Accounting and Audit News

​Guidance Note on the Companies (Auditor’s Report) Order, 2020

Companies (Auditor’s Report) Order, 2020 (CARO 2020) was issued on 25 February 2020 by The Ministry of Corporate Affairs. The Order comes into effect for financial year 2020-21 onward as a result of one year deferral notification dated 24 March 2020. The Order contains significant changes and several new reporting requirements. In order to clarify the requirement in initial stage, the Auditing and Assurance Standards Board of ICAI undertook the revision of the Guidance Note on CARO 2016 to provide appropriate guidance on new requirements on 13 June 2020. The major clarification has been provided in the area of Property, Plant and Equipment, Intangible assets and Immovable property.

 
Consequently, companies now have to alter their existing systems and processes to comply with the new requirement laid down in CARO, 2020.

Re-inventing Finance Process and Internal Control in Work from home due to covid-19

We have now  been working from home for a significant time period and the situation is expected to be in status-quo for foreseeable future. Especially, the support functions such as finance team, HR and office administration staff  may not join back soon to avoid large numbers of employees at office.

However, the businesses has started to revamp across the industries; warranting a relook into our processes and controls in such environment from different perspective. For exmaple : how are approvals taking place, where are vendors invoices centralized etc. Some guidance on business finance processes and structuring which company can now start looking with newperspective to standardize is as below:

1. Approval Matrix and Method

• Check all methods of approval documented in various process; see which areas need an added option of email approval
• Remove all physical vouchers approval requirement from documented process manual, if any under Internal Financial Control (IFC issued by MCA)
• Re-visit the approval limits and authorizations designed in the previous environment and change to current crisis requirement including cost-effectiveness objectives 
• Send an email clarification to all employees deciding that, no approvals on apps not used for business purpose such as ‘WhatsApp’ etc.; otherwise this will result in problems during the audit process

2. Documentary management system

• Check whether the soft copies documentary management system for invoices, agreement etc. is in place
• Ensure important physical documents i.e. signed contract, licence etc. during this period have been archived properly
•  Lay down the unambiguous documentary management policy with assigned responsible person and timelines for update
• Ensure the documents are timely saved on required designated path/server and proper mechanism are placed for assurance

3. Process re-structuring

• Check all the processes which are becoming a bottleneck due to requirements based on previous business environment
• Ensure the digital transformation required in various areas for effective control maintain future oriented approach.
• Re-structure cross-functional, centralized, and old-fashioned activities and role
• Proper communication to all the employees at different location about the emerging changes in process and instruction to be followed

In addition to above, any company also needs to look into various other process such handover processes from exiting employees, HR and administration related matters as well to avoid any issue once the industry returns from current work from home environment.

We would emphasis companies to create a proper checklist and step plan for each vertical and understand the current experience over the last few months and plan future course of action for restructure.