[Checklist] Clause 3(iv) to 3(vii) of the CARO | Companies (Auditor’s Report) Order, 2020

The Central Government, in exercise of the powers given, under section 143 (11) of the Companies Act, 2013, issued the CARO, 2020. It is applicable from financial year 2021-22. Further, in this regard, ICAI has issued an Exposure Draft on CARO 2020, to provide guidance to auditors. Appendix V of this guidance note contains an Illustrative Checklist on the CARO, 2020. In this writeup we covered the checklist on clause 3(iv) to 3(vii) of CARO 2020.

Clause 3(iv): In respect of loans, investments, guarantees, and security, whether provisions of sections 185 and 186 of the Companies Act have been complied with, if not, provide the details thereof;

(a) In case where, company has given loans to directors etc. Check and comment on following:

• • • Whether the company has given any loans given directly or indirectly to directors or any person in whom any of the director of the company is interested?
    • Whether the company has given any guarantee or provided any security in connection with any loan taken by directors or other person in whom any of the director of the company is interested?
    • Whether provisions of section 185 attracting on any transaction?
    • Whether relevant evidence obtain for ensuring those transaction which are covered under the exceptions provided under section 185?

(b) In case where, company has made loan/investment, check and comment on following:

• • • Whether details are obtained regarding loans given and investment made by the company including opening balances?
    • Whether details are obtained regarding guarantee given or security provided by the company?
    • Whether the company has made investment through more than two layers of investment companies?
    • Whether the limit of sixty per cent of its paid-up share capital, free reserves and securities premium account exceed by the company?
    • Whether the company has exceeded the limit of one hundred percent of its free reserves and securities premium account, whichever is more?
    • Whether prior approval by means of a special resolution passed at a general meeting has been obtained? In case limit of 60% or 100% exceed.
    • Whether interest rate is charged more or at par to the rates specified in sub-section (7) of section 186 of the Act, if not, the reasons thereof.

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