Under the new rules, the auditor needs to provide specific details on whether during any point of time of the year, the company has been sanctioned working capital limits in excess of Rs 5 crore in aggregate from banks or financial institutions on the basis of security of current assets. Also, whether the quarterly returns or statements filed with banks or financial institutions are in line with the books of account of the company.
A specific format has been prescribed to report the period and the amount of default by a company in repayment of loans or other borrowings or in the payment of interest to any lender. The auditor is also required to report about a company if it is declared a wilful defaulter by any bank, financial institution or any other lender. Details of immovable properties, whose title deeds are not held in the name of the company but are disclosed in the financial statements, will also have to be reported.
The rules also ask for disclosure of details of proceedings against the company for holding Benami property and whether the company has disclosed the details in its financial statements. Discrepancies of 10% or more in the aggregate of each class of inventory noticed during physical verification of inventory would have to be reported.
The auditor is required to report as whether any fraud by the company or any fraud on the company has been noticed or reported during the year. “If yes, the nature and the amount involved is to be indicated,” a government statement added. The rules make it mandatory for auditors to report if the company has conducted any non-banking financial or housing finance activities without a valid certificate of registration from the RBI.
Auditors said the new rules have raised the reporting responsibilities but firms would need to reveal far more information. “In the wake of recent corporate frauds, CARO 2020 significantly enhanced the reporting responsibilities of auditors. Though it is the responsibility of auditors to report on matters prescribed in CARO, the companies would get affected as they need to provide the underlying information,” said Sanjeev Singhal, partner, SR Batliboi and Co LLP.