Page 263 - CA Inter Audit PARAM

CA Ravi Taori
• whether the company has taken any funds from any entity or person on account of or to
meet the obligations of its subsidiaries, associates or joint ventures, if so, details thereof
with nature of such transactions and the amount in each case;
• whether the company has raised loans during the year on the pledge of securities held in
its subsidiaries, joint ventures or associate companies, if so, give details thereof and also
report if the company has defaulted in repayment of such loans raised;

QNO— Cl 9- Short Term Borrowing Used for Long Term Purpose New Course – (SM25/M24M)
CARO.19.50 Bhaskar CNO - CARO.080
CA. Ravi Patnaik is conducting audit of a company for which reporting requirements under CARO,
2020 are applicable. He finds that cash credit facilities amounting to ₹ 4 crores were released to the
company by branch of a bank for meeting its working capital requirements. He finds that out of above
funds, ₹ 1 crore have been used by company for installing effluent treatment plant to meet State
pollution control Board requirements.

Is there any reporting obligation upon him under CARO,2020?
Answer Clause (ix) (d) of CARO, 2020 whether funds raised on short term basis have been utilised for long term
purposes, if yes, the nature and amount to be indicated.

In the given situation, funds have been raised for meeting working capital requirements for ₹ 4 crores.
Cash credit facilities for meeting working capital requirements are, by their very nature, short term
borrowings. Out of above, ₹ 1 crore have been used by the company for investment in effluent
treatment plant which is ostensibly for a long-term purpose.

Hence, the matter needs to be reported in accordance with requirements of Clause (ix) (d) of CARO,
2020.

QNO CARO (Cl 9 - Requirements) New Course -- (N19E/N21M/M21M/M23E)
CARO.21 Bhaskar CNO - CARO.150
ABC Ltd. is a public company, which has availed various loans and cash credit facilities from Banks and
other financial institutions. The company has defaulted in repayments of such borrowings during the year
under audit. What are the reporting requirements in this regard under the Companies (Auditor's Report)
Order, 2020?

OR

State the matters to be included in the auditor's report as per CARO, 2020 regarding-
(i) Default in repayment of loans or borrowing to a financial institution, bank etc.
Answer ➢ Default in repayment of loans or borrowing to a financial institution, bank etc.
Clause 9:
• whether the company has defaulted in repayment of loans or other borrowings or in the
payment of interest thereon to any lender, if yes, the period and the amount of default to
be reported as below:
• Nature of borrowing, including debt securities
• Name of lender (Lender wise details to be provided in case of defaults to banks,
financial institutions and Government)
• Amount not paid on due date
• Whether principal or interest
• No. of days delay or unpaid
• Remarks, if any
• whether the company is a declared willful defaulter by any bank or financial institution or
other lender;
• whether term loans were applied for the purpose for which the loans were obtained; if not,
the amount of loan so diverted and the purpose for which it is used may be reported
• whether funds raised on short term basis have been utilized for long term purposes, if yes,
the nature and amount to be indicated;
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