CARO stands for the Companies (Auditor’s Report) Order. CARO 2020 is the order issued by the Ministry of Corporate Affairs under Section 143(11) of the Companies Act, 2013 — Notification G.S.R. 109(E) dated 25 February 2020. It requires the statutory auditor to report on 21 specified matters covering fixed assets, inventory, loans, statutory dues, fraud, going concern, CSR and more, in a separate annexure to the auditor’s report. It replaced CARO 2016 (16 clauses) and applies to audits of financial years commencing on or after 1 April 2021.
Every company audited under the Companies Act 2013, including foreign companies, unless it falls into an exempt category:
| Exemption | Condition |
|---|---|
| Banking / insurance companies | Excluded outright, regardless of size. |
| Section 8 companies | Companies licensed for charitable/not-for-profit objects. |
| One Person Companies (OPC) | Excluded outright. |
| Small companies | Paid-up capital ≤ ₹4 crore AND turnover ≤ ₹40 crore (Companies Act 2013 small-company definition). Exempt irrespective of borrowings or profits. |
| Independent private companies | Not a subsidiary or holding company of a public company, and all three limits met at once: paid-up capital + reserves & surplus ≤ ₹1 crore (balance-sheet date); total borrowings from banks/FIs ≤ ₹1 crore at any point in the year; total revenue ≤ ₹10 crore. |
Fail any one condition, or the company is a subsidiary/holding of a public company, and the exemption does not apply — CARO reporting is mandatory. Use the applicability checker for a specific company.
CARO 2020 is issued as a separate annexure — conventionally “Annexure A” — to the main auditor’s report, referenced from the “Report on Other Legal and Regulatory Requirements” section as required under Sec 143(11). It is signed together with the main report, dated the same day, and carries the auditor’s UDIN. It is not a standalone opinion — each of the 21 clauses is a factual/compliance statement, not an audit opinion on the financial statements.
Each row opens the full clause page — reporting requirement, verification checklist, and sample observation language.
| Clause | Subject | What it covers | |
|---|---|---|---|
| (i) | Property, Plant and Equipment and Intangible Assets | Records, physical verification, title deeds, revaluation, and Benami proceedings. | Read clause → |
| (ii) | Inventory | Physical verification of inventory and working-capital limit returns / quarterly statements. | Read clause → |
| (iii) | Investments, Guarantees, Security, Loans / Advances | Loans, investments, guarantees, security given — terms, recovery, classification. | Read clause → |
| (iv) | Compliance with Section 185 and 186 | Loans, investments, guarantees, security to directors and connected persons. | Read clause → |
| (v) | Public Deposits | Acceptance of deposits as defined under Sections 73 to 76 / Companies (Acceptance of Deposits) Rules 2014. | Read clause → |
| (vi) | Cost Records | Maintenance of cost records under Section 148(1) where applicable. | Read clause → |
| (vii) | Statutory Dues | Regularity of deposit and disputed dues. | Read clause → |
| (viii) | Undisclosed Income Surrender | Income surrendered or disclosed under the Income-tax Act 1961 search proceedings. | Read clause → |
| (ix) | Loans / Borrowings — Default, Willful Defaulter, End-use | Default in repayment to banks/FIs/government, willful defaulter status, end-use of borrowed funds. | Read clause → |
| (x) | Money Raised — IPO / FPO / Preferential / Private Placement | End-use of money raised and compliance with Section 42 / 62 for private placement / preferential allotment. | Read clause → |
| (xi) | Fraud | Fraud by or on the company, whistle-blower complaints, Section 143(12) reporting. | Read clause → |
| (xii) | Nidhi Company | Specific compliances for Nidhi Companies — net-owned funds, deposit acceptance, deposit ratio. | Read clause → |
| (xiii) | Related Party Transactions | Compliance with Section 177 (Audit Committee) and Section 188 (board / shareholder approval). | Read clause → |
| (xiv) | Internal Audit System | Existence of internal audit system commensurate with the size and nature of business; consideration of IA reports. | Read clause → |
| (xv) | Non-cash Transactions with Directors | Section 192 compliance for any non-cash transactions with directors or connected persons. | Read clause → |
| (xvi) | NBFC / CIC Registration with RBI | Registration requirements under Section 45-IA of RBI Act; CIC compliance. | Read clause → |
| (xvii) | Cash Losses | Cash losses in the current and immediately preceding financial year. | Read clause → |
| (xviii) | Resignation of Statutory Auditors | Issues / objections / concerns raised by outgoing statutory auditors during the year. | Read clause → |
| (xix) | Material Uncertainty on Going Concern | Going-concern viability on the basis of audited financials, expected dates of meeting liabilities. | Read clause → |
| (xx) | CSR — Unspent and Ongoing Project Transfers | Section 135 unspent CSR amounts — transfers to specified funds and ongoing-project escrow. | Read clause → |
| (xxi) | Qualifications / Adverse Remarks in Consolidated CARO | For holding companies — qualifications or adverse remarks by component auditors in their CARO reports. | Read clause → |
The checklist template carries all 21 clauses ready for your letterhead; the applicability checker settles the exemption question for a specific company in under a minute.
And when clause-wise observations should draft themselves from the underlying ledger work — see the CARO reporting module, or start free: your first audit is on us.
Verified 18 July 2026 against the original order — MCA Notification G.S.R. 109(E), 25 Feb 2020. For clause-by-clause audit procedures and documentation, see the long-form guide.
