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CARO 2020- Applicability and Timeline to FY 2021-22

MCA has further deferred applicability of the Companies Auditor’s Report Order (CARO) 2020 from FY 2019-20/ 2020-21 to 2021-22, i.e. CARO 2020 shall be applicable in respect of financial years beginning with 01/04/2021 onwards, as deferred by MCA. In short CARO applicability for FY 2019-20/ 2020-21 has been deferred to FY 2021-22.

Companies Auditors Report Order, ‘CARO’ 2020

The said order is applicable for reporting on financial statements of companies whose financial year commences on or after 1st April 2021.

In its endeavour to combat several corporate scams in the recent times, The reportable paras under CARO 2020 has been enhanced to 21 from earlier requirement of 16 paras to bring more transparency in the auditor’s report.

Applicability

The CARO 2020 is applicable to same companies as the CARO 2016 was applicable to. There is no change in applicability to categories of companies.

Key Updates and points in applicability:-

Change in definition of Small company as under section 2(85) of the companies act 2013 :-

1. The limit of paid up capital has been increased to two crores from fifty lakhs, and;

2. The limit of turnover has been increased to twenty crores from two crores.

  • Provided that nothing in this clause shall apply to—
  • holding company or a subsidiary company;
  • company registered under section 8; or
  • a company or body corporate governed by any special Act;”
  • It may also be noted that in case a company is covered under the definition of small company, it will remain exempted from the applicability of the Order even if it falls under any of the criteria specified for private company.

Non-Applicability of CARO, 2020.

CARO, 2020 shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013, except–

(i) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949;

(ii) an insurance company as defined under the Insurance Act,1938;

(iii) a company licensed to operate under section 8 of the Companies Act;

(iv) a One Person Company as defined in clause (62) of section 2 of the Companies Act and a small company as defined in 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 one crore rupees as on the balance sheet date and

– which does not have total borrowings exceeding 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 (including revenue from discontinuing operations) exceeding ten crore rupees during the financial year as per the financial statements.

You can download the official notification for extension of timeline for applicability from below link:

Download Notification

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