Page 221 - CA Final PARAM Digital Book.

(iii) As per clause (xviii) of para 3 of CARO 2020, the auditor shall include a statement on whether
there has been any resignation of the statutory auditors during the year, if so, whether the auditor
has taken into consideration the issues, objections or concerns raised by the outgoing auditors.

In the instant case, there has been no resignation made by the statutory auditors during the
financial year. The mere fact that Y&S Associates were thinking of resigning does not matter in the
current scenario, and hence this clause shall not be applicable in the given situation

QNO Clause 21- CFS Old Course – (N23M,N23R)
416.000 TITANIUM CNO—CARO.440
ABC & Associates are conducting audit of consolidated financial statements of “Crazy Paints Limited” for
year 2022-23. The consolidated financial statements consist of financial statements of parent company
and its five subsidiaries (audited by component auditors). While drafting audit report in respect of
consolidated financial statements under Companies Act, 2013, how firm should proceed to deal with
issue of reporting under CARO, 2020?
Answer CARO, 2020 specifically provides that it shall not apply to the auditor’s report on consolidated financial
statements except clause (xxi) of paragraph 3. This means that the auditor will need to give a CARO report
on the consolidated financial statements with respect to clause 3(xxi) of the Order only. Thus, the auditor is
not required to report on rest of the clauses of paragraph 3.

Clause 3(xxi) of CARO 2020 requires the auditor to state whether there have been any qualifications or
adverse remarks by the respective auditors in the Companies (Auditor’s Report) Order (CARO) reports of
the companies included in the consolidated financial statements. If yes, indicate the details of the
companies and the paragraph numbers of the CARO report containing the qualifications or adverse
remarks.

Therefore, it requires the auditor to provide details of the companies and the paragraph numbers of the
respective CARO report containing the qualifications or adverse remarks only. Reporting under this is only
required for those entities included in the consolidated financial statements to whom CARO 2020 is
applicable.

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