Illustrative Checklist on Clause 3(VIII) & 3(IX) of CARO 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 clauses 3(viii) & 3(ix) of CARO 2020.

Clause 3(viii): whether any transactions not recorded in the books of account have been surrendered or disclosed as income during the year in the tax assessments under the Income-tax Act, 1961 (43 of 1961), and if so, whether the previously unrecorded income has been properly recorded in the books of account during the year;

Therefore, for the fulfillment of the requirement of this clause the auditor has to check and comment on the following:

• 1. Whether listing of sources of income and financial statements have been obtained.
  2. Whether details of any assessment made during the financial year were obtained during the audit.
  3. Whether written representation is obtained from the management:

1. 1. • Specifying the income which are not recorded in the books of account and have been disclosed by the assesse.
      • Containing year-wise listing of amount disclosed.
      • Containing reasons for non-disclosure earlier and source of income.
      • Containing the impact of such unrecorded transactions on the financial statements.
      • Containing the completeness of the information provided by the management.

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