Applicability of CARO 2020 extended till 1st April, 2021
The COVID 19 pandemic has been largely disruptive to the growth of India. With an ever-increasing corona virus cases, lockdown was considered as an only solution to flatten the curve. However, the measures which were implemented to avoid a human disaster, have in turn led to the birth of several issues such as unemployment, recession, hindrance to economic growth, financial instability and so on.
Due to the emerging financial distress faced by most people on account of the large-scale economic distress caused by COVID 19, the Government of India had extended the due dates of various provisions to provide relief in the current pandemic situation.
The government is providing various relief measures and relaxations in order to boost businesses and the economy. In the same context the MCA has postponed the applicability of Companies (Auditor’s Report) Order, 2020 [CARO, 2020] till 1st April, 2021. Earlier this year, the MCA has postponed the applicability of Companies (Auditor’s Report) Order, 2020 [CARO, 2020] from FY 2019-20 to FY 2020-21.
Brief Introduction to CARO:
To enhance the scope of the audit, the MCA in consultation with the National Financial Reporting Authority (NFRA) released the CARO 2020. It lists out the subject matters on which the applicable companies are mandatorily required to report. It has included additional reporting requirements after consultations with the NFRA. NFRA is an independent regulatory body for regulating the audit and accounting profession in India. The aim is to enhance the overall quality of reporting by the company auditors.
To whom is CARO 2020 applicable?
CARO 2020 shall apply to every company including a foreign company, except
- a banking company defined under Section 5(c) of Banking Regulation Act, 1949
- an insurance company defined under Section 2 of the Insurance Act, 1938
- company licensed to operate under section 8 of the Companies Act
- One Person Company defined under section 2(62) of the Companies Act, 2013 and a small company as defined under section 2(85) of the Companies Act, 2013
- a private limited company, not being a subsidiary or holding company of a public company, having
paid up capital and reserves and surplus <= Rs 1 crore (on balance sheet date)
total borrowings from any bank or FI <= Rs 1 crore (at any point during the FY)
total revenue as disclosed in Scheduled III to the Companies Act, 2013 (including revenue from discontinuing operations) <= Rs 10 crore (as per financial statements)
Reporting expectations from the auditor are expanding significantly. The implementation of CARO 2020 would lead to more transparency between the company and stakeholders and hence the auditor needs to ensure that he is more perspective and skeptical while discharging his duties.