CARO clause 3(xx) requires the auditor to report whether, in respect of other than ongoing projects, the company has transferred unspent corporate social responsibility amount to a fund specified in Schedule VII within six months of the expiry of the financial year, as required under section 135, and to report details of unspent amount in respect of ongoing projects; this means separately tracking the CSR obligation for ongoing versus non-ongoing projects, since they follow different transfer routes and different timelines, and the exact clause wording and timelines should be confirmed against the current order and section 135 rules.
The two different unspent-amount routes
| Project type | Where unspent amount is parked | Timeline |
|---|---|---|
| Non-ongoing project | Transferred to a fund specified in Schedule VII (for example, a fund set up by the Central Government) | Within six months of the expiry of the financial year |
| Ongoing project (part of a multi-year board-approved plan) | Transferred to a separate 'Unspent CSR Account' opened with a scheduled bank | Within thirty days of the end of the financial year, to be spent within three financial years of transfer |
Testing approach
- 01Recompute the section 135 obligation independentlyCompute two percent of average net profit for the preceding three financial years, as adjusted under section 198, rather than accepting the company's stated obligation figure without recalculation.
- 02Classify every approved CSR project as ongoing or non-ongoingCheck the board-approved CSR plan and committee minutes for the project's stated duration; a project spanning more than one financial year, approved as such by the board, is ongoing and follows the unspent CSR account route.
- 03Trace the transfer for non-ongoing project shortfallsConfirm the unspent amount on non-ongoing projects was transferred to the specified Schedule VII fund within six months of the financial year end, with the bank transfer evidence and the fund's acknowledgement.
- 04Confirm the unspent CSR account was opened and funded on timeFor ongoing projects, check that a separate unspent CSR account was opened with a scheduled bank within thirty days of the financial year end, and that the unspent amount was transferred into it, not left in the general bank account.
- 05Check utilisation of amounts already sitting in the unspent CSR accountAmounts transferred to the unspent CSR account in a prior year must be spent within three financial years of transfer; confirm utilisation against this rolling deadline and check whether any amount has lapsed and requires transfer to the Schedule VII fund.
A company that reports its full CSR obligation as spent, but on closer trace shows an unpaid commitment or a grant disbursed to an implementing agency that has not yet utilised the funds, has not actually spent the amount for section 135 purposes merely by transferring it to the agency.
Regulatory requirement
The exact clause wording, transfer deadlines, the definition of ongoing project, and the specified Schedule VII fund are set out in section 135, the CSR rules and the Companies (Auditor's Report) Order as currently in force. Confirm all of these against current source material before drafting the report.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- CARO & Companies ActCARO 2020 reporting checklist for statutory auditorsThe topic areas CARO reporting covers, what evidence each one needs, and how the clauses fit together across the audit file.
- CARO & Companies ActBooks of account compliance under the Companies ActWhat proper books of account require under the Companies Act, the audit-trail-software requirement, and how to test whether it is actually switched on.
- Bank, cash & treasuryTreasury controls audit checklist for mid-market companiesSegregation of duties over payments, dual signatories, bank mandate review frequency, and whether cash flow forecasting is real or decorative.
- CARO & Companies ActSecretarial compliance checklist for a statutory auditorBoard meeting frequency, statutory registers and ROC filing timeliness, read as evidence of compliance culture rather than a secretarial checklist in its own right.
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