CARO 2020

I. APPLICABILITY II. REPORTING

I] APPLICABILITY

It is applicable to all the companies including a foreign company, except-(key-BIPSO)

B-Banking company
I-Insurance company
P-Private limited company (excludes subsidiary/holding of public Company), if
PUSC + Reserve < ₹ 1 crore (on B/S date);
Total Borrowing < ₹ 1 crore (any time of the year) &
Total Turnover/Reserve, < ₹ 10 crores (on B/S Date)
S-Section 8 companies
O-One Person Company and Small Companies even if it falls under any criteria specified
for private company
Authors Note:-
1. CARO Reporting does not apply to consolidated FS [except PARA 3(XXI)]
2. CARO will be equally applicable for branches

II] REPORTING CLAUSES UNDER PARA 3 OF THE ORDER

(i) PROPERTY, PLANT & EQUIPMENTS (PPE)

Following matters shall be including in the auditors report/:-
(a) Adequacy of Records:-
 Whether the company is maintaining proper records
showing full particulars Including Quantitative
details and situation of PPE
 Whether the company is maintaining proper records showing full particulars of
Intangible Assets.
(b) Physical Verification:-
Whether these PPE have been physically verified by the management at regular Intervals.
When annual verification is not possible than all assets must be verified at least
once in every 3 years.
Whether any material discrepancies were noticed on such verification and if so
whether the Same have been properly dealt in BOA.
(c) Tittle Deed:-
Whether the title deeds of all the immovable properties(Other than Properties where
the company is the lessee and the lease agreements are duly executed in favour of
the lessee) Disclosed in the financial statements are held in the name of the
company.
If not
Description of Gross Held in Whether Period held- Reason for
property Carrying name of promoter, indicate not being
value director or range, where held in name
their relative appropriate of company*
or employee

*also indicate if in dispute.

(d) Revaluation of Property, Plant and Equipment:-
Whether the company has revalued its PPE (including Right of Use
assets) 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 PPE or intangible
(e) Proceedings for holdings Benami Property:-
Whether 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
there under,
If so
Whether the company has appropriately disclosed the details in its Financial Statements.
(ii) INVENTORIES [PARA 3(ii)]
(a) 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;
(b) Whether during any point of time of the year, the company has been sanctioned working
capital limits in excess of ₹5 crores, in aggregate, from banks or financial institutions on the
basis of Security of current PPE; whether the quarterly returns or statements filed by the
company with such banks or financial institution are in agreement with the books of account
 of the company,
If not
Give details.
Authors Note:-Whether physical verification of inventory has been conducted at regular
intervals by the management all material items must be verified at least once in year.
(iii) INVESTMENTS,GUARANTEE SECURITY ,LOANS OR ADVANCES [PARA 3(iii)]
Whether during the year the company has made investment in
Any guarantee or security or granted any loans
OR advances in the nature of loans, secured,
OR unsecured

COMPANY Companies, LLP,

Firms, other parties
(a) whether during the year the company has provided loans or provided advances in the
nature of loans, or stood guarantee, or provided security to any other entity [not

applicable to companies whose principal business is to give loans],

If so
Indicate the aggregate amount during the year, and balance outstanding at the
balance sheet date with respect to such loans or advances and guarantees or
security

To subsidiaries, joint ventures To parties other than subsidiaries,

and associates joint ventures and associated
(b) whether the investments made, guarantees provided, security given and the terms and
conditions of the grant of all loans and advances in the nature of loans and
guarantees provided are not prejudicial to the company’s interest;
(c) In respect of loans and advances in the nature of loans, whether the schedule of
repayment of principal and payment of interest has been stipulated and whether the
repayments or receipts are regular;
(d) if the amount is overdue, state the total amount overdue for more than 90 days, &
whether reasonable steps have been taken by the company for recovery of the principal
& interest;
(e) whether any loan or advance in the nature of loan granted which has fallen due
during the year, has been renewed or extended or fresh loans granted to settle the
overdues of existing loans given to the same parties,

if so,
specify the aggregate amount of such dues renewed or extended or settled by fresh
loans & the percentage of the aggregate to the total loans or advances in the nature
 of loans granted during the year [not applicable to companies whose principal
business is to give loans];
(f) whether the company has granted any loans or advances in the nature of loans either
repayable on demand or without specifying any terms or period of repayment,
if so,
specify the aggregate amount, percentage thereof to the total loans granted, aggregate of
amount loans granted to Promoters, related parties as defined in Sec. 2(76) of the
Companies Act, 2013.
(iv) COMPLIANCE OF PROVISIONS OF SECS.185 & 186 – [PARA 3(iv)]
In respect of loans, investments, guarantees, and security whether
provisions of Sections 185 and 186 of the Companies Act, 2013
have been complied with.
If not
Provide details thereof.
(v) PUBLIC DEPOSITS [PARA 3(v)]
 In respect of deposits accepted by the company or amounts
which are deemed to be deposits, whether the directives
issued by the RBI and the provisions of sections 73 to 76
or any other relevant provisions of the Companies Act &

the rules framed There under, where applicable, have been complied with.
If not,
the nature of such contraventions be stated;
 If an order has been passed by Company Law Board or National Company Law
Tribunal or Reserve Bank of India or any Court or any other Tribunal, whether
the Same has been complied with or not?
(vi) COST RECORDS [PARA 3(vi)]
Whether maintenance of cost records has been specified by the
CG u/s 148(1) of the Companies Act, 2013 and whether such
accounts and records have been so made and Maintained.
(vii) STATUTORY DUES [PARA 3(vii)]
(a) Whether the company is regular in depositing undisputed
statutory dues including Goods and Services Tax, provident
fund, employees’ state insurance, income-tax, sales- tax,
service tax, duty of customs, duty of excise, value added
tax, cess and any other statutory dues to the appropriate authorities and
if not,
the extent of the arrears of outstanding statutory dues as at the last day of the
financial year concerned for a period of more than 6 months from the date they
 became payable, shall be indicated.
(b) Where statutory dues referred above have not been deposited on account of
any dispute, then the amounts involved and the forum where dispute is
pending shall be mentioned.
Authors Note:-
A mere representation to the concerned Department shall not be treated as a dispute.
(viii) UNRECORDED INCOME [PARA 3(viii)]
(a) Whether any transactions not recorded in the books of
account have been the tax assessments under the surrendered
or as income during the year in the tax assessments

disclosed under the Income-tax Act, 1961,

if so,

(b) whether the previously unrecorded income has been properly recorded in the
books of account during the year;
(ix) REPAYMENT OF DUES [PARA 3(ix)]
(a) Whether the company has defaulted in repayment of
loans or other borrowings or in the payment of interest
thereon to any lender, if yes, the period and amount

of default to be reported as per the format below:

Nature of Name of Amount not Whether No. of days Remarks, if

principal
borrowing, Lenders* paid on due or delay or any
including date interest unpaid
debt securities

*Lender wise details to be provided in case of defaults to banks, financial institutions and
Government.
(b) whether the company is a declared wilful defaulter by any bank or
financial institution or other lender;
(c) whether term loans were applied for the purpose for which the loans were
obtained;
if not

the amount of loan so diverted and the purpose for which it is used may be
reported;
(d) whether funds raised on short term basis have been utilised for long term
purposes, if yes, the nature and amount to be indicated;
 (e) whether the company has taken any funds from any entity or person on
account of or to meet the obligations of its subsidiaries, associates or joint
ventures, if so, details thereof with nature of such transactions and the
amount in each case;
(f) whether the company has raised loans during the year on the pledge of
securities held in its subsidiaries, joint ventures or associate companies, if so,
give details thereof and also report if the company has defaulted in
repayment of such loans Raised.
(x) APPLICATION OF MONEY RAISED BY PUBLIC ISSUE AND PREFERENTIAL
ALLOTMENT- [PARA 3(x)]
(a) Application of Money raised by public issue:-
Whether moneys raised by way of initial public offer or further
public offer (including debt instruments) during the year were

applied for the purposes for which those are raised, if not, the
details together with delays or default and subsequent rectification,
if any,

As may be applicable, be reported.

Nature of the fund Details of default Amount(₹) Subsequently

Raised (Reason/Delay) rectified(yes/no)and
Details

(b) Preferential allotment:-

whether the company has made any preferential allotment or private placement of
shares or convertible debentures (fully, partially or optionally convertible) during the

if so,
whether the requirements of section 42 and section 62 of the Companies Act,
2013 have been complied with and the funds raised have been used for the purposes for
which the funds were raised,
if not,

provide details in respect of amount involved and nature of non-compliance;

The auditor may report the non-compliances incorporating the following details:

Nature of Purpose for Total Amount Amount Unutilized Remark, if

Securities viz. which funds Raised/opening utilized for balance as at any
Equity raised unutilized the other Balance sheet
shares/ balance purpose Date
 Convertible
debentures

(xi) FRAUD [PARA 3(xi)] IMPORTANT

(a) Whether any fraud by the company or any fraud on
the Company has been noticed or reported during the year;
If yes,

the nature and the amount involved is to be indicated.

(b) whether any report u/s 143(12) of the Companies Act has been filed by the
auditors in Form ADT-4 as prescribed under rule 13 of Companies (Audit and
Auditors) Rules,2014 with the Central Government;
(c) whether the auditor has considered whistle-blower complaints, if any, received
during the year by the company;
(xii) NIDHI COMPANIES [PARA 3(xii)]
 Whether the Nidhi Company has complied with the
Net Owned Fund to Deposits in the ratio of 1: 20

to meet out the liability;

 Whether the Nidhi Company is maintaining 10% unencumbered term deposits
as specified in the Nidhi Rules, 2014 to meet out the liability.
 whether there has been any default in payment of interest on deposits or
repayment thereof for any period and if so, the details thereof;
(xiii) TRANSACTION WITH RELATED PARTIES- [PARA 3(xiii)]
 Whether all transactions with the related parties are in
compliance with Secs. 177 and 188 of Companies Act, 2013

where applicable and

 The details have been disclosed in the Financial Statements etc. as required by
the applicable accounting standards.
 Based on the procedures performed by the auditor, if auditor comes across any non-
compliance, then, it should be duly reported. The following particulars may be
incorporated:
Nature of the related party Amount involved (₹) Remarks [details of non-
relationship and the compliance may be giving]
underlying transaction

(xiv) INTERNAL AUDIT SYSTEM- [PARA 3(xiv)]

(a) whether the company has an internal audit system commensurate
 with the size and nature of its business;
(b) whether the reports of the Internal Auditors for the period under
audit were considered by the statutory auditor.
(xv) NON-CASH TRANSACTION WITH DIRECTORS- [PARA 3(xv)]
 Whether the company has entered into any non-cash
transactions with directors or persons connected with him &
if so,
 whether provisions of Section 192 of Companies Act, 2013 have been complied
with.
(xvi) REGISTRATION WITH RBI- [PARA 3(xvi)] IMPORTANT
(a) Whether the company is required to be registered u/s 45-IA of
the Reserve Bank of India Act, 1934 and if so, whether the registration
has been obtained.
(b) whether the company has conducted any Non-Banking Financial or Housing
Finance activities without a valid Certificate of Registration (COR) from the Reserve
Bank of India as per the Reserve Bank of India Act, 1934;
(c) whether the company is a Core Investment Company (CIC) as defined in the
regulations made by the Reserve Bank of India, if so, whether it continues to fulfil the
criteria of a CIC, and in case the company is an exempted or unregistered CIC,
whether it continues to fulfil such criteria;
(d) whether the Group has more than one CIC as part of the Group, if yes, indicate
the number of CICs which are part of the Group;
(xvii) CASH LOSSES- [PARA 3(xvii)]
 Whether the company has incurred cash losses in the financial
year and in the immediately preceding financial year,
if so,
 state the amount of cash losses;
(xviii) CONSIDERATION OF ISSUES RAISED BY OUTGOING AUDITOR- [PARA 3(xviii)]
 Whether there has been any resignation of the statutory
auditors during the year,
if so,
 whether the auditor has taken into consideration the issues, objections or concerns
raised by the outgoing auditors
(xix) EXISTENCE OF MATERIAL UNCERTAINTY AS TO COMPANY ABILITY TO MEET ITS
LIABILITIES- [PARA 3(xix)]
On the basis of the financial ratios, ageing and expected dates of
realisation of financial assets and payment of financial liabilities,
other information accompanying the financial statements, the
 auditor’s knowledge of the Board of Directors and management plans, Whether the
auditor is of the opinion that no material uncertainty exists as on the date of the
audit report that company is capable of meeting its liabilities existing at the date of
balance sheet as and when they fall due within a period of one year from the
balance sheet date.
(xx) TRANSFER OF UNSPENT CSR AMOUNT- [PARA 3(xx)]
(a) whether, in respect of other than ongoing projects, the
company has transferred unspent amount to a Fund specified

in Schedule VII to the Companies Act, within a period of

6 months of the expiry of the financial year in compliance with 2nd proviso to Sec.
135(5)of the said Act;
(b) whether any amount remaining unspent u/s 135(5) of the Companies Act,
pursuant to any ongoing project, has been transferred to special account in compliance
with the provision of Sec. 135(6) of the said Act.
(xxi) QUALIFICATIONS OR ADVERSE REMARKS IN CARO REPORT OF GROUP
COMPANIES- [PARA 3(xxi)]
 Whether there have been any qualifications or adverse
remarks by the respective auditors in the CARO reports

of the companies included in the consolidated financial statements,

If yes,
 indicate the details of the companies and the paragraph numbers of the CARO
report containing the qualifications or adverse remarks.

III] REASONS TO BE STATED FOR UNFAVOURABLE OR QUALIFIED REMARKS

 Where, in the auditor’s report, the answer to any of the questions referred to in Para
3 is unfavourable or qualified, the auditor’s report shall also state the basis for such
unfavourable or qualified answer, as the case may be.
 Where the auditor is unable to express any opinion on any specified matter, his
report shall indicate such fact together with the reasons as to why it is not possible for
him to give his opinion on the same.