You have been appointed as the statutory auditor of KYM Pvt. Ltd. for the F.Y. 2024-25. The company has a Paid-up capital and Reserves & Surplus…

CARO 2020 is an additional reporting requirement applicable to all companies unless specifically exempted. In the given case, KYM Pvt. Ltd. is a private limited company and is not a banking company, insurance company, Section 8 company, One Person Company or a small company. Further, although its paid-up capital and reserves are 2 crore, its total borrowings are 9 crore, which exceeds the exemption limit of 1crore prescribed for private companies. Accordingly, KYM Pvt. Ltd. does not fall under the exempted category, and therefore, CARO 2020 is applicable to the company for the F.Y. 2024-25. (i) In the given situation, Company has incurred cash losses of 50lakh during F.Y. 2024-25 AND 75lakh with negative working capital. The auditor is required to report under Clause (xvii) of Paragraph 3 of CARO, 2020, that whether the company has incurred cash losses in the financial year and in the immediately preceding financial year, if so, state the amount of cash losses. (ii) In respect of the fraud discovered by the management, the auditor is required to report under Clause (xi) (c) of Paragraph 3 of CARO, 2020, which requires the auditor to state whether the auditor has considered whistle-blower complaints, if any, received during the year by the company; (iii) KYM Pvt Ltd has obtained term loans of 4crores for the Metrolines, Monorail and Coastal Roads from the Bank in the year 2023-24. Coastal Road project has not commenced as on 31-03-2025 and hence the loan remains unutilised. Under Clause 3 (ix) (c) of CARO, 2020, the auditor is required to report on the application of term loans which requires the auditor to state whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported; Mere non-utilisation due to non-commencement of the project does not constitute diversion or misuse of funds. Accordingly, no adverse reporting or qualification is required, though an explanatory statement is to be included in the CARO report indicating non-utilisation of the term loan. Subject to adequate disclosure in the notes, the audit opinion remains unmodified. (iv) With regard to the Metrolines and Monorail projects, which are ongoing in nature, the existence of an unspent amount of 2crores as on 31-03-2025 represents normal timing differences in the execution of long-term infrastructure projects. Under Clause 3 (ix) (c) of CARO, 2020, the auditor is required to report on the application of term loans for their intended purposes. Where term loans are not fully utilised due to the stage of execution of the project, an explanatory remark is required in the CARO report. Since the funds are intended to be applied for the stated purpose and there is no diversion, misuse or default, no adverse reporting under CARO, 2020 is warranted. The auditor is also required to evaluate the entity's ability to continue as a going concern as per SA 570 and express the opinion in his report accordingly.