As you would Know, MCA has notified Companies (Auditor’s Report) Order 2020 or CARO 2020, with effect from February 25th, 2020. Notice that it was 16 Clauses earlier and there are 21 Clauses now. It added 5 Additional Clauses.
Below are 10 major changes in CARO 2020
1) Fixed Asset Rejig
a. Before words Fixed Assets, Now it is replaced with land, plant, equipment and intangible assets (PPEIA).
b.When Title Deed is not in the company’s name (except in the case of Lease) then all these instances disclose with justification in the tabular format.
c.Any Revaluation to be recorded in PPEIA.
d.Any Benami proceedings started to be reported.
2) Inventory Physical Verification & Bank Limit Rejig
a. Coverage of inventory verification and the procedure to be disclosed.
b. Any dis.crepancy to be closed above 10 percent
c. Any Working Capital Limit beyond 5 Cr on Current Assets Collateral to be reported and returns filed with Bank in compliance with Records
3) Loans & Advances Rejig
a. Earlier payments settled by extension, renewal or new loans to be reported.
b. Any loans on a request basis to be reported separately.
4) Default in Loan Repayment Rejigs
a. Specified Default Reporting table
b. Disclosure of Financial Institutions found willful defaulter.
c. Terms of loan used for the right purpose or not
d. Whether Short term loans are applied for long term purposes.
e. Funds received under the service obligation of Subsy, JV or Associate Companies
f. Funds received for the commitment of shares of Subsy, JV or Associate Companies
5) Fraud Reporting Rejig
a. ADT-4 Filed by the Auditor, if any, to be reported.
b. Any complaint made to the whistleblower during the audit
6) Managerial Remuneration Clause Deletion
a. Payment of management remuneration in accordance with Sch V has been withdrawn
7) Five New Clauses
a. 17 – Cash Losses – Cash losses need to be reported to the FY if any
b. 18 – Resignation of Auditor – Issues raised by him whether they were considered or not if any.
c. 19 –The willingness of the Company to meet its current liabilities in the auditor’s view on the basis of ratios results and aging.
d. 20 – CSR Compliance – Ongoing project whether the unused amount was transferred to the fund within 6 months / Special account
e. 21 – Companies in Consolidation –All negative comments of CARO, whether of any grant, JV or Associate company as consolidated, must be reported in Holding Company Clause 21 of CARO.
8) NBFC Companies Compliance Reporting Rejig
a. Whether NBFC is having a valid Certificate from RBI
b. Whether it’s CIC, whether there is more than 1 CIC and compliance in the community.
9) Internal Audit Rejig
a. Whether the Internal Audit System exists as per the Company Size or not?
b.Whether any internal audit report was considered by the auditors
10) Income Tax Transactions not in Books
a. Whether any transactions offered for income tax purposes, but not recorded in Books.
Conclusion:-
Welcome Changes, these will improve the reporting especially after ILFS, DHFL Fiasco
Latest Updates
- NRI Tax Filing in India: A Guide to Rent, Capital Gains & Interest IncomeNRI Tax Filing in India: A Guide to Rent, Capital Gains & Interest Income As global mobility increases, a significant number of Indians live abroad while maintaining financial interests in India—be it property, investments, or bank accounts. For Non-Resident Indians (NRIs), understanding how income earned in India is taxed is crucial, […]
- Foreign Tax Credit in India: A Guide for NRIsForeign Tax Credit in India: A Guide for NRIs As cross-border employment, freelancing, and global investments become increasingly common, a growing number of Indians are earning income from foreign sources. However, this also brings with it the challenge of double taxation, particularly for those who return to India and become tax […]
- Top 10 Tax Filing Rules for FY 2024-25Top 10 Tax Filing Rules for FY 2024-25 Filing your Income Tax Return (ITR) is more than just a statutory formality — it’s a crucial step for financial transparency, refund claims, and avoiding penalties. For the Financial Year 2024–25 (Assessment Year 2025–26), the Income Tax Department has introduced key rule changes […]
- Crypto Non-Filers Under IT ScannerCrypto Non-Filers Under IT Scanner As the digital asset space gains momentum in India, so does the scrutiny by tax authorities. The Income Tax Department (ITD) has intensified its efforts to ensure compliance among cryptocurrency investors and traders, particularly those who have not reported their earnings from Virtual Digital Assets (VDAs) […]
- Income Tax Filing 2025: 6 Easy Ways to e-Verify Your ITR OnlineIncome Tax Filing 2025: 6 Easy Ways to e-Verify Your ITR Online Filing your Income Tax Return (ITR) is only part of the compliance process — the job isn’t done until you verify your return. Without verification, your ITR submission will be treated as invalid under the Income Tax Act, 1961. Fortunately, the […]