## CARO 2020: Companies Auditor's Report Order, 2020
### What is CARO?
CARO is an order issued by the Central Government under Section 143(11) of the Companies Act, 2013. It requires auditors to report on specific matters beyond the standard audit report, providing additional accountability for company operations.
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### General Rule: CARO Applies to Every Company Including Foreign Companies
Exceptions (entities exempt from CARO 2020):
| Exempt Entity | Governing Provision |
|---|---|
| Banking company | Section 5(c), Banking Regulation Act, 1949 |
| Insurance company | Insurance Act, 1938 |
| Section 8 company (not-for-profit) | Section 8, Companies Act, 2013 |
| One Person Company (OPC) | Section 2(62), Companies Act |
| Small company | Section 2(85), Companies Act |
| Qualifying private limited companies | (See four-condition test below) |
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### Special Exemption: Private Limited Companies
A private limited company is exempt only if ALL four conditions are satisfied simultaneously:
| Condition | Threshold |
|---|---|
| Not a subsidiary or holding company of a public company | — |
| Paid-up capital + Reserves & Surplus | ≤ ₹1 crore as on Balance Sheet date |
| Total borrowings from any bank or FI | ≤ ₹1 crore at any point during the FY |
| Total revenue (Sch. III, including discontinuing operations) | ≤ ₹10 crore during the FY |
> Critical exam point: Failing even ONE condition means CARO applies in full.
> The borrowing test is at any point in time during the year — not just at year-end. A temporary overdraft exceeding ₹1 crore triggers CARO.