Contents I-9 CARO, 2020 in nutshell I-35 CARO, 2020 clause-wise Ready Reckoner I-37 FAQs and Case Studies on CARO, 2020 I-43 CARO Checklist I-69 DIVISION ONE CARO REPORTING UNDER CARO, 2020 (APPLICABLE FROM FINANCIAL YEAR 2021-22) CHAPTER 0 Introduction 3 CHAPTER 1 Additional Regulatory Information Disclosure Requirements of Schedule III vis-a-vis CARO, 2020 11 CHAPTER 2 Applicability of CARO, 2020 33 CHAPTER 3 Property, Plant and Equipment 61 CHAPTER 4 Intangible Assets 103 I-5
CHAPTER 5 Title Deeds of all Immovable Properties Disclosed in Accounts 121 CHAPTER 6 Proceedings Pending against the Company for Holding Benami Property 138 CHAPTER 7 Inventory 151 CHAPTER 8 Quarterly Statements Submitted to Banks/FIs by Companies Enjoying Sanctioned Working Capital Limits 178 CHAPTER 9 Loans or Advances in the Nature of Loans or Guarantees or Security Provided to, or Investments made in, Other Entities 189 CHAPTER 10 Reporting on Compliance with Sections 185 and 186 as Regards Loans, Investments, Guarantees and Securities 244 CHAPTER 11 Acceptance of Public Deposits and Deemed Deposits 266 CHAPTER 12 Maintenance of Cost Records 287 CHAPTER 13 Payment/Non-Payment of Statutory Dues 298 CHAPTER 14 Transactions not Recorded in the Books and Surrendered or Disclosed as Income in Tax Assessment 319 I-6
CHAPTER 15 Company Defaults in Repayment of Loans/Other Borrowings/in Payment of Interest to any Lender 324 CHAPTER 16 End use of Term Loans 350 CHAPTER 17 ‘Asset-Liability Maturity Mismatch’ - Use of Short-Term Funds for Long-Term Purposes 356 CHAPTER 18 Funds taken from other entities by Company to Meet Obligations of Subsidiaries, Associates or JVs 362 CHAPTER 19 Whether Company has Raised Loan on Pledge of Securities in Subsidiaries, Associates or JVs 367 CHAPTER 20 End Use of Moneys Raised by Way of IPO/FPO 371 CHAPTER 21 Private Placement/Preferential Allotment of Shares/FCDs/ PCDs/OCDs 377 CHAPTER 22 Frauds Noticed/Reported 394 CHAPTER 23 Reporting of Compliances by Nidhi Companies 411 CHAPTER 24 Related Party Transactions 418 CHAPTER 25 Internal Audit 449 I-7
CHAPTER 26 Non-Cash Transactions Involving Directors or Connected Persons 461 CHAPTER 27 Registration of NBFCs u/s 45-IA of RBI Act, 1934 468 CHAPTER 28 Whether Company has Incurred Cash Loss 485 CHAPTER 29 Resignation of Statutory Auditors 490 CHAPTER 30 Material Going Concern Uncertainty 496 CHAPTER 31 Transfer of Unspent CSR Funds 530 CHAPTER 32 Reasons to be Stated by Auditor for Qualified or Adverse Remarks in CARO Report 539 DIVISION TWO CARO REPORT ON CONSOLIDATED FINANCIAL STATEMENTS UNDER CARO, 2020 CHAPTER 33 Qualified/Adverse Remarks in CARO Reports of Companies Included in Consolidated Financial Statements 543 APPENDICES SCHEDULE III OF COMPANIES ACT, 2013 549 COMPANIES (AUDITOR'S REPORT) ORDER, 2020 654 RELEVANT PROVISION OF COMPANIES ACT, 2013 661 I-8
Chapter-heads I-5 CARO, 2020 in nutshell I-35 CARO, 2020 Clause-wise Ready Reckoner I-37 FAQs and Case Studies on CARO, 2020 I-43 CARO Checklist I-69 DIVISION ONE CARO REPORTING UNDER CARO, 2020 (APPLICABLE FROM FINANCIAL YEAR 2021-22) INTRODUCTION 0.1 3 0.2 3 0.3 4 0.4 4 0.5 5 0.6 5 0.7 5 0.8 6 0.9 7 0.10 7 0.11 8 I-9
0.12 8 0.12-1 8 0.12-1A 8 0.12-2 9 0.12-3 9 0.12-4 9 0.12-5 9 0.12-6 10 0.12-7 10 1 ADDITIONAL REGULATORY INFORMATION DISCLOSURE REQUIREMENTS OF SCHEDULE III VIS-A-VIS CARO, 2020 1.1 11 1.2 12 1.2-1 i c 12 1.2-2 i c 15 1.3 15 1.3-1 i c 16 1.3-2 i d 18 1.4 18 1.4-1 i e 19 I-10
1.4-2 i e 20 1.5 21 1.5-1 ii b 22 1.5-2 ii b 23 1.6 24 1.6-1 iii f 24 1.6-2 iii f 26 1.7 27 1.7-1 viii 27 1.7-2 viii 28 1.8 29 1.8-1 ix b 29 1.8-2 ix b 30 1.9 31 1.9-1 ix c 31 I-11
1.9-2 ix c d 32 2 APPLICABILITY OF CARO, 2020 2.1 34 2.2 34 2.2-1 34 2.2-2 36 2.3 38 2.3-1 38 2.3-2 39 2.3-3 40 2.3-4 40 2.3-5 48 2.3-6 50 2.3-7 51 2.3-8 52 2.3-9 iv 55 2.3-10 58 2.4 60 3 PROPERTY, PLANT AND EQUIPMENT 3.1 63 3.1-1 64 3.1-2 65 I-12
3.1-3 65 3.2 65 3.2-1 i.e., 66 3.2-2 i 66 3.3 i a A 66 3.3-1 i a A 67 3.3-2 67 3.3-3 i a A 72 3.3-4 74 3.3-5 75 3.3-6 75 3.4 i b 75 3.4-1 75 3.4-2 76 3.4-3 79 3.5 79 3.5-1 80 3.6 i d 81 3.6-1 81 3.6-2 82 3.6-3 82 3.6-4 83 I-13
3.6-5 86 3.6-6 86 3.6-7 i d 86 3.7 92 3.8 i d) 93 3.9 i d 93 3.10 i 94 3.11 95 3.12 96 3.13 i a A i b 96 3.14 98 4 INTANGIBLE ASSETS 4.1 104 4.1-1 106 4.1-2 106 4.1-3 106 4.2 106 4.3 107 4.3-1 107 4.3-2 i a B 109 4.3-3 111 4.3-4 112 4.4 i d 112 I-14
4.4-1 112 4.4-2 113 4.4-3 113 4.4-4 114 4.4-5 114 4.4-6 114 4.4-7 i d 114 4.5 117 4.6 i d 118 4.7 i d 118 4.8 i d 119 4.9 i 119 4.10 120 5 TITLE DEEDS OF ALL IMMOVABLE PROPERTIES DISCLOSED IN ACCOUNTS 5.1 122 5.2 125 5.3 126 5.4 127 5.5 127 I-15
5.6 127 5.7 i 129 5.8 i c 130 5.9 132 6 PROCEEDINGS PENDING AGAINST THE COMPANY FOR HOLDING BENAMI PROPERTY 6.1 benami 139 6.2 Benami 140 6.2-1 26 141 6.2-2 141 6.2-3 benami 142 6.2-4 “benami 145 6.3 benami 145 6.4 147 6.5 149 6.6 h 150 6.7 j a 150 7 INVENTORY 7.1 152 7.1-1 i ii a 152 I-16
7.1-2 i ii a 152 7.2 152 7.2-1 ii a e.g., 153 7.3 153 7.3-1 e.g., 153 7.3-2 154 7.3-3 154 7.4 ii a 156 7.5 157 7.6 157 7.6-1 157 7.6-2 158 7.6-3 159 7.7 ii a 160 7.8 i 173 7.9 h 174 7.10 ii a 174 7.11 176 I-17
8 QUARTERLY STATEMENTS SUBMITTED TO BANKS/ FIs BY COMPANIES ENJOYING SANCTIONED WORKING CAPITAL LIMITS 8.0 179 8.1 179 8.1-1 180 8.1-2 180 8.1-3 180 8.1-4 181 8.1-5 181 8.1-6 181 8.2 181 8.3 182 8.4 184 9 LOANS OR ADVANCES IN THE NATURE OF LOANS OR GUARANTEES OR SECURITY PROVIDED TO, OR INVESTMENTS MADE IN, OTHER ENTITIES 9.1 193 9.2 195 9.2-1 196 I-18
9.2-2 6 201 9.3 201 9.4 202 9.4-1 203 9.5 iii 203 9.6 a iii 205 9.6-1 iii a 206 9.7 iii b 207 9.7-1 211 9.7-2 211 9.7-3 213 9.7-4 213 9.7-5 iii b 227 9.7-6 e 227 9.7-7 228 9.8 iii c 228 9.8-1 iii c 230 9.8-2 231 I-19
9.9 iii c 231 9.10 iii d 231 9.10-1 iii d 232 9.10-2 iii d 232 9.11 233 9.11-1 233 9.11-2 233 9.12 iii e 233 9.12-1 iii e 234 9.12-2 iii e 234 9.13 iii f 235 9.13-1 76 235 9.13-2 69 236 9.13-3 238 9.13-4 iii f 239 9.14 239 10 REPORTING ON COMPLIANCE WITH SECTIONS 185 AND 186 AS REGARDS LOANS, INVESTMENTS, GUARANTEES AND SECURITIES 10.1 244 10.2 245 10.3 245 10.3-1 246 10.3-2 247 I-20
10.3-3 247 10.3-4 248 10.3-5 249 10.3-6 250 10.3-7 250 10.4 251 10.5 251 10.5-1 252 10.6 252 10.6-1 253 10.6-2 255 10.6-3 255 10.6-4 256 10.6-5 256 10.6-6 256 10.6-7 257 10.6-8 257 10.7 257 10.8 257 10.9 257 10.10 258 10.11 259 10.12 259 10.12-1 260 10.13 262 I-21
10.14 262 10.14-1 262 10.14-2 263 10.15 265 11 ACCEPTANCE OF PUBLIC DEPOSITS AND DEEMED DEPOSITS 11.1 v 268 11.2 268 11.2-1 268 11.2-2 274 11.2-3 275 11.2-4 282 11.3 283 11.4 285 11.5 v 285 11.6 286 12 MAINTENANCE OF COST RECORDS 12.1 vi 288 12.2 289 12.2-1 289 12.3 289 12.3-1 294 12.4 vi 295 I-22
12.5 vi 295 12.6 295 12.7 296 12.8 vi 296 12.9 296 13 PAYMENT/NON-PAYMENT OF STATUTORY DUES 13.1 vii 300 13.2 300 13.2-1 vii a 302 13.2-2 306 13.2-3 vii a 306 13.2-4 307 13.2-5 307 13.2-6 307 13.2-7 vii b 307 13.2-8 311 13.2-9 j a 311 13.3 vii a 312 13.4 vii b 312 13.5 315 13.6 vii a b 315 13.7 315 I-23
14 TRANSACTIONS NOT RECORDED IN THE BOOKS AND SURRENDERED OR DISCLOSED AS INCOME IN TAX ASSESSMENT 14.1 319 14.2 320 14.2-1 320 14.2-2 321 14.3 321 14.4 322 15 COMPANY DEFAULTS IN REPAYMENT OF LOANS/ OTHER BORROWINGS/IN PAYMENT OF INTEREST TO ANY LENDER 15.1 ix a 325 15.1-1 325 15.1-2 325 15.1-3 325 15.1-4 326 15.1-5 326 15.1-6 327 15.2 329 15.3 331 15.4 ix b 332 15.5 xix 333 15.6 334 I-24
Annex 15.1 335 16 END USE OF TERM LOANS 16.1 350 16.2 351 16.3 ix c 351 16.4 352 16.4-1 352 16.5 352 16.6 353 16.7 354 17 ‘ASSET-LIABILITY MATURITY MISMATCH’ - USE OF SHORT-TERM FUNDS FOR LONG-TERM PURPOSES 17.1 356 17.2 ix d 356 17.3 357 17.4 358 17.5 358 17.6 358 17.7 358 17.8 359 17.9 359 17.10 360 17.11 361 17.12 ix d 361 I-25
18 FUNDS TAKEN FROM OTHER ENTITIES BY COMPANY TO MEET OBLIGATIONS OF SUBSIDIARIES, ASSOCIATES OR JVs 18.1 363 18.2 363 18.3 363 18.4 363 18.5 363 18.6 364 19 WHETHER COMPANY HAS RAISED LOAN ON PLEDGE OF SECURITIES IN SUBSIDIARIES, ASSOCIATES OR JVs 19.1 367 19.2 368 19.3 368 19.4 369 20 END USE OF MONEYS RAISED BY WAY OF IPO/FPO 20.1 371 20.2 372 20.3 372 20.4 373 20.5 373 I-26
20.6 373 20.7 376 20.8 x a 376 20.9 376 21 PRIVATE ALLOTMENTPLACEMENT/PREFERENTIALOFSHARES/FCDs/PCDs/OCDs 21.1 x b 378 21.2 x b 378 21.3 379 21.4 388 21.5 391 21.6 392 21.7 393 22 FRAUDS NOTICED/REPORTED 22.1 395 22.2 xi vis-a-vis 395 22.2-1 397 22.2-2 397 22.2-3 398 22.2-4 399 22.2-5 400 22.3 400 22.4 xi a 403 22.4-1 xi a 404 I-27
22.5 406 22.6 406 22.6-1 xi b 407 22.7 407 22.7-1 xi c 408 22.7-2 xi c 410 22.7-3 xi c 410 22.7-4 410 22.8 410 23 REPORTING OF COMPLIANCES BY NIDHI COMPANIES 23.1 412 23.2 412 23.3 412 23.3.1 413 23.4 414 23.5 414 23.6 416 23.7 416 23.7-1 xii 416 24 RELATED PARTY TRANSACTIONS 24.1 xiii 419 24.2 419 24.3 iv 420 I-28
24.3-1 420 24.3-2 420 24.3-3 427 24.3-4 428 24.4 xiii 430 24.4-1 430 24.4-2 432 24.4-3 433 24.4-4 439 24.4-5 iv 443 24.4-6 443 24.4-7 444 24.5 444 24.6 447 25 INTERNAL AUDIT 25.1 450 25.2 450 25.2-1 451 I-29
25.2-2 451 25.3 xiv a b 452 25.4 453 25.5 454 25.5-1 xiv a 456 25.6 xiv b 457 25.7 xiv b 460 26 NON-CASH TRANSACTIONS INVOLVING DIRECTORS OR CONNECTED PERSONS 26.1 xv 461 26.2 xv 462 26.2-1 462 26.2-2 462 26.2-3 463 26.2-4 463 26.3 463 26.3-1 464 26.3-2 465 26.4 xv 465 26.5 467 26.6 467 I-30
27 REGISTRATION OF NBFCs U/S 45-IA OF RBI ACT, 1934 27.1 xvi 469 27.2 xvi a 470 27.2-1 470 27.2-2 470 27.2-3 470 27.2-4 471 27.2-5 471 27.2-6 472 27.2-7 i.e 473 27.3 xvi a 476 27.4 xvi b 477 27.4-1 477 27.4-2 478 27.4-3 478 27.5 xvi b 479 27.6 xvi c 480 27.6-1 480 27.6-2 481 27.6-3 481 27.6-4 481 27.7 xvi c 482 27.8 xvi d 483 27.8-1 483 27.9 xvi d 483 I-31
27.10 xvi 484 27.11 484 28 WHETHER COMPANY HAS INCURRED CASH LOSS 28.1 485 28.2 487 28.3 487 28.4 488 28.5 488 28.6 489 29 RESIGNATION OF STATUTORY AUDITORS 29.1 xvii 491 29.1-1 491 29.1-2 491 29.1-3 493 29.1-4 493 29.2 xviii 493 29.3 495 30 MATERIAL GOING CONCERN UNCERTAINTY 30.1 497 30.1-1 498 30.1-2 500 I-32
30.1-3 501 30.2 xix 501 30.3 505 30.4 xix 505 30.5 505 30.6 505 30.7 511 30.8 513 30.8-1 514 30.8-2 521 31 TRANSFER OF UNSPENT CSR FUNDS 31.1 531 31.2 xx a 531 31.3 xx b 532 31.4 532 31.5 xx a 532 31.6 xx b 535 31.7 537 32 REASONS TO BE STATED BY AUDITOR FOR QUALIFIED OR ADVERSE REMARKS IN CARO REPORT 32.1 539 I-33
32.2 539 DIVISION TWO CARO REPORT ON CONSOLIDATED FINANCIAL STATEMENTS UNDER CARO, 2020 33 QUALIFIED/ADVERSE REMARKS IN CARO REPORTS OF COMPANIES INCLUDED IN CONSOLIDATED FINANCIAL STATEMENTS 33.1 544 33.2 544 33.3 544 APPENDICES SCHEDULE III OF COMPANIES ACT, 2013 549 COMPANIES (AUDITOR'S REPORT) ORDER, 2020 654 RELEVANT PROVISION OF COMPANIES ACT, 2013 661 I-34
Applicability of the order to OPCs Q1. Is CARO, 2020 (‘the Order’) applicable to audit report of an OPC Ans: iv limit or turnover limit or paid up capital plus reserves limit to qualify Ans: iv v Companies Incorporation Rules, 2014, ` [See Q.3 below] I-43 FAQ s and Case Studies on CARO, 2020
` 1.25 crores as on Financial Year Turnover (` in crores) 2018-19 1.60 2019-20 1.80 2020-21 2.90 2021-22 12.00 Will it be exempt from CARO, 2020 for the financial year 2021-22? Ans: Guidance Note on CARO, 2020, ` iv iv v Applicability of the Order to a Small Company Ans: iv I-44
“ ba i c ii def Companies Specification of Definitions Details Rules, 2014 t Companies Specification of Definitions Details Amendment Rules, 2021 t i ii ` 1.50 crores. The reserves and surplus as on that date is ` 30 lakhs. The Financial Year Turnover (` in crores) 2018-19 7.00 2019-20 12.00 2021-22 15.00 Will the company be exempt from CARO, 2020 for the financial year Ans:2021-22? ` ` iv I-45
III which incorporate various
of CARO, 2020? Are these Additional
See Appendix inter alia I-46
Q8. required Schedule disclosure requirements Regulatory required given Chapter 1;
in notes to accounts by companies exempt from CARO? Ans: See
Information disclosures
` Ans: Guidance Note on CARO, 2020 ` Q7. If a private limited company’s paid up share capital is ` 2 crores ` 20 crores or and reserves limit of ` ` 1 crore and total revenue limit of ` Ans: ` ` Guidance Note on CARO, 2020 v ARI disclosures required by Schedule III
to be
by amended
What about the Additional Regulatory Information disclosures
“Additional Regulatory Information”“Additional Regulatory Information” “Additional Regulatory Information” Ans: Property, Plant and Equipment ` of the same. Comment Ans: i b inter alia, reasonable intervals I-47
“There is a regular programme for the physical verification of Property, plant and Equipment, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets, though all the assets were not physically verified during the year. The management is in the process of identifying discrepancies, if any, on such verification”
Comment whether the above remarks are in compliance with CARO, 2020.
Sr. No. Situation What can be considered by the au ditor as reasonable intervals i.e. `pursuant to the Companies (Auditor’s Report) Order, 2020 reads as
Ans: pursuant to the Companies (Auditor’s Report) Order, 2020 reads as I-48
“As explained to us, all the assets have not been physically verified during the year but there is a regular programme of verification. In our opinion, the same is reasonable having regard to the size of the Company and the nature of its assets. The management has explained to us that no material discrepancies were noticed on such verification.”
Ans: ii a e.g.
b i
Q11. Ans: There fore, Para 3(ii)(a) appears to apply to inventories of construction companies.
I-49Ans:
Comment whether the above remarks are in compliance with CARO, 2020.
Ans: i b Inventories
See Para 7.7 ed in next year due to lack of time and resources. Whether the auditor Ans: ii a reasonable intervals cement) covered in clause 3(iii)(a) to (f) of CARO, 2020 Ans: iii a f iii a f to company [Clause 3(iii)(b) of CARO, 2020] if provisions of section Ans: a I-50
an
and the
CARO Report on Consolidated Financial Statements under CARO 2020
The
This book provides a para-wise commentary on Companies (Auditor’s Report) Order (CARO). It is a complete guide on the applicability matters that need to be reported by Auditor on CARO. This book will be helpful for Auditors. Present Publication is the 9th Edition, amended up to 31st July 2022, authored by CA Srinivasan Anand G. This book is divided into two divisions:CARO Reporting under CARO 2020 (Applicable from Financial Year 2021-22)
Rs. : 1695 | USD : 53 AUTHOR : Srinivasan Anand G. PUBLISHER : TAXMANN DATE OF PUBLICATION : August 2022 EDITION : 9th Edition ISBN NO : 9789356223486 NO. OF PAGES : 814 BINDING TYPE : PAPERBACK CARO 2020Description ORDER NOW