The Ministry of Corporate Affairs (MCA) has announced a new format of statutory audits of companies. The MCA has notified Companies (Auditor’s Report) Order, 2020 (CARO 2020) on 25 February 2020. The CARO 2020 replaces the earlier order, i.e. Companies (Auditor’s Report) Order, 2016.
Introduction to CARO 2020
CARO 2020 is a new format for the issue of audit reports in case of statutory audits of companies under Companies Act, 2013. CARO 2020 has included additional reporting requirements after consultations with the National Financial Reporting Authority (NFRA). NFRA is an independent regulatory body for regulating the audit and accounting profession in India. The aim of CARO 2020 is to enhance the overall quality of reporting by the company auditors.
Applicability of CARO 2020
CARO 2020 is applicable for all statutory audits commencing on or after 1 April 2021 corresponding to the financial year 2020-21. The order is applicable to all companies which were covered by CARO 2016. Thus, CARO 2020 applies to all the companies currently, including a foreign company. However, it does not apply to the following companies:
- One person company.
- Small companies (Companies with paid up capital less…
