{"id":29305,"date":"2020-03-02T12:00:29","date_gmt":"2020-03-02T06:30:29","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=29305"},"modified":"2020-03-04T11:46:43","modified_gmt":"2020-03-04T06:16:43","slug":"a-detailed-analysis-of-caro-2020-vs-caro-2016","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/a-detailed-analysis-of-caro-2020-vs-caro-2016\/","title":{"rendered":"A Detailed Analysis of CARO 2020 vs. CARO 2016"},"content":{"rendered":"<p class=\"has-drop-cap\">This article is primarily intended to highlight the differences between CARO 2020 and <a href=\"https:\/\/enterslice.com\/learning\/caro-2016-applicability-reporting-requirements\/\">CARO 2016<\/a>. CARO 2020 stands for Companies (Auditor&rsquo;s Report) Order, 2020. Section 143 of the Companies Act, 2013 states that auditors are mandated to report on the matters entailed in CARO. CARO is an order which lists down the matters deemed necessary by the Ministry of Corporate Affairs (MCA) on which the auditors are required to comment in their audit reports.<\/p>\n\n\n\n<p>CARO was implemented to drive forward the MCA&rsquo;s objective that the financial statements of certain entities must be accompanied by reports on some material issues as opined by the auditors. The auditors of companies on which CARO is applicable are required to comment on the clauses enumerated in the CARO order after performing necessary audit procedures for verification. <a href=\"https:\/\/enterslice.com\/learning\/caro-2020-new-audit-rules-to-enhance-due-diligence\/\">CARO 2020<\/a> has been issued in the supersession of CARO 2016. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Differences between CARO 2016 and CARO 2020<\/h2>\n\n\n\n<p>The matters\nsubsumed in CARO 2020 are shown in the below-mentioned sections in comparison to\nthe matters covered in CARO 2016:<\/p>\n\n\n\n<p><strong><em>Effective date<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  CARO 2016 was applicable from\n  the financial year 2015-16.\n  <\/td><td>\n  CARO 2020 has superseded\n  CARO 2016 and is applicable from the financial year 2019-20.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><\/p>\n\n\n\n<p><strong><em>Applicability of CARO<\/em><\/strong><\/p>\n\n\n\n<p><strong>CARO\n2016: <\/strong>It is applicable\nto all companies (including foreign company), except: <\/p>\n\n\n\n<p>1. Banking &amp; Insurance companies;<\/p>\n\n\n\n<p>2. Company registered u\/s 8 of the Companies\nAct, 2013;<\/p>\n\n\n\n<p>3. One Person Company and small company; <\/p>\n\n\n\n<p>4. A Private Ltd. Company:<\/p>\n\n\n\n<ul><li>Not a subsidiary or holding company of a public company;<\/li><li>Paid-up capital + R &amp; S not exceeding Rs. 1 crore as on the balance sheet date;<\/li><li>Borrowings not exceeding Rs. 1 crore from any bank or financial institution at any time during the FY; and<\/li><li>Revenue (including revenue from discontinuing operations) not exceeding Rs. 10 crore in the FY.<\/li><\/ul>\n\n\n\n<p><strong>CARO\n2020: <\/strong>CARO 2020 has\nsuperseded CARO 2016 and is applicable from the financial year 2019-20. The\napplicability is same as CARO 2016.<\/p>\n\n\n\n<p>Note<strong>:\n<\/strong>CARO 2016 was not applicable to consolidated financial statements. However,\nCARO 2020 comprises a clause which is now applicable to auditor&rsquo;s report on\nCFS.According to this clause, where\nany qualifications or adverse remarks are highlighted by the auditors in their respective\nstandalone companies&rsquo; CARO reports, then the details of such remarks are to be mentioned\nby the auditor of the company in his CARO report of CFS.<\/p>\n\n\n\n<p><strong><em>Paragraphs: Modified<\/em> (<\/strong>The matters to be reported by the auditors are those as contained in Paragraphs 3 and 4 of CARO.)<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  CARO 2016 comprises 16 reporting\n  clauses in Paragraph 3.\n  <\/td><td>\n  CARO 2020 comprises 21 reporting\n  clauses in Paragraph 3.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Fixed Assets: Modified<\/em><\/strong><\/p>\n\n\n\n<p><strong>CARO 2016<\/strong> focuses on reporting requirements of all\nfixed assets.<\/p>\n\n\n\n<ol><li>Maintenance of proper records including\ndetails of quantity and situation of FA<\/li><li>Physical verification at regular\nintervals by the management<\/li><li>Material discrepancies accounted for in\nthe books of account <\/li><li>Title deeds of immovable <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Property&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Property refers to the legal designation of ownership over valuable items or assets held by an individual or a business. This ownership grants the holder certain legal rights to use, consume,(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/property\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>property<\/a>, if not\nheld in the name of the company<\/li><\/ol>\n\n\n\n<p><strong>CARO 2020<\/strong> accords more focus on Property, Plant, Equipment\n(PPE) and intangible assets (in parlance with the terminology of IND-AS).<\/p>\n\n\n\n<ol><li>Maintenance of proper records including\ndetails of quantity and situation of PPE <\/li><li>Maintenance of proper records of\nintangibles<\/li><li>Physical verification at regular\nintervals by the management<\/li><li>Material discrepancies accounted for in\nthe books of account<\/li><li>Title deeds of immovable property, if not\nheld in the name of the company &ndash; Format prescribed (*<em>Refer Note A)<\/em><\/li><li><a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Revaluation&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Revaluation refers to the government or central bank&amp;#039;s deliberate increase in the value of a country&amp;#039;s currency relative to other currencies, often to boost trade and control inflation. This is(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/revaluation\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Revaluation<\/a> of PPE if done by a Registered\nValuer; and if the amount of change is &gt;= 10% of net carrying value<\/li><\/ol>\n\n\n\n<p><strong><em>Reporting on Benami Transactions: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  Details of any proceedings\n  pending under the Benami Transactions (Prohibition) Act, 1988 against the\n  company; and its appropriate disclosure in FS\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Working capital: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. If sanctioned working\n  capital limits in excess of Rs. 5 crore from banks or financial institutions\n  on hypothecation of current assets\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2. If quarterly returns filed\n  with banks or financial institutions are in conformity with books\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Investments, loans and advances given: Modified<\/em><\/strong><\/p>\n\n\n\n<p><strong>CARO 2016: <\/strong><\/p>\n\n\n\n<ol><li>The terms and conditions of loans are not\nprejudicial to the interests of company<\/li><li>Whether the repayment is in order<\/li><li>Loans outstanding for more than 90 days and\ntheir recovery position<\/li><li>Whether Sections 185 and 186 of the Companies\nAct have been complied with&nbsp; <\/li><\/ol>\n\n\n\n<p><strong>CARO 2020:<\/strong><\/p>\n\n\n\n<ol><li>Proper disclosure of investments,\ngranting of guarantee or security, and providing of loans or advances <\/li><li>Disclosure of aggregate amounts during\nthe year and O\/S balances of loans to subsidiaries, joint ventures and\nassociates<\/li><li>Disclosure of aggregate amounts during\nthe year and O\/S balances of loans to parties other than subsidiaries, joint ventures\nand associates<\/li><li>The terms and conditions of loans are not\nprejudicial to the interests of company<\/li><li>Whether the repayment is in order<\/li><li>Loans outstanding for more than 90 days\nand their recovery position<\/li><li>Whether Sections 185 and 186 of the\nCompanies Act have been complied with&nbsp; <\/li><li>In case of loans or advances repayable on\ndemand, without any terms or period of payment, specify the amount of such\nloans given to the promoters &amp; related parties<\/li><li>In case existing loans falling due during\nthe year have been extended, renewed, replaced with fresh loans, specify the\naggregate amount and percentage of such loans<\/li><\/ol>\n\n\n\n<p><strong><em>Reporting on deposits: Modified<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. For deposits accepted\n  by the company, whether RBI&rsquo;s directives and Sections 73 to 76 have been\n  followed\n  <\/td><td>\n  1. For deposits accepted\n  by the company or <em>deemed deposits<\/em>,\n  whether RBI&rsquo;s directives and Sections 73 to 76 have been followed\n  <\/td><\/tr><tr><td>\n  2. If an order is passed\n  by the court or any other tribunal like RBI, CLB, NCLT, etc.\n  <\/td><td>\n  2. If an order is passed\n  by the court or any other tribunal like RBI, CLB, NCLT, etc.\n  <\/td><\/tr><tr><td>\n  3. Whether any\n  non-compliance is noticed and specify the nature of contravention &nbsp;\n  <\/td><td>\n  3. Whether any\n  non-compliance is noticed and specify the nature of contravention&nbsp; \n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Transactions not recorded: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. Are there any\n  transactions not recorded in the books of account but disclosed as income in\n  the income tax proceedings\/assessments\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2.&nbsp; Proper disclosure of such unrecorded transactions\n  has been done or not\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Defaults in repayment: Modified<\/em><\/strong><\/p>\n\n\n\n<p><strong>CARO 2016: <\/strong><\/p>\n\n\n\n<ol><li>The details of period and amount of default\nin respect of repayment of loans or borrowings to banks, financial\ninstitutions, Government or debenture holders<\/li><\/ol>\n\n\n\n<p><strong>CARO 2020:<\/strong><\/p>\n\n\n\n<ol><li>The details of period and amount of default\nin respect of repayment of loans or borrowings to banks, financial\ninstitutions, Government or debenture holders<\/li><li>Format\nspecified for showing lender-wise details of default (**<em>Refer Note B)<\/em><\/li><li>Whether the company is declared as a willful\ndefaulter by a lender<\/li><li>Whether terms loans\/short-term loans are applied\nfor the purpose for which they were obtained; with details of diversion, if any<\/li><li>Details of funds procured by the company to\nmeet the obligations of subsidiaries, joint ventures and associates <\/li><li>Whether the company has raised loans on\nthe pledge of securities held in subsidiaries, joint ventures and associates <\/li><\/ol>\n\n\n\n<p><strong><em>Reporting on Whistle-blower complaints: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  Whistle-blower complaints\n  received by the company during the year; to be considered by the auditor while\n  submitting his audit report\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Internal Audit&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A glossary on internal audit is a valuable resource that compiles and defines essential terms and concepts in the field of internal auditing. It aids professionals and learners in comprehending(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/internal-audit\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Internal audit<\/a>: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. The company&rsquo;s internal\n  audit system is commensurate with the size and nature of its business or not\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2. Whether the statutory\n  auditor has considered the internal audit reports of the company\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Cash losses: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. Cash losses incurred\n  by the company in the current FY and in the preceding FY\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2. &nbsp;The amount of cash losses\/negative balance reflecting\n  in cash flow statement\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Resignation of statutory auditors: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. Any resignation of the\n  statutory auditor during the year\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2. Whether details of\n  issues, objections or concerns raised by the outgoing auditors have been appropriately\n  considered \n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Uncertainty to meet liabilities: Inserted<\/em><\/strong>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. Details of material uncertainty\n  with regard to realization of financial assets and payment of financial\n  liabilities\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2. Whether any such uncertainty\n  exists on the date of audit report that the company will not be capable of\n  meeting its liabilities as and when they fall due within a period of 1 year from\n  the B\/S date\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on CSR: Inserted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  1. In relation to ongoing\n  CSR projects, details of transfer of unspent CSR amount to the Special\n  Account within stipulated time in compliance with Section 135\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  2. For CSR projects other\n  than ongoing ones, details of transfer of unspent CSR amount to the Fund specified\n  in Schedule VII within stipulated time in compliance with Section 135\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Inventory: Modified<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Physical verification\n  at regular intervals by the management\n  <\/td><td>\n  1. Physical verification\n  at regular intervals by the management\n  <\/td><\/tr><tr><td>\n  2. Material discrepancies\n  accounted for in the books of account \n  <\/td><td>\n  2. Material discrepancies\n  accounted for in the books of account\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  3. Materiality is considered\n  to be 10% or more for inventory items\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Statutory Dues: No change<\/em><\/strong><\/p>\n\n\n\n<p><strong>CARO 2016:<\/strong><\/p>\n\n\n\n<ol><li>The company is regularly depositing its statutory\ndues with authorities such as ESI, Provident Fund, Income Tax, etc.<\/li><li>If not regular, statutory dues\noutstanding for more than 6 months as on the last date of the FY should be\ndisclosed<\/li><li>If\nany taxes have not been deposited because of any pending dispute, disclosure on\nthe amount of such dispute and the forum where the litigation is ongoing<\/li><\/ol>\n\n\n\n<p><strong>CARO 2020: <\/strong>Same provisions as CARO 2016.<\/p>\n\n\n\n<p><strong><em>Reporting on Fraud: Modified<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Any fraud by the\n  company or its officers\/employees which has been noticed during the FY\n  <\/td><td>\n  1. Any fraud by the\n  company or its officers\/employees which has been noticed during the FY\n  <\/td><\/tr><tr><td>\n  2. The nature and amount\n  of fraud involved &nbsp;&nbsp;\n  <\/td><td>\n  2. The nature and amount\n  of fraud involved\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  3. Whether any report in\n  FORM ADT-4 has been filed by the auditor with the Central Government in\n  relation to suspected offense&nbsp;&nbsp; \n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Cost Records: No change<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  If maintenance of cost records\n  is specified by the Central Government u\/s 148 of the Companies Act 2013,\n  whether such accounts and cost records have been maintained or not by the company\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Managerial Remuneration: Omitted<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Whether managerial\n  remuneration is paid after taking requisite approvals defined u\/s 197\n  <\/td><td>\n  Omitted in CARO 2020.\n  <\/td><\/tr><tr><td>\n  2. Amount of unapproved\n  remuneration and steps taken to secure its refund\n  <\/td><td>\n  Omitted in CARO 2020.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Public Offer: No Change<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Utilization of money\n  raised through IPO or FPO for the earmarked purposes for which it was raised\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><tr><td>\n  2. In case of any delay\n  and defaults in utilization, details thereof\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Nidhi company: Modified<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Maintenance of net\n  owned funds to deposits in the ratio of 1:20 to meet out the liability\n  <\/td><td>\n  1. Maintenance of net\n  owned funds to deposits in the ratio of 1:20 to meet out the liability\n  <\/td><\/tr><tr><td>\n  2. Maintenance of 10% unencumbered\n  term deposits as specified in Nidhi Rules\n  <\/td><td>\n  2. Maintenance of 10% unencumbered\n  term deposits as specified in Nidhi Rules\n  <\/td><\/tr><tr><td>\n  None\n  <\/td><td>\n  3. Whether there is any\n  default in payment of interest on deposits or repayment thereof\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Related Party Transactions: No change<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Whether all\n  transactions with related parties have been made in compliance with Section\n  177 and 188\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><tr><td>\n  2. Appropriate disclosure\n  in FS in accordance with <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Accounting&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Accounting is the language of business, serving as the backbone of financial management and decision-making. It involves the systematic recording, analysis, and reporting of financial(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/accounting\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>accounting<\/a> standards&nbsp;\n  \n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Registration under RBI: Modified<\/em><\/strong><\/p>\n\n\n\n<p><strong>CARO 2016:&nbsp;&nbsp;&nbsp;&nbsp; <\/strong><\/p>\n\n\n\n<ol><li>Whether\nregistration has been obtained by NBFCs liable to be registered under the RBI\nAct<\/li><\/ol>\n\n\n\n<p><strong>CARO 2020:&nbsp;&nbsp;&nbsp;&nbsp; <\/strong><\/p>\n\n\n\n<ol><li>Whether registration has been obtained by\nNBFCs liable to be registered under the RBI Act<\/li><li>Conduction of any <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;NBFC&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Non-Banking Financial Companies (NBFC) operate similarly to banks but do not possess the legal status of a bank. Registered under the Companies Act 2013 and governed by the RBI Act&amp;#039;s section(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/nbfc\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>NBFC<\/a> activities without\nholding a valid Certificate of Registration (CoR)<\/li><li>Whether the company qualifies for a Core\nInvestment Company (CIC) <\/li><li>The\nnumber of CICs if the group has more than one CIC<\/li><\/ol>\n\n\n\n<p><strong><em>Reporting on Non-cash transactions: No change<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  Any non-cash transactions\n  entered into with directors or related persons is within the limits provided\n  u\/s 192\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Reporting on Private Placement or Preferential <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Allotment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An allotment is the systematic distribution of business resources, often pertaining to the distribution of shares during initial public offerings (IPOs) to underwriting firms or to new and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/allotment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Allotment<\/a>: No change<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  1. Private placement or\n  preferential allotment made by the company is in accordance with Section 42\n  and 62\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><tr><td>\n  2. Whether the amount\n  raised has been utilized for the purposes for which it was raised \n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Paragraph 4: No change<\/em><\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>CARO\n  2016<\/strong>\n  <\/td><td>\n  <strong>CARO\n  2020<\/strong>\n  <\/td><\/tr><tr><td>\n  If CARO report to be\n  annexed with the auditor&rsquo;s report contains any unfavorable or qualified\n  remarks, the auditor shall state the reasons for his opinion.\n  <\/td><td>\n  Same as CARO 2016.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>*Note A &ndash; <\/strong><em><strong>Details of Title Deeds as prescribed under CARO 2020<\/strong><\/em><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  Description\n  of property\n  <\/td><td>\n  Gross carrying value\n  <\/td><td>\n  Held in name of\n  <\/td><td>\n  Whether promoter, director\n  or their relative or employee\n  <\/td><td>\n  Period held\n  &ndash; indicate range, where\n  appropriate\n  <\/td><td>\n  Reason for not being held\n  in name of company\n  <\/td><\/tr><tr><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  Also indicate if in dispute\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong>** Note B &ndash; <\/strong><em><strong>Details of Default in repayment as prescribed under CARO 2020<\/strong><\/em><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  Nature of borrowing, including\n  debt securities\n  <\/td><td>\n  Name of lender\n  <\/td><td>\n  Amount not paid on due date\n  <\/td><td>\n  Whether principal or interest\n  <\/td><td>\n  No. of days delay or unpaid\n  <\/td><td>\n  Remarks, if any\n  <\/td><\/tr><tr><td>\n  &ndash;\n  <\/td><td>   Lender wise details to be provided   in case of defaults to banks, financial institutions, and Government   <\/td><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  &ndash;\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\">Increased Due Diligence<\/h2>\n\n\n\n<p>Looking at the circumstances which have led to the introduction of CARO 2020, we have been besieged by a number of corporate failures (especially IL&amp;FS) and a whole boost of exposure to corporate frauds as witnessed under IBC, which has triggered CARO 2020. It is a very decisive and concerted effort to bring in more accountability, corporate trusteeship, and transparency and to use the auditors as a via media to ensure corporate governance. <\/p>\n\n\n\n<p>A different feature of CARO 2020 is the enhanced due diligence responsibility on the auditors. A typical auditor is concerned about the truth and fairness of the FS; however, CARO 2020 covers many governance issues on which the <a href=\"https:\/\/www.mca.gov.in\/\">MCA<\/a> requires the auditors to comment. The audit has been used as a mechanism to control corporate misgovernance. The auditors have to state more details under CARO 2020 in order to strengthen the accountability of the management through the mouth of the auditor.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <\/p>\n\n\n\n<p>The\nfollowing are some important changes in CARO 2020 which strive to assert a\ngreater level of due diligence:<\/p>\n\n\n\n<ul><li>Bringing into picture CSR details which were missing in CARO 2016 to accord more accountability on companies who were not taking CSR seriously<\/li><li>Going concern reporting is strengthened by adding additional clause on the company&rsquo;s capability to meet its liabilities<\/li><li>Consideration of the issues of the previous auditor<\/li><li>Separate reporting of negative cash losses visible in the cash flow statement<\/li><li>Activities carried out by NBFCs or HFCs without valid certificates<\/li><li>Disclosure on the work of internal auditors<\/li><li>Reporting of transactions not recorded in the books of account but surrendered in income tax assessments<\/li><li>Giving due recognition to whistleblower complaints<\/li><li>More stringent and detailed disclosures on loans and advances<\/li><li>Defining material discrepancies in inventory values and PPE values <\/li><li>Compliance by companies who have been sanctioned working capital limits in excess of Rs. 5 crore<\/li><\/ul>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/caro-2020-new-audit-rules-to-enhance-due-diligence\/\" target=\"_blank\" rel=\"noopener noreferrer\">CARO 2020-New Audit Rules Introduced to Enhance Due Diligence of Auditors\n<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>This article is primarily intended to highlight the differences between CARO 2020 and CARO 2016. CARO 2020 stands for Companies (Auditor&rsquo;s Report) Order, 2020. Section 143 of the Companies Act, 2013 states that auditors are mandated to report on the matters entailed in CARO. CARO is an order which lists down the matters deemed necessary [&hellip;]<\/p>\n","protected":false},"author":30,"featured_media":29307,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"acf":{"service_id":"215"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A Comprehensive Analysis of CARO 2020 vs. CARO 2016<\/title>\n<meta name=\"description\" content=\"CARO 2020 covers many governance issues on which the MCA requires the auditors to comment. Brief about A Comprehensive Analysis of CARO 2020 vs. CARO 2016.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/a-detailed-analysis-of-caro-2020-vs-caro-2016\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Comprehensive Analysis of CARO 2020 vs. CARO 2016\" \/>\n<meta property=\"og:description\" content=\"CARO 2020 covers many governance issues on which the MCA requires the auditors to comment. Brief about A Comprehensive Analysis of CARO 2020 vs. CARO 2016.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/a-detailed-analysis-of-caro-2020-vs-caro-2016\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-02T06:30:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-03-04T06:16:43+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/02\/A-Detailed-Analysis-of-CARO-2020-vs.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"670\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Ruchi Gandhi","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Ruchi-Gandhi.jpg","authorDescription":"A CA together with MBA (Fin) and M Com, she relishes taking interest in insightful writing in the domain of taxation and finance. She has gained experience as a full-time author and has also served an accounting role in industry.","postViews":601,"readingTime":9,"nextPost":{"id":29323,"slug":"sweet-sellers-to-mention-best-before-and-manufacturing-date-from-june-1-2020"},"prevPost":{"id":29300,"slug":"nbfc-can-now-go-for-insolvency-resolution-process-under-ibc"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/02\/A-Detailed-Analysis-of-CARO-2020-vs.jpg","postTerms":"Startup","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/29305"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/30"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=29305"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/29305\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/29307"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=29305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=29305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=29305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}