Caro 2020 will be applicable for audit of financial statements of eligible companies for financial years commencing on and after April 1, 2019, and would be applicable to all those companies on which Caro 2016 was applicable.
“Caro 2020 is expected to significantly improve the overall quality of reporting by the auditors on the financial statements of the companies and thereby lead to greater transparency and faith in the financial affairs of the companies,” the ministry said in a statement.
In an order issued on February 25, the ministry had made it clear that listed companies will have to disclose all whistleblower complaints to the auditor, and these will have to be mentioned in the audit reports.
There have been several instances where companies have brushed aside whistleblower complaints, and refrained from disclosing them to the shareholders by terming them as ‘benami complaints’. “Where the auditor is unable to express any opinion on any specified matter, his report shall indicate such a fact together with the reasons as to why it is not possible for him to give his opinion on the same,” the ministry said.
There have been several instances of whistleblower complaints being filed with the Securities and Exchanges Board of India (Sebi) against listed companies. But the market regulator said firms often do not officially disclose them to the public.
According to the corporate affairs ministry statement, the auditor will be expected to provide details of immovable properties whose title deeds are not held in the name of the company, discrepancies of 10% or more in the aggregate of each class of inventory, and whether during any point of time of the year the company has been sanctioned working capital limits in excess of Rs 5 crore.
Under clause 3(iii) of Caro 2020, the auditor is also expected to report in detail the investments made by the company in 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, or any other parties during the year, that they are not prejudicial to the interests of the company.
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