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a. Payment of management remuneration in accordance with Sch V has been withdrawn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
- How to Calculate and Pay Advance Tax for CorporatesHow to Calculate and Pay Advance Tax for Corporates Advance tax, often referred to as “pay-as-you-earn,” is the income tax payable in advance as per the provisions of the Income Tax Act. Sections 208 and 209 of the Income Tax Act outline the rules and computation methods for advance tax. This guide provides […]
- Highlights and Updates from the 55th GST Council MeetingHighlights and Updates from the 55th GST Council Meeting The 55th GST Council meeting, held on December 21, 2024, in Jaisalmer, Rajasthan, was chaired by the Union Finance Minister. Attendees included the Union Minister of State for Finance, several Chief and Deputy Chief Ministers, State Finance Ministers, and senior officers from […]
- A Guide to Belated Returns, Revised Returns, and ITR-UA Guide to Belated Returns, Revised Returns, and ITR-U Filing Income Tax Returns (ITR) is a crucial responsibility for taxpayers in India. As the year nears its end, December 31, 2024, is the final date to submit belated and revised returns for the financial year 2023-24 (assessment year 2024-25). This guide […]
- Bombay High Court Directs CBDT to Extend E-Filing Deadline; Upholds Section 87A Rebate as a Fundamental RightBombay High Court Directs CBDT to Extend E-Filing Deadline; Upholds Section 87A Rebate as a Fundamental Right In a landmark decision, the Bombay High Court has directed the Central Board of Direct Taxes (CBDT) to extend the deadline for filing income tax returns (ITRs) from December 31, 2024, to January 15, 2025. This decision comes […]
- Mandatory Multi-Factor Authentication for E-Way Bill and E-Invoice Generation from April 2025Mandatory Multi-Factor Authentication for E-Way Bill and E-Invoice Generation from April 2025 Starting April 1, 2025, the use of Multi-Factor Authentication (MFA) will become mandatory for all GST-registered taxpayers accessing the updated E-Way Bill and E-Invoice systems. This initiative, as announced in an advisory on the GST portal, aims to bolster […]