The Companies (Auditor's Report) Order 2020 (CARO 2020) was notified by the Ministry of Corporate Affairs on 25 February 2020 and applies to audit reports issued for financial periods commencing on or after 1 April 2021 (deferred from 1 April 2020 due to COVID-19). It supersedes CARO 2016 and applies to every report made by the auditor on the standalone financial statements of every company under Section 143 of the Companies Act 2013 — with specific exemptions.
CARO 2020 does NOT apply to: (a) banking companies; (b) insurance companies; (c) Section 8 (non-profit) companies; (d) one-person companies; (e) small companies as defined in Section 2(85); (f) certain private limited companies meeting all four conditions — not a holding / subsidiary of a public company, paid-up capital + reserves and surplus ≤ ₹1 cr at balance-sheet date, total borrowings from any bank / FI ≤ ₹1 cr at any point during the year, and total revenue (including discontinued operations) ≤ ₹10 cr during the year.
For applicable companies, CARO 2020 mandates the auditor to include a separate Annexure to the audit report addressing 21 specific reporting clauses — covering PPE / RoU records, inventory, loans and investments, deposits, internal audit, statutory dues, fraud reporting, transactions with related parties, CSR compliance, going concern, and more. Each clause has a specific "matter on which to report".
A private limited company has: paid-up capital ₹50 lakh, reserves and surplus ₹40 lakh, bank borrowings ₹80 lakh maximum during the year, turnover ₹8 cr.
