Appendix II
Clause-by-clause comparison of the reporting
requirements of the Order and the erstwhile CARO
2016
1. Short title, application and commencement.-(1) This Order
may be called the Companies (Auditor's Report) Order,
2016.2020.
(2) It shall apply to every company including a foreign company as
defined in clause (42) of section 2 of the Companies Act, 2013 (18
of 2013) hereinafter referred to as the Companies Act except
(i) a banking company as defined in clause (c) of section 5 of the
Banking Regulation Act, 1949 (10 of 1949);
(ii) an insurance company as defined under the Insurance Act,
1938 (4 of 1938);
(iii) a company licensed to operate under section 8 of the
Companies Act;
(iv) a One Person Company as defined underin clause (62) of
section 2 of the Companies Act and a small company as
defined underin clause (85) of section 2 of the Companies
Act; and
(v) a private limited company, not being a subsidiary or holding
company of a public company, having a paid up capital and
reserves and surplus not more than rupees one crore rupees
as on the balance sheet date and which does not have total
borrowings exceeding rupees one crore rupees from any
bank or financial institution at any point of time during the
financial year and which does not have a total revenue as
disclosed in Scheduled III to the Companies Act, 2013
(including revenue from discontinuing operations) exceeding
rupees ten crore rupees during the financial year as per the
financial statements.
(3) It shall come into force on the date of its publication in the
Official Gazette.
Guidance Note on CARO 2020 (Revised 2022)
2. Auditor's report to contain matters specified in paragraphs
3 and 4. - Every report made by the auditor under section 143 of
the Companies Act, 2013 on the accounts of every company
audited by him, to which this Order applies, for the financial years
commencing on or after the 1st April, 20152019, shall in addition,
contain the matters specified in paragraphs 3 and 4, as may be
applicable:
Provided thethis Order shall not apply to the auditor’s report on
consolidated financial statements. except clause (xxi) of
paragraph 3.
3. Matters to be included in the auditor's report. - The auditor's
report on the accounts of a company to which this Order applies
shall include a statement on the following matters, namely:
(i) (a) (A) whether the company is maintaining proper records
showing full particulars, including quantitative details and
situation of fixed assetsProperty, Plant and Equipment;
(B) whether the company is maintaining proper records
showing full particulars of Intangible assets.;
(b) whether these fixed assetsProperty, Plant and
Equipment have been physically verified by the management
at reasonable intervals; whether any material discrepancies
were noticed on such verification and if so, whether the same
have been properly dealt with in the books of account;
(c) whether the title deeds of all the immovable
properties. (other than properties where the company is the
lessee and the lease agreements are duly executed in favour
of the lessee) disclosed in the financial statements are held in
the name of the company. , If if not, provide the details
thereof; in the format below:-
Description Gross Held in Whether Period held Reason for
of property carrying the name promoter, – indicate not being
value of director or range, held in
their where name of
relative or appropriate company*
employee
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Guidance Note on CARO 2020 (Revised 2022)
- - - - - *also
indicate if
in dispute
(d) whether the company has revalued its Property, Plant
and Equipment (including Right of Use assets) or intangible
assets or both during the year and, if so, whether the
revaluation is based on the valuation by a Registered Valuer;
specify the amount of change, if change is 10% or more in the
aggregate of the net carrying value of each class of Property,
Plant and Equipment or intangible assets;
(e) whether any proceedings have been initiated or are
pending against the company for holding any benami property
under the Benami Transactions (Prohibition) Act, 1988 (45 of
1988) and rules made thereunder, if so, whether the company
has appropriately disclosed the details in its financial
statements;
(ii) (a) whether physical verification of inventory has been
conducted at reasonable intervals by the management and
whether, in the opinion of the auditor, the coverage and
procedure of such verification by the management is
appropriate; whether any material discrepancies of 10% or
more in the aggregate for each class of inventory were
noticed and if so, whether they have been properly dealt with
in the books of account;
(b) whether during any point of time of the year, the
company has been sanctioned working capital limits in excess
of five crore rupees, in aggregate, from banks or financial
institutions on the basis of security of current assets; whether
the quarterly returns or statements filed by the company with
such banks or financial institutions are in agreement with the
books of account of the Company, if not, give details;
(iii) whether during the year the company has made investments
in, provided any guarantee or security or granted any loans or
advances in the nature of loans, secured or unsecured, to
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Guidance Note on CARO 2020 (Revised 2022)
companies, firms, Limited Liability Partnerships or any other
parties covered in the register maintained under section 189 of the
Companies Act, 2013.. , Iif so,
(a) whether during the year the company has provided
loans or provided advances in the nature of loans, or stood
guarantee, or provided security to any other entity [not
applicable to companies whose principal business is to give
loans], if so, indicate -
(A) the aggregate amount during the year, and balance
outstanding at the balance sheet date with respect to such
loans or advances and guarantees or security to
subsidiaries, joint ventures and associates;
(B) the aggregate amount during the year, and balance
outstanding at the balance sheet date with respect to such
loans or advances and guarantees or security to parties
other than subsidiaries, joint ventures and associates;
(a) (b) whether the investments made, guarantees provided,
security given and the terms and conditions of the grant of
such all loans and advances in the nature of loans and
guarantees provided are not prejudicial to the company’s
interest;
(b)(c) in respect of loans and advances in the nature of
loans, whether the schedule of repayment of principal and
payment of interest has been stipulated and whether the
repayments or receipts are regular;
(c)d) if the amount is overdue, state the total amount
overdue for more than ninety days, and whether reasonable
steps have been taken by the company for recovery of the
principal and interest;
(e) whether any loan or advance in the nature of loan
granted which has fallen due during the year, has been
renewed or extended or fresh loans granted to settle the
overdues of existing loans given to the same parties, if so,
specify the aggregate amount of such dues renewed or
extended or settled by fresh loans and the percentage of the
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aggregate to the total loans or advances in the nature of loans
granted during the year [not applicable to companies whose
principal business is to give loans];
(f) whether the company has granted any loans or advances
in the nature of loans either repayable on demand or without
specifying any terms or period of repayment, if so, specify the
aggregate amount, percentage thereof to the total loans
granted, aggregate amount of loans granted to Promoters,
related parties as defined in clause (76) of section 2 of the
Companies Act, 2013;
(iv) in respect of loans, investments, guarantees, and security,
whether provisions of sections 185 and 186 of the Companies Act,
2013 have been complied with., If if not, provide the details
thereof.;
(v) in case, the company hasrespect of deposits accepted by
the company or amounts which are deemed to be deposits,
whether the directives issued by the Reserve Bank of India and
the provisions of sections 73 to 76 or any other relevant
provisions of the Companies Act, 2013 and the rules framedmade
thereunder, where applicable, have been complied with,? ‘ If if
not, the nature of such contraventions be stated; if an order has
been passed by Company Law Board or National Company Law
Tribunal or Reserve Bank of India or any court or any other
tribunal, whether the same has been complied with or not?;
(vi) whether maintenance of cost records has been specified by
the Central Government under sub-section (1) of section 148 of
the Companies Act, 2013 and whether such accounts and records
have been so made and maintained. ;
(vii) (a) whether the company is regular in depositing undisputed
statutory dues including Goods and Service Tax, provident fund,
employees' state insurance, income-tax, sales-tax, service tax,
duty of customs, duty of excise, value added tax, cess and any
other statutory dues to the appropriate authorities and if not, the
extent of the arrears of outstanding statutory dues as on the last
day of the financial year concerned for a period of more than six
months from the date they became payable, shall be indicated;
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Guidance Note on CARO 2020 (Revised 2022)
(b) where statutory dues of income tax or sales tax or service tax
or duty of customs or duty of excise or value added tax referred to
in sub-clause (a) have not been deposited on account of any
dispute, then the amounts involved and the forum where dispute
is pending shall be mentioned. (A a mere representation to the
concerned Department shall not be treated as a dispute).
(viii) whether any transactions not recorded in the books of
account have been surrendered or disclosed as income during the
year in the tax assessments under the Income Tax Act, 1961 (43
of 1961), if so, whether the previously unrecorded income has
been properly recorded in the books of account during the year;
(viii) (ix)(a) whether the company has defaulted in repayment of
loans or other borrowings or in the payment of interest thereon to
a financial institution, bank, government or dues to debenture
holders?any lender?, If if yes, the period and the amount of default
to be reported (in case of defaults to banks, financial institutions,
and government, lender wise details to be provided). as per the
format below:-
Nature of Name of Amount Whether No. of Remarks,
borrowing, lender* not paid principal days if any
including on due or delay or
debt date interest unpaid
securities
* lender wise
details to be
provided in
case of
defaults to
banks,
financial
institutions
and
Government.
(b) whether the company is a declared wilful defaulter by
any bank or financial institution or other lender;
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(c) whether term loans were applied for the purpose for
which the loans were obtained; if not, the amount of loan so
diverted and the purpose for which it is used may be reported;
(d) whether funds raised on short term basis have been
utilised for long term purposes,if yes, the nature and amount
to be indicated;
(e) whether the company has taken any funds from any
entity or person on account of or to meet the obligations of its
subsidiaries, associates or joint ventures, if so, details thereof
with nature of such transactions and the amount in each case;
(f) whether the company has raised loans during the year
on the pledge of securities held in its subsidiaries, joint
ventures or associate companies, if so, give details thereof
and also report if the company has defaulted in repayment of
such loans raised;
(ix) (x)(a) whether moneys raised by way of initial public offer or
further public offer (including debt instruments) and term
loans during the year were applied for the purposes for which
those are raised, If if not, the details together with delays or
default and subsequent rectification, if any, as may be
applicable, be reported;
xiv) (b) whether the company has made any preferential allotment
or private placement of shares or fully or partly convertible
debentures (fully, partially or optionally convertible) during the
year under review and if so,, as to whether the requirements
of section 42 and section 62 of the Companies Act, 2013
have been complied with and the amount funds raised have
been used for the purposes for which the funds were raised.,
If if not, provide the details in respect of the amount involved
and nature of non-compliance;
(x)(xi)(a) whether any fraud by the company or any fraud on the
Ccompany by its officers or employees has been noticed or
reported during the year, If if yes, the nature and the amount
involved is to be indicated;
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Guidance Note on CARO 2020 (Revised 2022)
(b) whether any report under sub-section (12) of section
143 of the Companies Act has been filed by the auditors in
Form ADT-4 as prescribed under rule 13 of Companies (Audit
and Auditors) Rules, 2014 with the Central Government;
(c) whether the auditor has considered whistle-blower
complaints, if any, received during the year by the company;
(xi) whether managerial remuneration has been paid or
provided in accordance with the requisite approvals
mandated by the provisions of section 197 read with
Schedule V to the Companies Act? If not, state the amount
involved and steps taken by the company for securing
refund of the same;
(xii)(a) whether the Nidhi Company has complied with the Net
Owned Funds to Deposits in the ratio of 1:20 to meet out the
liability.; and
(b) whether the Nidhi Company is maintaining ten per cent
unencumbered term deposits as specified in the Nidhi Rules,
2014 to meet out the liability;
(c) whether there has been any default in payment of interest
on deposits or repayment thereof for any period and if so, the
details thereof;
(xiii) whether all transactions with the related parties are in
compliance with sections 177 and 188 of Companies Act, 2013
where applicable and the details have been disclosed in the
financial statements, etc., as required by the applicable
accounting standards;
(xiv)(a) whether the company has an internal audit system
commensurate with the size and nature of its business;
(b) whether the reports of the Internal Auditors for the
period under audit were considered by the statutory auditor;
(xv) whether the company has entered into any non-cash
transactions with directors or persons connected with him and if
so, whether the provisions of section 192 of Companies Act, 2013
have been complied with;
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Guidance Note on CARO 2020 (Revised 2022)
xvi) (a) whether the company is required to be registered under
section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934)
and if so, whether the registration has been obtained.
(b) whether the company has conducted any Non-
Banking Financial or Housing Finance activities without a
valid Certificate of Registration (CoR) from the Reserve
Bank of India as per the Reserve Bank of India Act 1934;
(c) whether the company is a Core Investment Company
(CIC) as defined in the regulations made by the Reserve
Bank of India, if so, whether it continues to fulfil the criteria
of a CIC, and in case the company is an exempted or
unregistered CIC, whether it continues to fulfil such criteria;
(d) whether the Group has more than one CIC as part of
the Group; if yes, indicate the number of CICs which are
part of the Group.
(xvii) whether the company has incurred cash losses in the
financial year and in the immediately preceding financial year, if
so, state the amount of cash losses;
(xviii) whether there has been any resignation of the statutory
auditors during the year, if so, whether the auditor has taken into
consideration the issues, objections or concerns raised by the
outgoing auditors;
(xix) on the basis of the financial ratios, ageing and expected
dates of realisation of financial assets and payment of financial
liabilities, other information accompanying the financial
statements, the auditor's knowledge of the Board of Directors and
management plans, whether the auditor is of the opinion that no
material uncertainty exists as on the date of the audit report that
company is capable of meeting its liabilities existing at the date of
balance sheet as and when they fall due within a period of one
year from the balance sheet date;
(xx)(a) whether, in respect of other than ongoing projects, the
company has transferred unspent amount to a Fund specified in
Schedule VII to the Companies Act within a period of six months
of the expiry of the financial year in compliance with second
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proviso to sub-section (5) of section 135 of the said Act;
(b) whether any amount remaining unspent under sub-section
(5) of section 135 of the Companies Act, pursuant to any ongoing
project, has been transferred to special account in compliance
with the provision of sub-section (6) of section 135 of the said Act;
(xxi) whether there have been any qualifications or adverse
remarks by the respective auditors in the Companies (Auditor’s
Report) Order (CARO) reports of the companies included in the
consolidated financial statements, if yes, indicate the details of the
companies and the paragraph numbers of the CARO report
containing the qualifications or adverse remarks.
4. Reasons to be stated for unfavourable or qualified
answers.- (1) Where, in the auditor's report, the answer to any of
the questions referred to in paragraph 3 is unfavourable or
qualified, the auditor's report shall also state the basis for such
unfavourable or qualified answer, as the case may be.
(2) Where the auditor is unable to express any opinion on any
specified matter, his report shall indicate such fact together with
the reasons as to why it is not possible for him to give his opinion
on the same.
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