CARO 2020 - Applicability, Exemptions and Selected Clauses (PPE, Inventory, Loans)

# Companies Auditor's Report Order 2020 (CARO 2020)

## Applicability

CARO 2020 applies to every company including foreign companies, EXCEPT:

1. One Person Company (OPC)

2. Insurance company

3. Banking company

4. Small company

5. Section 8 company (charitable)

6. Private company (not being subsidiary or holding of public company) that satisfies ALL of the following:

• Paid up capital + Reserves & Surplus ≤ ₹1 crore as on B/S date
• Total borrowings ≤ ₹1 crore from any bank/FI at any point during FY
• Total revenue (including discontinuing operations) ≤ ₹10 crore as per P&L

> All three conditions must be satisfied cumulatively for the private company exemption.

### CARO on Consolidated FS

CARO does NOT apply to report on Consolidated FS, EXCEPT Clause (xxi) of Para 3.

## Para 3 — Matters to be Included in Auditor's Report (Selected Clauses)

### Clause (i) — Property, Plant & Equipment (PPE) & Intangible Assets

(a) Whether company is maintaining proper records showing full particulars of:

• (A) Quantitative details of PPE
• (B) Intangible assets

(b) Whether PPE is physically verified by Mgt at reasonable intervals, whether material discrepancies were noticed, and if so, whether properly dealt with in Books of Account (BOA).

(c) Whether title deeds of all immovable properties (other than leased properties) disclosed in FS are held in name of the company. If not, provide details in format:

(d) Whether company has revalued PPE or intangible assets during year. If yes:

• Revaluation must be done by Registered Valuer
• Specify amount of change if change is ≥10% in aggregate of net carrying value of each class

(e) Whether any proceedings are initiated or pending against the company for holding benami property; if so, whether properly disclosed in FS.

### Clause (ii) — Inventory

(a) Whether physical verification of inventory is conducted at reasonable intervals by Mgt:

• Whether coverage & procedure of verification are appropriate
• Whether discrepancies of ≥10% in aggregate for each class of inventory were noticed
• If so, whether properly dealt with in BOA

(b) Whether company was sanctioned working capital limits > ₹5 crores in aggregate from banks/FIs at any time during year on basis of security of current assets:

• Whether quarterly statements filed are as per BOA
• If not, give details

### Clause (iii) — Loans, Investments, Guarantee & Security

Whether company has made investments in, provided guarantee/security/loans (secured or unsecured) to companies, firms, LLPs or other parties. If so:

(a) Whether company has provided loans/advances/guarantees/security to other entity (NOT applicable to companies whose principal business is to give loans). If so, indicate:

• Aggregate amount during year
• Balance outstanding at B/S date

for:

• (A) Subsidiaries, Joint Ventures, Associates
• (B) Other parties

(b) Whether investments, guarantees, security and terms & conditions of loans/advances/guarantees are not prejudicial to company's interest.

## Summary of Key Thresholds in CARO 2020 (Clauses i-iii)