ICAI: Guidance note on CARO,2020

Guidance note on CARO,2020

Guidance note on CARO 2020 by ICAI includes  detailed guidance on various clauses of CARO 2020

ICAI issues Guidance note on Companies Auditor’s report order, 2020

The Ministry of Corporate Affairs (MCA) has issued the Companies (Auditor’s Report) Order, 2020 (CARO 2020) on 25th February 2020, which was initially applicable for statutory audits of financial statements for periods beginning on or after April 1, 2019.

Subsequently, vide notification dated 24th March 2020, applicability of CARO 2020 was deferred by one year.

Accordingly, CARO 2020 would be applicable for statutory audits of financial statements for periods beginning on or after April 1, 2020.

CARO 2020 contains several changes including many additional reporting requirements vis-à-vis CARO 2016 to further enhance overall quality of reporting by the auditors.

These changes necessitated the revision of the Guidance Note on CARO 2016 earlier issued by ICAI.

It is glad to note that the Auditing and Assurance Standards Board (AASB) of ICAI has brought out this Guidance Note on the Companies (Auditor’s Report) Order, 2020 for providing appropriate guidance to the members so that the requirements of the Order can be fulfilled in letter and spirit by them.

The Guidance Note is developed to provide detailed guidance on various clauses of CARO 2020 and various issues involved therein in an easy to understand language.

This Guidance Note is quite comprehensive and self-contained reference document to assist the members in discharging their duties efficiently.

The Ministry of Corporate Affairs issued the Companies (Auditor’s Report) Order, 2020 (CARO 2020) on 25th February 2020.

The Order was initially applicable for audits of financial year 2019-20 and onwards but subsequently its applicability was deferred by one year vide notification dated 24th March 2020.

Now, the Order would be applicable for audits of financial year 2020-21 and onwards. The Order contains several significant changes and several new reporting requirements vis-à-vis earlier Order i.e. CARO 2016.

The Auditing and Assurance Standards Board of ICAI undertook the revision of the Guidance Note on CARO 2016 to provide appropriate guidance to the members on CARO 2020.

We feel immense pleasure in placing in hands of the members this Guidance Note on the Companies (Auditor’s Report) Order, 2020 issued by the Board under the authority of the Council of ICAI.

The Guidance Note was initially developed by six study groups constituted by the Board for this purpose and thereafter it was finalised with the contribution of the Board members and the Central Council members.

The Guidance Note has been written in easy to understand language and contains detailed guidance on all clauses of CARO 2020.

The Guidance Note will supersede the Guidance Note on CARO 2016 for audits of financial statements for periods beginning on or after April 1, 2020.

The members may note that in light of the said amendments, a comprehensive revision of the Guidance Note on CARO 2020 is being initiated by AASB.

In the interregnum, the members should read CARO 2020 in conjunction with the corresponding amendments made in Schedule III to the Companies Act, 2013 for presentation and disclosure requirements stated therein and perform the audit procedures accordingly.

The Announcement summarises interplay of some of the clauses in CARO 2020 and consequential amendments to Schedule III to the Companies Act, 2013.

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