CARO 2020ガイド | 条項別分析

Companies (Auditor’s Report) Order (CARO) is an extended version of an Audit report wherein the Auditor provides more information in his audit report about the auditee company to make the report more transparent and reliable. Under the Companies Act, CARO has been in place for a very long time. However, it has been amended over a period of time as per changes of business and the economy.

Now, new version of CARO has been notified by the Ministry of Corporate Affairs (MCA) by Companies (Auditor’s Report) Order, 2020 (hereinafter referred to as ‘CARO 2020’). The latest version - CARO, 2020 is having 21 clauses and it is applicable for all statutory audits commencing on or after 1^st April 2021. With this, the companies have to keep more control over its activities and share information with auditors and users of financial statements for more transparency and accountability.

This article will help you in learning about the new CARO 2020 requirements in detail.

1.   Applicability of CARO, 2020

CARO 2020 is applicable to all companies including foreign companies. However, the following are the exceptions:

1. A banking company (as defined in section 5(c) of the Banking Regulation Act, 1949);

2. An insurance company (as defined under the Insurance Act, 1938);

3. A company licensed to operate u/s 8 of Companies Act

4. One Person Company; 

5. Small company as defined in Section 2(85) of the Companies Act, 2013. As per the Companies Act, Small company is those companies that are not public companies and has:
   1. Paid-up share capital does not exceed INR 4 Crores; and 
   2. Gross turnover does not exceed INR 40 Crores as per its last profit and loss accounts.

The threshold limit for small companies has been revised recently through a press release dated 16th September 2022. The earlier threshold limit for share capital was INR 2 Crores and Gross turnover was INR 20 Crores.

6. Private Company (not being a subsidiary or holding company of a public company), having-
   1. Paid up Share capital and reserves and surplus not more than INR 1 crore as on the balance sheet date; and
   2. Total borrowings have not exceeded INR 1 Crores from any bank or financial institution at any point time during the financial year; and
   3. Total revenue, as disclosed in Schedule III to the Act (including revenue from discontinuing operations), was up to INR 10 crore during the financial year as per the financial statements. 

2.   Matters to be included in Auditor’s Report

• Audit report of every auditor, to which CARO applies,  shall contain the matter discussed below.
• CARO, 2020 is applicable from Financial Year commencing from 01.04.2019.
• The table is given below lists down all matters required to be reported in the auditor’s report under the purview of CARO, 2020:

Clause (i): Property, Plant & Equipment & Intangible Asset

Clause(ii): Inventory

Clause (iii): Investments made, Guarantee or security given

1. This clause requires reporting of:
   1. Investments made, 
   2. The guarantee provided or security provided or
   3. Loan or advances granted, secured or unsecured, 

to companies, firms, LLP, or any other parties during the year.

2. If the company has provided loans or advances or stood guarantee or provided security to any other entity during the year then the auditor shall report:
   1. loans or advances and guarantees or security to subsidiaries, joint ventures and associates: the aggregate amount given during the year and balance outstanding at the balance sheet date 
   2. Loans or advances and guarantees or security to other: the aggregate amount given during the year and balance outstanding at the balance sheet date.

3. これらの投資、保証、担保、およびその条件が、会社の利益を損なうものではないか。
4. 貸付金および前払金について、元本および利息の返済スケジュールが定められているか、また返済が定期的に行われているか。90日以上延滞している金額がある場合、会社が回収のために合理的な措置を講じているか。
5. 当年度中に返済期限が到来する貸付金または前払金がある場合、当該貸付金が更新または延長されているか、あるいは既存の貸付金に対して新規の貸付が行われているか。その場合、監査人は以下を明記しなければならない：
   1. 更新、延長、または新規貸付により決済された債務額
   2. 当年度中に供与された貸付金または貸付の性質を有する前払金の総額に対する割合（%）
6. 会社が返済条件や期間を定めずに貸付金または前払金を供与しているか。肯定的な回答の場合、監査人は以下を報告しなければならない：
   1. 総額、
   2. 当該貸付金の総貸付額に対する割合（%）、および会社法2013年第2条第(76)項に定義されるプロモーターや関連当事者に対して供与された貸付金の総額。

条項(iv)：供与された貸付金、投資、保証、および担保

• 本条項は、会社が以下の規定を遵守しているかを確認することを監査人に求めている：
  • 取締役への貸付に関する第185条の規定、および
  • 会社による貸付および投資に関する第186条の規定。

• 常勤取締役、代表取締役、または取締役が利害関係を有する者への貸付や前払金などのコンプライアンスについては、契約または取り決めの台帳に記載されていること。さらに、投資額が所定の基準額を超える場合は、取締役会および株主の適切な承認を得ている必要がある。

• 不遵守がある場合、監査人はその詳細を報告しなければならない。

条項(v)：預り金

• 会社が預り金または預り金とみなされる金額を受け入れている場合、監査人は会社が以下の規定を遵守しているかを確認しなければならない：
  • インド準備銀行（RBI）が発行する指令；
  • 会社法第73条から第76条の規定
  • その他、会社法およびそれに基づく規則の適用される規定

• 違反がある場合、監査人はその違反の性質を報告しなければならない。

• さらに、会社法委員会（CLB）、国家会社法審判所（NCLT）、インド準備銀行（RBI）、または裁判所や審判所によって命令が下されている場合、それが遵守されているか否かについても報告する。

条項(vi)：原価記録

• 監査人は以下について報告しなければならない：
  • 会社が原価記録を保持する義務があるか否か；
  • 義務がある場合、当該原価記録が作成および保持されているか否か。

‍条項(vii)：法定債務

• 監査人は、会社がGST、積立基金（Provident Funds）、ESI、所得税、サービス税、その他法定債務などの争いのない法定債務を定期的に納付しているかを確認しなければならない。
• 不遵守がある場合、監査人は以下を報告しなければならない：
  • 会計年度末時点で6か月以上未払いの法定債務額。
  • 当該金額が紛争を理由に未納である場合、監査人は以下を報告しなければならない：
    • 対象となる金額；
    • 紛争が係属中の機関

• 関係当局への単なる申し立ては、紛争とはみなされない。

条項(viii)：過年度の未申告所得

本条項は、帳簿に記録されていない取引があるかどうかを報告するものである。ただし、そのような取引が所得税法に基づき所得として開示されている場合に限る。その場合、以前に記録されていなかった所得が帳簿に適切に記録されているかを確認する。

条項(ix)：貸付金および借入金の返済不履行

‍

条項(x)：証券の発行

1. IPO/FPO：
   1. 監査人は、当年度中にIPO/FPOを通じて調達された資金が、調達目的のために使用されたことを確認しなければならない。
   2. そうでない場合、監査人は以下を報告しなければならない：
      1. 遅延または不履行
      2. 事後の是正措置（ある場合）。

2. 優先割当、私募、または転換社債：

The Auditor shall check:

1. provisions of sections 42 (private placement) and 62 (Issue of shares on preferential basis) of the Act have been complied with or not.
2. Funds raised are utilized for the purpose for which it was raised.

In case of non-compliance, the auditor shall report the amount involved and the nature of non-compliance.

Clause (xi): Fraud

• This is another important clause in CARO, 2020 wherein the auditor shall check whether any fraud by the company or any fraud on the company has been noticed. If so, the auditor shall report the nature and amount involved.
• Fraud involving amounts of INR 1 crore or more needs to be reported by the auditor to the board or audit committee and after their replies, it should be submitted to the Central Government in ADT-4. This clause covers the reporting of Form ADT-4.
• In this chain, this clause also needs to report on any complaint made by a whistle-blower to the company during the current year.

Clause (xii): Nidhi Companies

• Reporting is required whether the Nidhi company has compiled with the following requirement:
  • Net Owned Funds to Deposit in the ratio of 1:20
  • 10% unencumbered term deposits is maintained
  • Whether there has been any default in repayment of interest on deposits 

Clause (xiii): Related Party Transactions

• According to this clause, all related party transactions entered into are to be checked for compliance viz. approvals, limits, etc. of sections 177 (audit committee) and 188 (related party transactions) of the Act. 
• Also, the disclosures of related party transactions in financial statements should be in accordance with applicable accounting standards.

Clause (xiv): Internal Audit & Auditor

• Internal audit, is a major system prevailing in listed companies and other specified companies given in section 138 of the Companies Act, 2013.
• The Auditor shall ensure that whether the internal audit system implemented by the company is commensurate with the size and nature of its business.
• Whether the Report of the internal auditor is used by the auditor or not.

Clause (xv): Non-Cash transactions

• This clause puts a check on non-cash transactions undertaken by a company that involves the director or any person connected with him/her. 
• If such transactions have taken place in the company, then make sure that proper approvals as required in section 192 of the Act are obtained.

Clause (xvi): Banking & Investment Companies

This clause requires reporting on the following issues:

• Whether the company is required to be registered under RBI Act. If so, whether the registration has been obtained.
• Whether the company has conducted any non-banking financial or housing finance activities without a valid certificate of registration from RBI.
• Whether the company is a Core Investment Company (CIC) and if so, whether it continues to fulfil the criteria of CIC.
• Whether the group has more than one CIC. If yes, number of CICs

Clause (xvii): Cash Losses

The auditor shall report the cash losses incurred in the current year and last year.

Clause (xviii): Resignation of statutory auditors

This clause requires reporting of any resignation by a statutory auditor during the year along with the objections, and concerns raised.

Clause (xix): Liquidity and solvency position

• This clause examines a company's solvency position for repayment of its liabilities over a period of one year considering various factors like financial ratios, ageing, knowledge of management and board of directors plan, and most importantly, non-existence of any material uncertainty in business.

Clause (xx): Transfer of unspent amount of CSR funds

• This clause is relating to CSR funds and their application. Confirmation from management is to be obtained about activities undertaken in accordance with Schedule VII of the Act.
• Details of the amount spent on projects should also be taken from management and verified with bank statements, vouchers, etc.
• The basis that, it should be reported that any unspent amount on projects is transferred to a fund specified in the aforesaid schedule for projects other than ongoing ones within 6 months of the close of the financial year and to a special account for ongoing projects within 30 days of the close of the financial year.

Clause (xxi): Qualification in CARO,2020 of standalone financial statements

• In case any qualifications or adverse remarks are included by the respective auditors,  then details of the companies and the paragraph numbers of the CARO, 2020 report containing the qualifications or adverse remarks are required to be included in the consolidated financial statements of the group.

3. Qualification in report/unfavorable report

A statutory auditor has to mention comments against each matter applicable to the company. In cases, where an auditor is unable to express any opinion on any such matter which is applicable to the company, he is also required to indicate in his report such a fact, together with the reasons why he is unable to express any opinion. 

Also, in case of a qualified or unfavorable opinion, the auditor shall state the basis for such opinion.