MCA Notifies Companies (Auditor’s Report) Order, 2020

The Ministry of Corporate Affairs vide an Order dated 25th February 2020 has notified the Companies (Auditor’s Report) Order, 2020. This Order shall apply to every report made by the auditor under Section 143 of Companies Act, 2013 from the financial year commencing on or after 01st April 2019. Companies (Auditor’s Report) Order, 2020 has enhanced the auditor’s reporting requirements in certain areas, such as loan, company property, default in payment of interest on deposits or repayment, non-cash transactions with directors, cash losses by company etc. The main provisions of this Order are as follows-

This Order is applicable to every company including a foreign company, a banking company, an insurance company, one-person company and a private limited company, not being a subsidiary or holding company of a public company.

This Order specifies the matters that should be there in every report made by the auditor. Some of the matters are-

  • Maintenance of proper records by company, including quantitative details and situation of Property, Plant and Equipment.
  • Maintenance of proper records by company showing full particulars of intangible assets.
  • Physical verification of company’s Property, Plant and Equipment by the management at reasonable intervals.
  • Title deeds of all the immovable properties disclosed in the financial statements are held in the name of the company. If not, details in prescribed form are provided.
  • Revaluation of Property, Plant and Equipment (including Right of Use assets) or intangible assets or both during the year.
  • Whether legal proceeding is pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988.
  • Whether the company is a declared willful defaulter by any bank.
  • The amount of loan so diverted and the purpose for which it is used may be reported.
  • Whether any fraud by the company or any fraud on the company has been noticed.
  • Whether the reports of the Internal Auditors for the period under audit were considered by the statutory auditor.
  • Whether the company is a Core Investment Company (CIC) and fulfilled the criteria to be CIC.
  • Whether the company has incurred cash losses in the financial year.

Where, in the auditor’s report, the answer to any of the questions is unfavorable, the auditor’s report shall also state the basis for such unfavorable answer.

If the auditor is unable to express his opinion in any matter, his report shall indicate the reason why it is not possible for him to give opinion.

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