## CARO 2020 – Clause 1: Fixed Assets

Clause 1 covers both tangible fixed assets (PPE) and intangible assets.

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### Sub-clause (i): Records

Asset Type	What to Report
PPE	Whether proper records are maintained showing full particulars including quantitative details and situation of each asset
Intangible assets	Whether proper records are maintained showing full particulars

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### Sub-clause (ii): Physical Verification of PPE

Whether PPE has been physically verified by management at reasonable intervals
Whether any material discrepancy was noticed
Whether such discrepancies were properly dealt with in the books of accounts

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### Sub-clause (iii): Title Deeds of Immovable Properties

Whether title deeds of all immovable properties disclosed in FS are held in the name of the company
If not in the company's name, report in a prescribed format:

Column	Description
Description of property	—
Gross carrying value	—
Held in name of	(actual holder)
Whether promoter/director/relative/employee	—
Period held (indicate range where appropriate)	—
Reason for not being in company's name	—

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### Sub-clause (iv): Revaluation

Whether the company has revalued PPE or intangible assets during the year
If yes, whether the revaluation is based on valuation by a Registered Valuer
Whether the amount of change is specified, particularly if it is 10% or more in aggregate of the net carrying value of each class of PPE or intangible asset

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### Sub-clause (v): Benami Property

Whether any proceedings have been initiated or are pending against the company under the Benami Transactions (Prohibition) Act
Whether the company has disclosed the details in its financial statements

Worked example

### Example 1

During the audit of Omega Ltd, you find that the company owns five factory buildings but the title deeds of two are in the name of the Managing Director, and one is in the name of a relative of a director. How would you report this under CARO 2020?

Answer: Under Clause 1(iii), since title deeds of immovable properties are not in the name of the company, you must report the details in the prescribed format: description of property, gross carrying value, name of holder (MD / director's relative), relationship (director / relative of director), period held, and reason for non-registration in the company's name.

### Example 2

Zeta Ltd revalued its plant & machinery (carrying value ₹50 crore) during the FY, resulting in an upward revaluation of ₹8 crore (16%). The valuation was done internally by the CFO without engaging a registered valuer. What are your CARO reporting obligations?

Answer: Under Clause 1(iv): (1) Revaluation has occurred — report that fact; (2) The revaluation is NOT based on valuation by a Registered Valuer — report non-compliance; (3) The change (₹8 crore = 16%) exceeds 10% of net carrying value — specify the amount of change.

⚠️ Common exam mistakes

Reporting only PPE records and missing the separate requirement for intangible assets records.
Confusing 'physical verification by management' (Clause 1 requirement) with 'physical verification by auditor' — CARO asks about management's verification, not the auditor's.
Missing the 10% threshold for mandatory disclosure of the revaluation amount — amounts below 10% still need to be disclosed if revaluation occurred, but the 10% flag specifically requires specifying the amount.
Not knowing that the Registered Valuer requirement applies to both PPE and intangible assets, not just tangible assets.
Forgetting the Benami Transactions sub-clause (v) — a common omission in exam answers on Clause 1.

Reference: Clause 3(i) – Fixed Assets — Companies (Auditor's Report) Order, 2020

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CARO 2020 – Clause 1: Fixed Assets (PPE and Intangible Assets)

Worked example

⚠️ Common exam mistakes