and companies. It covers topics such as property, plant and equipment, loans and investments, related party transactions, and more.
a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949. (10 of 1949); surance Act,1938 (4 of 1938); a company licensed to operate und. section 8 of the Companies Act; a One Person Company as defined in clause (62) of section 2 of the Companies Act and a small company as defined in clause (85) of s.
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What is the guidance note?
Companies (Auditor’s Report) Order, 2016 (CARO 2016). Appendix II to this Guidance Note contains a clause-by-clause comparison of the reporting requirements of the Order and the erstwhile CARO 2016. 3. The purpose of this Guidance Note is to enable the members to comply with the reporting requirements of the Order.
