MCA going to amend CARO - Companies (Auditor’s Report) Order

India is set to strengthen audit reporting standards with the role of auditors coming under cloud after a number of corporate frauds. 

The ministry of corporate affairs plans to propose changes to the Companies (Auditor’s Report) Order or CARO as soon as the next government assumes office. “We will further strengthen the Companies (Auditor's Report) Order. We will make it even sharper,” a senior government official told ET. 

The move comes at a time when questions have been raised on the role of auditors in several of the recent financial scams, particularly the loan repayment defaults of Infrastructure Leasing and Financial Services, which is being investigated by the Serious Fraud Investigations Office of the ministry of corporate affairs. 

The official said even the current standards were “good enough”, and auditors would not be alowed to use the fact of a revision of rules as an excuse for poor or negligent audit reporting under current standards. The auditing standards, which were last revised in 2016, dictate the disclosures that auditors must make when filing auditor’s reports. 

CARO applies to most large companies in India other than financial and charitable institutions. The last revision of these rules added the requirement that managerial remunerations and related party transactions be included in the auditor’s report. 

Experts say CARO has progressed along with international standards but could possible benefit from the inclusion of more evaluations by auditors of the company’s status in the place of multiple smaller disclosures. 

The ministry is also looking to operationalise the recently formed National Financial Reporting Authority. NFRA is set to take charge of oversight of audits of larger corporates including listed companies from the Institute of Chartered Accountants of India (ICAI). #casansaar (Source - Economic Times)