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MCA defers CARO 2020 applicability date by a year

K.R.Srivats New Delhi | Updated on December 20, 2020

The Corporate Affairs Ministry (MCA) has deferred the applicability date by one year, for the Companies Auditors Report Order (CARO) 2020 which had placed more onus on statutory auditors as regards fulfilling their professional responsibilities.

CARO 2020 was the overhauled auditor’s report that was to accompany balance sheets of companies for financial year commencing on or after April 1, 2020 (FY 20-21). Now with the latest MCA move, CARO 2020 will be applicable for financial years commencing on or after April 1, 2021.

The new reporting regime of CARO 2020–which was introduced by MCA in consultation with National Financial Reporting Authority in February this year— had superseded CARO 2016. Under the new regime, an auditor was required to report/certify several details which was so far not required to be certified. As many as 21 items required detailing in the new CARO-2020, according to experts.

This latest MCA move to defer the applicability of CARO 2020 by a financial year would come as a respite for corporate India, which has been buffeted by challenges of business continuity since the Covid-19 pandemic broke out in March.

Sanjeev Singhal, Partner at SR Batliboi and Co LLP, said: “While companies were gearing up to comply with the enhanced requirements such as whistle blower complaints, evergreening of loans , default in repayment of loans/borrowings etc., Covid 19 has caused significant disruptions forcing the companies to focus on ensuring business continuity.”

“ Deferral of CARO ‘2020 by one year will give the much needed relief to companies and they will be able to use the additional time to prioritise allocation of resources and better prepare for the enhanced requirements. It will be equally helpful for the auditors as well,” said Singhal.

Under the Companies Act 2013, there has been three versions of CARO— which specifies the format of the auditor report on company financial statements—in 2015, 2016 and 2020.

Published on December 20, 2020

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