Provisions of CARO- The Companies (Auditor’s Report) Order, 2020

1. Rule 1 Applicability

CARO shall apply to every company including a Foreign company under section 2(42) except-

a. Banking Company as defined in section 5(c)  of the Banking Regulation Act, 1949.

b. An insurance company as defined under insurance act 1938;

c. Section 8 Company;

d. OPC;

e. A Pvt. company, not being a subsidiary or holding of public company,

1. having a paid up Capital and reserve and surplus not more than 1 cr. as on the balance sheet date and;

2. Which doesn’t have a total revenue as disclosed in scheduled III to the Companies Act exceeding 10 Cr. during the financial year during the financial year as per the financial statements.


2. Rule 2

Every Auditors of the company, the companies on which said order applies, shall in his auditor report shall in addition, contains the matter specified in Paragraph 3 and 4 as may be applicable.

This is not applicable on the CFS except the Clause (Xxi) of paragraph 3.

3. Matter to be stated in Auditor Report Rule 3

1. Whether the Company is maintaining proper records showing the proper particulars, like details of Property and plant & Machinery;

2. Particulars of Intangible assets, whether full particulars are recorded or not;

3. Whether these Property/ Plant and machinery properly verified or not by the management at reasonable intervals; whether any material discrepancies were notice on such verification and if so , whether the same has been removed or not;

4. Whether the titled deeds of all immovable properties disclosed in the financial statements are held in the name of the company, if not then the details shall be provided as follows;

Description Of the property Gross  Value Held In name  of Whether Director Relative, Promoters Employee Period


Reason for not been held in the name of Company

5. whether the company has revalued its Property, Plant and Equipment or intangible assets or both during the year and, if so, whether the revaluation is based on the valuation by a Registered Valuer; specify the amount of change, if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment or intangible assets;

6.  Any proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988  and rules made thereunder, if so, whether the company has appropriately disclosed the details in its financial statements;

7.  whether physical verification of inventory has been conducted at reasonable intervals by the management and whether, in the opinion of the auditor, the coverage and procedure of such verification by the management is appropriate; whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed and if so, whether they have been properly dealt with in the books of account;

8. whether during any point of time of the year, the company has been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets; whether the quarterly returns or statements filed by the company with such banks or financial institutions are in agreement with the books of account of the Company, if not, give details;

9. Whether during the year company has made any Interoperate loan, investment, provide security and give any guarantee to any company, firm, LLP or any other  parties;

10. Any changes in clause 9 during the years;

12. any other matter, for more details kindly refer

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May 2021