Audit _ Assurance - Schedule III Cos Act and CARO

1. SCHEDULE –III
& CAR0

2. Schedule III Amendments
2
 The Ministry of Corporate Affairs (MCA) has amended Schedule III of Companies Act 2013
(“Act”) on 24 March 2021 to increase transparency and provide additional disclosures to
users of financial statements. These amendments are effective from 1 April 2021 onwards.
Companies need to provide significant information about the new clauses in financial
statements. In addition, companies may need to realign their Financial Statements Close
Process (FSCP) and internal control over financial reporting.
 Previously, MCA had issued the Companies (Auditor’s Report) Order, 2020 (CARO 2020),
which is also applicable for audit reports to be issued on or after 01 April 2021. Some of the
changes in Schedule III are in line with changes in CARO 2020, so Companies can provide the
required information in financial statements for Auditors to report in CARO 2020.

3. Divisions of Schedule III
2
 Division 1: Financial Statements for a company whose
Financial Statements are drawn up with the Companies
(Accounting Standards) Rules, 2006.
 Division II: Financial Statements for a company whose
financial statements are drawn up in compliance of the
Companies (Indian Accounting Standards) Rules, 2015
 Division III: Financial Statements for a Non-Banking
Financial Company (NBFC) whose financial statements
are drawn up in compliance of the Companies (Indian
Accounting Standards) Rules, 2015
Division 1
(Accounting
Standards)
Rules, 2006.
Division II
• (Indian
Accounting
Standards)
Rules, 2015.
Division III
• Non-Banking
Financial
Company
(NBFC)
(Indian
Accounting
Standards)
Rules, 2015.

4. Amendments in relation to Balance sheet
2
 A company must round off the figures in the financial statement. The criteria for rounding off shall now be the
‘Total Income’ instead of Turnover. Previously, the rounding-off was optional for the companies.
 The balance sheet shall also include the details of the promoter’s shareholding held at the end of the year and the
changes, if any, during the year.
 “Current maturities of the long-term borrowings” shall be disclosed separately under the heading short-term
borrowings.

5. Ageing schedule of Trade payables
2
 An ageing schedule in respect of trade payables shall be provided for the period
covering less than one year, 1-2 years, 2-3 years, and more than 3 years in
respect of:
 Micro Small and Medium Enterprises (MSME);
 Others;
 Disputed Dues – MSMEs; and
 Disputed Dues – Others
Similar information shall be given where no due date of payment is specified, in that
case disclosure shall be from date of transaction. Unbilled dues shall be disclosed
separately.

6. Ageing schedule of Trade receivables
2
 An ageing schedule in respect of Trade Receivables shall be provided for the period of less than 6 months, 6
month – 1 year, 1-2 year, 2- 3 year and more than 3 years in respect of:
 Undisputed Trade Receivables - Considered good
 Undisputed Trade Receivables - Considered doubtful
 Disputed Trade Receivables - Considered good
 Disputed Trade Receivables -Considered doubtful
Similar information shall be given where no due date of payment is specified, in that case disclosure shall be from
date of transaction. Unbilled dues shall be disclosed separately.

7. Property, Plant and Equipment
2
 The word “Tangible Assets” has been replaced with “Property, Plant and
Equipment” and word “and Intangible Assets” has been inserted after the
words “Property, Plant and Equipment”.
 Under the heading Tangible Assets and Intangible Assets, a reconciliation
statement shall be provided in respect of gross and net carrying amount of each
class of assets at the beginning and at the end of the reporting period showing
additions, disposals, acquisitions, revaluations, and various other adjustments.
 Security Deposits shall not be disclosed under “Long Term Loans and
Advances” but disclosed under “Other Non-current assets”
 The entities in addition to the above, are required to provide the details of any
discrepancies of the utilization of specific borrowed fund.

8. Amendments in relation to statement of Profit and Loss and Additional
Information
2
 A Company will have to provide details of transactions not recorded in the books
but have been surrendered or disclosed as income during the year in the tax
assessments.
 Whether the company is covered under Section 135 of the Companies Act, 2013 in
respect of Corporate Social Responsibility (CSR)? If yes, the entity is required to
provide certain disclosures as a part of its financial statements.
 In case, an entity is involved in trading or has invested in Crypto-Currency and
Virtual Currency during the financial year, the disclosures in respect of profit and
loss on the transaction and the amount of currency held at the reporting date shall
be provided in the Notes to Accounts.

9. Reporting requirement in respect of Regulatory disclosures
2
 On the basis of CARO 2020, the companies will be required to provide the details of all the immovable property
(other than properties wherein the entity is the lessee and the lease agreements are duly executed in favour of
the lessee) the title deeds of which are not in the name of the company and where such properties are jointly
held with others, disclosure should be provided to the extent of entity’s share in prescribed format.
 In case, the entity has revalued its Property, Plant and Equipment, disclosure should be provided whether the
revaluation is based on the valuation done by a registered valuer as defined under Rule 2 of the Companies
(Registered Valuer and Valuation) Rules, 2017.
 The entities shall be required to report whether any loans or advances in the nature of loans have been granted
to promoters, KMPs, and other Related Parties which are repayable on demand or without specifying any terms
or period of repayment in prescribed format.

10. 2
 As a part of the additional requirement, the entities shall be required to provide Ageing Schedule for less than 1 year, 1-2
years, 2-3 years and more than 3 years in respect of:
 Capital Work-In-Progress (CWIP); and
 Intangible Assets under developments
Details of projects in progress and projects temporarily suspending shall be given separately.
 For capital-work-in progress/Intangible Assets under development, whose completion is overdue or has exceeded its cost
compared to its original plan, completion schedule with ageing less than 1 year, 1-2 years, 2-3 years and more than 3 years
shall be given in prescribed format.
Reporting requirement in respect of Regulatory disclosures

11. Additional Disclosures
2
 Any proceedings have been initiated or pending against the entity under the Benami Transactions
(Prohibitions) Act, 1988, the corresponding disclosures shall be provided in the financial
statements.
 Where the Company has borrowings from banks or financial institutions on the basis of
security of current assets, it shall disclose whether quarterly returns or statements of current
assets.
 Whether the entity has been declared as a wilful defaulter by any bank or financial institution
or other lender.
 Whether the entity has entered into a transaction with such entities whose name has been
struck off under Section 248 of the Act.
 Whether any charge or satisfaction is pending to be registered with the Registrar of the
Companies beyond statutory period

12. Clause (87) of Companies Act 2013
2
 Entity has to comply with the number of layers of subsidiaries. In case, an entity has not complied with the number of
layers, the name and the CIN of the companies beyond the specified layers shall be disclosed as a part of the financial
statements of an entity.
 Additionally, the entities shall be required to disclose the certain ratios, namely:
 Current Ratio;
 Debt- equity Ratio;
 Debt Service Coverage Ratio;
 Return on Equity Ratio;
 Inventory turnover ratio;
 Trade Receivables turnover ratio;
 Trade payables turnover ratio;
 Net capital turnover ratio;
 Net profit ratio;
 Return on Capital employed; and
 Return on investment.
Further explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.

13. Compliances with approved scheme of agreements
2
 Company shall make a disclosure to the effect of scheme of arrangements in the books of accounts
and any deviation in this regard shall be explained.
 Details in respect of Utilization of Borrowed funds and share premium shall be provided .
 Company has advanced or loaned or invested funds or provided any guarantees to any other
person or entity, including foreign entities, the details pertaining to the same are to be provided.
Vice-versa, disclosures are to be made in case the Company receives funds for the same purpose
or acts as an intermediary for another company.
 provide a declaration that relevant provisions of the Foreign Exchange Management Act, 1999 and
Companies Act, 2013 have been complied with for such transactions and the transactions are not
violative of the Prevention of Money-Laundering act, 2002.

14. Contact us
HYDERABAD DELHI
C- 699A, 1st Floor, Sector-7, Palam
Extn., Dwarka, New Delhi, Delhi
110075
CHENNAI
Old no 19, New no 13B, New
Bangaru colony first Street, KK
Nagar West, Chennai 600078
BANGALORE
90/1, 3rd Floor, Pasha South
Square, Rathavilas Road,
Basavangudi, Bangalore -
560004
MUMBAI
Flat no.3, Plot no.226/227, Sion
East, Mumbai - 400022
Vizag: Level 3, Kupilli Arcade, Akkayyapalem, Visakhapatnam 530016,
Andhra Pradesh
Vijayawada: # 56-11-3, Sri Devi Complex, Y.V.R Street, MG Road, Patamata, Vijayawada, Andhra
Pradesh
Tirupati: H. No: 6-154/1, Syamala Nilayam, Near Water Tank, Akkarampalli, Tirupathi, Andhra Pradesh
Kurnool: #21, Top Floor, Skandanshi Vyapaar, New Bus Stand Road, Kurnool 518 003, Andhra
Pradesh
UAE Address: 2103, Bayswater Tower, Business Bay, Dubai,
UAE
USA Address: SBC LLC, 8 The Green, Suite A in the City
of Dover, Delaware - 19901
Suite 5, Level 3, Reliance Cyber
Ville,, Madhapur, Hitech City,
Hyderabad – 500081

15. Thank You
www.steadfastconsultan ts.in
SBC refers to one or more of Steadfast Business Consulting LLP (LLPIN: AAL-1503), a Hyderabad based Limited Liability Partnership, and its network of member firms, branches and affiliates. SBC provides tax, consulting, audit and financial advisory
services to clients within and beyond borders spanning multiple industries. With local connect and expertise put together with global outlook and capabilities, SBC believes in providing holistic solutions to clients tailored to meet business objectives and
address most complex challenges and at the same time be robust, scalable and sustainable from a tax, legal and regulatory standpoint.