Covid-19 Impact on Reporting Under CARO, 2016 for F.Y. 2019-20

What is the Impact of Covid-19 on Reporting Under CARO, 2016 for F.Y. 2019-20 and What Clauses Auditor Should have to Focus.

Being CARO,2020 made applicable from the financial year 2020-2021, while reporting for the financial year 2019-2020, auditors should continue to comment on the matters set out in the (CARO 2016).
some of the list of the clauses of CARO 2016 which are expected to be impacted by COVID-19, as the auditor is required to comment as at the year-end, is given below

Clause 3(i): Fixed Assets

Auditor Remarks:– this clause requires (a) Whether the company is maintaining proper records showing full particulars including quantitative details and situation of fixed asset.
(b) Whether these fixed assets have been physically verified by the management at reasonable intervals.
(c) Whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account.

In this regard, if the auditor is unable to collect sufficient appropriate audit evidence, the Auditor is required to commenting on this clause, and where appropriate, the auditor’s opinion should also be suitably modified.

Clause 3(ii): Physical verification of inventory

Auditor Remarks:- This clause requires the auditor to comment whether the inventory of the company have been physically verified by the management at reasonable intervals and further requires the auditor to comment whether any material discrepancies were noticed on such verification and if so, whether those discrepancies have been properly dealt with in the books of account.

In this regard, if the auditor is unable to collect sufficient appropriate audit evidence, the Auditor is required to commenting on this clause, and where appropriate, the auditor’s opinion should also be suitably modified.

Clause 3(vii): Reporting on deposit of statutory dues

Auditor Remarks:– This clause requires reporting on the payment of statutory dues including the extent of arrears as on the last day of the financial year. Considering that the last day of the financial year 2019-20 fell during the lockout period, and extension of time is being granted for payment of certain dues by the Government authorities/regulators.

the commenting in respect of this clause should reflect the factual position regarding the extension of date granted by the relevant authorities for payment of such dues.

Further, where the company has made the payment within such extended due dates, it does not constitute a noncompliance and accordingly will not be required to be reported under this clause.
However, if there is no extension of the due date and an option has been given to make payments at a later date upon payment of interest and penalty, it should be reported as default.

Clause 3(viii): Default in repayment of loans or borrowing

Auditor Remarks: RBI has issued a circular dated 27th March 2020 on COVID-19– Regulatory Package. The circular provides that companies may decide to opt for a moratorium period for repayment of term loans / working capital financing facilities etc., however interest would continue to be charged for this period.


Where the company has exercised this option, the auditor should make a factual statement in his report. Further, where the company has made the payment within such extended due dates, it does not constitute a non-compliance and accordingly is not required to be reported under this clause.

More you can read at :- www.icai.org

Spread the Knowledge

Leave a Reply

Your email address will not be published.