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ICAI: CARO 2016 is Liable to CA exams in November 2021

CARO 2016 applicable to CA Exams

The Institute of Chartered Accountants of India ( ICAI) commented that CARO 2016 is liable to CA exams in November 2021.

ICAI stated that it is to be noted that the students that Companies (Auditor’s Report) Order, 2016 issued by Ministry of Corporate Affairs would be applicable for the IPCC (Opted out), Intermediate, Final (Old – Opted out ) and Final (New) examinations to be held in November 2021.

The Companies (Auditor’s Report) Order, 2020 is the new format for the problem of audit reports towards statutory audits of companies beneath the Companies Act, 2013. It has concerned that some more reporting needs post to the consultations through the national Financial Reporting Authority (NFRA). Towards controlling the audit and accounting profession in India NFRA is the independent regulatory organization. The target is to increase the quality of the reporting through the company auditors. 

CARO 2020 will raise the higher due attention and revealings upon the auditors of subjected firms and is been made to provide the higher clarity for the financial concerns for these firms. 

Read Also: ICAI: Extend authority Peer Review Certificate in the wake of COVID

The salient features of the CARO, 2020 are:

  1. CARO 2020 consists of additional clauses with respect to CARO 2016 and the current clauses of CARO 2016 have been redrafted to elicit brief statements from the auditors.
  2. A particular format is given for reporting the information of these immovable properties whose title records are not contained in the name of the firm however are revealed in the financial statements.
  3. Towards the firm the disclosure of the proceedings for existing Benami Property and whether the company has revealed the information in its financial statements.
  4. Flaws of 10% or exceeds the average of every class of inventory revealed in the physical verification of the inventory will need to be reported. 
  5. The auditor is to give the information about the firm as during the time of the year at a specific point that the firm has been provided working capital limits in excess to Rs 5 crores, in average from the banks or financial institutions upon the grounds of the security of the present assets and if the quarterly return or statements furnished through the firm with these banks or financial institutions are in agreement with the books of account of the firm.
  6. For the investments executed by the firm the auditor in clause 3(iii) of CARO, 2020, specified that any guarantee or security provided or any loans or advances in the nature of loans granted, secured or unsecured, to companies, firms, Limited Liability Partnerships, etc. in the year that they are not biased to the company interests. 
  7. For reporting the period a particular format is been prescribed and the amount of the default through the firm in repayment of the loans or other borrowings or in the payment of the interest to the lender. 
  8. The auditor is obligated to furnish his choice upon the grounds of the financial ratios, ageing and supposed dates of realization of financial assets and payment of financial liabilities, additional details directing the financial statements the auditor’s knowledge of the board of directors and administration plans that no material uncertainty takes place on the audit report date which the firm is competent of meeting the liability existing on the time of the balance sheet and when they get not furnished within 1 year from the date of the balance sheet.
  9. The number of cash losses that occurred in the FY, a quick report is to be given for the last FY. 
  10. The auditor needs to acknowledge the issues, objections or concerns urged through the outgoing auditors prior to forming his call. 
  11. There is a need to report about the firm if it is declared a wilful defaulter through any bank or financial institution/other lenders.
  12. The auditor will need to report as to whether term loans were applied for the intention for which the loans were taken if not the amount of the loan so transferred and the intention for which it is practiced will need to be reported. 
  13. The auditor needs to report so as to whether any fraud through the firm or any bogus on the firm is been seen or reported in the year if yes nature and the amount engaged is to be designated. 
  14. The auditor is to acknowledge whistle-blower complaints taken in the year by the Company in his audit.
  15. The auditor is to report if the firm has done any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India according to the RBI Act.

The auditor is now needed to show the information of the subsidiary firms and the sub-clauses number having qualifications adverse remarks through the corresponding auditors in CARO reports of the firms engaging in the consolidated financial statements.

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