A DETAILED ANALYSIS ON CARO,2020 PART-II
MCA (Ministry of Corporate Affairs), in consultation with the NFRA (National Financial Reporting Authority) and by virtue of Section 143(11) of Companies Act, 2013 (Companies Act), has issued Companies (Auditor’s Report) Order, 2020 (CARO, 2020) on 25th February 2020 which supersedes Companies (Auditor’s Report) Order, 2016 (CARO, 2016).
The said order is applicable for reporting on financial statements of companies whose financial year commences on or after 1st April 2021.
I. Loans, Advances, Investments, Guarantee:
Loan and Adcances given by the company 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 companies, firms, Limited Liability Partnerships or any other parties, if 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 the 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 the 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; (b) whether the investments made, guarantees provided, security given and the terms and conditions of the grant of all loans and advances in the nature of loans and guarantees provided are not prejudicial to the company’s interest;
(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;
(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 overdue 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 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, a percentage thereof to the total loans granted, the aggregate amount of loans granted to Promoters, related parties as defined in clause (76) of section 2 of the Companies Act, 2013;
1. The ambit of financial transactions has been widened enough to include loans given to any party which was limited to parties covered under Section 189 register;
2. Renewal, extension, or granting of fresh loans to settle the overdue of existing loans are to be reported; loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment granted to related parties are to be disclosed along with the aggregate amount and percentage.
Deposits and deemed deposits:
1. in respect of deposits accepted by the company or amounts which are deemed to be deposited, 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 and the Rules made thereunder, where applicable, have been complied with, 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;
Payment of Statutory Dues:
(a) whether the company is regular in depositing undisputed statutory dues including Goods and Services 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;
(b) where statutory dues referred to in sub-clause (a) have not been deposited on account of any dispute, then the amounts involved and the forum where the dispute is pending shall be mentioned (a mere representation to the concerned Department shall not be treated as a dispute);
Key Changes and Analysis:-
1. The Goods and Service tax has been added; 2. The auditor is required to report on regularity on payment of statutory dues also, even if the same is not Outstanding for a period of more than six months on balance sheet date; The non-payment of advance tax would also constitute default ;
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