Page 202 - CA Final PARAM Digital Book.

Part 8- CARO 2020

QNO Applicability (Computation of TO) Old Course – (SM17, SM21)
379.000 TITANIUM CNO—CARO.040

T Pvt. Ltd.’s paid up Capital & Reserves are less than ₹ 50 lakhs and it has no outstanding loan exceeding
₹ 25 lakhs from any bank or financial institution. Its sales are ₹ 6 crores before deducting Trade discount

₹ 10 lakhs and Sales returns ₹ 95 lakhs. The services rendered by the company amounted to ₹ 10 lakhs.
The company contends that reporting under Companies Auditor’s Reports Order (CARO) is not
applicable. Discuss.
Answer Part I -- Relevant Standards & Laws
▪ CARO, 2020
▪ Schedule III
Part II -- Requirements of Relevant Standards & Laws
➢ CARO 2020
The CARO, 2020 specifically exempts a private limited company, not being a subsidiary or holding
company of a public company,
• having a paid-up capital and reserves and surplus not more than rupees one crore as on
the balance sheet date and
• which does not have total borrowings exceeding rupees one crore from any bank or
financial institution at any point of time during the financial year and
• which does not have a total revenue as disclosed in Scheduled III to the Companies Act,
2013 (including revenue from discontinuing operations) exceeding rupees ten crore during
the financial year as per the financial statements.

➢ Schedule III
As per Schedule III, revenue from operations shall consist of revenue from sale of products, sale of
services, and other operating revenues.
While computing total revenue, trade discount as well as sales returns are required to be
deducted.
Part III – Case Discussion
➢ In the given case, paid up capital and reserves of T Pvt. Ltd. is less than one crore and has no loan
outstanding exceeding one crore from any bank or financial institution. Further, its total revenue
as disclosed in Schedule III to the Companies Act, 2013 (including revenue from discontinuing
operations) is not exceeding rupees ten crore during the financial year as per the financial
statements.
Part IV – Conclusion
➢ Thus CARO 2020 will not be applicable to T Pvt. Ltd.

QNO Applicability (2 Loans Outstanding & Default) Old Course – (M07E, N15R, PM17)
380.000 TITANIUM CNO—CARO.020
E-Tech Pvt. Ltd., which has an aggregate outstanding loan of ₹ 20 lakhs from Banks and ₹ 30 lakhs from
Financial Institutions, defaulted in repayment thereof to the extent of 50%. The company holds that it
being a private limited company, the Companies (Auditor’s Report) Order, 2020 is not applicable. You are
required to state the list of companies to which CARO is applicable and state how would you deal with
the given situation as an auditor of the company.
Answer Part I -- Relevant Standards & Laws
▪ CARO, 2020
Part II -- Requirements of Relevant Standards & Laws
➢ Applicability of Companies (Auditor’s Report) Order, 2020 [CARO, 2020]:
The CARO,2020 is an additional reporting requirement Order which has been issued by the Central
Government in consultation with the Institute of Chartered Accountants of India under section
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