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CMA Intermediate · Corporate Accounting and Auditing · Audit Report and Reporting under CARO

Which statement about clause 3(iv) of CARO 2020 is correct?

Clause 3(iv) requires the auditor to state whether sections 185 and 186 of the Companies Act have been complied with in respect of loans, investments, guarantees and security, and to give details of any non-compliance. It is not limited to directors' loans.

  1. AIt requires the auditor to report whether provisions of sections 185 and 186 of the Companies Act have been complied with in respect of loans, investments, guarantees and security, giving details if notCorrect
  2. BIt requires reporting only on loans to directors under section 185, not on investments
  3. CIt requires reporting on qualifications in the CARO reports of group companies in the consolidated financial statements
  4. DIt requires reporting on discrepancies of 10% or more in inventory

Explanation

Clause 3(iv) covers compliance with sections 185 and 186 for loans, investments, guarantees and security, with details if not complied. Reporting on group-company CARO qualifications is clause 3(xxi), and inventory discrepancies are in clause 3(ii)(a).

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