CARO 2020 Clause-wise Checklist Generator
Generate Your CARO 2020 Checklist
Answer the questions below to check if CARO 2020 applies to your company and generate the 21-clause auditor reporting checklist customised to your entity profile.
How This Tool Works
The checklist generator runs your entity profile through the four-step CARO 2020 applicability cascade laid down in Paragraph 1(2) of the Order, then maps the 21 reporting clauses of Paragraph 3 to your specific situation.
Step 1 — Entity Type Filter
CARO 2020 explicitly excludes banking companies, insurance companies, Section 8 companies and One Person Companies regardless of size. LLPs are outside scope altogether because they are governed by the Limited Liability Partnership Act, 2008 and not by the Companies Act, 2013.
Step 2 — Small Company Test
If the entity is a Private Limited or unlisted Public Limited company that is not a holding or subsidiary of a public company, the tool tests it against the Small Company definition under Section 2(85) of the Companies Act read with the 2022 amendment rules: paid-up capital not exceeding ₹4 crore and turnover not exceeding ₹40 crore.
Step 3 — Pvt Ltd Specific Exemption
For Private Limited companies that are not holding or subsidiary of a public company, the tool checks the three cumulative thresholds in Paragraph 1(2)(iv) of CARO 2020: paid-up capital plus reserves and surplus up to ₹1 crore, total borrowings up to ₹1 crore at any time during the year, and total revenue up to ₹10 crore. All three must be met for the exemption.
Step 4 — Consolidated FS Carve-out
If you select Consolidated Financial Statements, the tool returns only Clause (xxi) — the requirement to report qualifications or adverse remarks made by component auditors in their respective standalone CARO reports. All other clauses are not applicable to consolidated audit reports.
Step 5 — Conditional Clause Mapping
If CARO applies, the tool generates the full 21-clause checklist and then deactivates clauses that are not relevant to your entity: Clause (xii) only applies to Nidhi companies, Clause (xvi) to NBFCs, HFCs and CICs, Clause (xx) only when CSR under Section 135 is triggered, Clause (x) only when fund-raising occurred during the year, and Clause (vi) flags whether cost records under Section 148(1) are mandated for your industry.
Applicability & Exemptions Decoded
CARO 2020 was issued under Section 143(11) of the Companies Act, 2013 and applies to every report made by an auditor under Section 143 on the accounts of every company including a foreign company as defined in Section 2(42). The applicability is to standalone financial statements; consolidated reporting is governed only by Clause (xxi).
Entities Categorically Exempt
| Entity Type | Statutory Basis | Reason |
|---|---|---|
| Banking Company | Section 5(c), Banking Regulation Act, 1949 | Separate audit framework under RBI |
| Insurance Company | Section 2(7A), Insurance Act, 1938 | Separate audit framework under IRDAI |
| Section 8 Company | Section 8, Companies Act, 2013 | Charitable purpose, not-for-profit |
| One Person Company (OPC) | Section 2(62), Companies Act, 2013 | Single-shareholder simplified regime |
| Small Company | Section 2(85), Companies Act, 2013 | Paid-up capital ≤ ₹4 cr AND turnover ≤ ₹40 cr |
Pvt Ltd Specific Exemption — All Three Cumulative
A private limited company that is not a holding or subsidiary of a public company can claim exemption from CARO 2020 only if it meets all three of the following conditions simultaneously, as per Paragraph 1(2)(iv) of the Order:
- Paid-up capital plus reserves and surplus not more than ₹1 crore as on the balance sheet date
- Total borrowings not exceeding ₹1 crore from any bank or financial institution at any point of time during the financial year
- Total revenue as disclosed under Schedule III (including revenue from discontinuing operations) not exceeding ₹10 crore during the financial year
Trap to avoid: The borrowings test is "at any point of time during the year", not just on the balance sheet date. A private company that touched ₹1.2 crore borrowings on 30 September and repaid by 31 March still fails the test.
LLPs, Partnerships and Other Entities
CARO 2020 does not extend to Limited Liability Partnerships, partnership firms, sole proprietorships, Hindu Undivided Families or trusts, since these are not "companies" under the Companies Act, 2013. The auditor of these entities reports under different audit frameworks — the LLP Act, 2008 for LLPs and the Income-tax Act, 1961 (Section 44AB) for tax audits of other forms.
For the original notification, see the MCA Order S.O. 849(E) dated 25 February 2020 and the subsequent deferral orders. The complete Companies Act, 2013 text is available on India Code.
The 21 Clauses: A Complete Map
Paragraph 3 of CARO 2020 contains 21 clauses with 50 sub-clauses covering property, plant and equipment, inventory, loans, statutory dues, fraud, related parties, internal audit, going concern, CSR and consolidated reporting. Below is a topic-wise map of what each clause requires the auditor to report.
| Clause | Topic | Conditional? |
|---|---|---|
| 3(i) | Property, Plant & Equipment + Intangible Assets (records, physical verification, title deeds, revaluation, benami) | No |
| 3(ii) | Inventory verification + Working capital limits over ₹5 crore reconciled with quarterly returns | No |
| 3(iii) | Loans, advances, investments, guarantees, security | No |
| 3(iv) | Compliance with Sec 185 and Sec 186 (loans to directors, investments) | No |
| 3(v) | Public deposits and deemed deposits (Sec 73 to 76) | No |
| 3(vi) | Maintenance of cost records under Section 148(1) | Industry-specific |
| 3(vii) | Statutory dues — regularity of payment + disputed amounts | No |
| 3(viii) | Income surrendered or disclosed in Income Tax search/survey | If applicable |
| 3(ix) | Default in repayment of loans, willful defaulter, end-use of funds | If borrower |
| 3(x) | IPO, FPO, preferential allotment, private placement compliance | If raised funds |
| 3(xi) | Fraud — by or on the company, ADT-4, whistleblower complaints | No |
| 3(xii) | Nidhi-specific compliance (Net Owned Funds, deposits) | Nidhi only |
| 3(xiii) | Related party transactions — Sec 177 audit committee + Sec 188 | No |
| 3(xiv) | Internal audit system adequacy + reports considered | No |
| 3(xv) | Non-cash transactions with directors (Sec 192) | No |
| 3(xvi) | NBFC / HFC / CIC registration with RBI under Sec 45-IA | NBFC only |
| 3(xvii) | Cash losses in current and immediately preceding FY | No |
| 3(xviii) | Statutory auditor resignation — issues raised by outgoing auditor | If resigned |
| 3(xix) | Material uncertainty on going concern — financial ratios, ageing | No |
| 3(xx) | CSR unspent transfer to specified fund and special account | If Sec 135 applies |
| 3(xxi) | Consolidated CARO — qualifications/adverse remarks of component auditors | Consol FS only |
The Institute of Chartered Accountants of India has published a Guidance Note on CARO 2020 with an illustrative checklist (Appendix V) and clause-by-clause comparison with CARO 2016 (Appendix II). The ICAI Auditing and Assurance Standards Board updates this Guidance Note periodically with FAQs.
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Talk to a CA on WhatsAppCommon Mistakes Auditors and Companies Make
The Quality Review Board of ICAI and the National Financial Reporting Authority have flagged several recurring CARO 2020 reporting deficiencies in their inspection reports. Avoiding these protects both the auditor and the company.
1. Treating "At Any Point" as "At Year-End"
For both the Pvt Ltd specific exemption (₹1 crore borrowings test) and Clause 3(ii)(b) on working capital limits over ₹5 crore, the threshold check is at any point during the financial year, not just the balance sheet date. Companies that temporarily breach the limit mid-year still trigger the reporting obligation.
2. Missing the Working Capital Quarterly Return Reconciliation
Clause 3(ii)(b) requires the auditor to verify that quarterly returns or statements filed with banks or financial institutions for working capital limits over ₹5 crore agree with the books of account. Mismatches must be reported with details. This is one of the most frequently missed reporting items in first-year CARO 2020 audits.
3. Ignoring Title Deed Format Specified in Clause 3(i)(c)
Clause 3(i)(c) requires reporting on title deeds of immovable property in a specified tabular format with description, gross carrying value, holder name, period held, related-party status and reason for non-holding. A narrative comment is not compliant — the format is mandatory.
4. Confusing Consolidated and Standalone Reporting
CARO 2020 applies only to standalone financial statements except for Clause (xxi). Auditors sometimes incorrectly include the full 21-clause report in consolidated audit reports, or omit the Clause (xxi) reporting in consolidated reports altogether. Both are deviations from Paragraph 2 of the Order.
5. Skipping Going Concern Ratio Disclosure
Clause 3(xix) requires the auditor to consider key financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, and to confirm that no material uncertainty exists on the company meeting its liabilities for one year from the balance sheet date. Generic going concern statements without ratio analysis are inadequate.
6. Overlooking Auditor Resignation Disclosure
Under Clause 3(xviii), if the statutory auditors resigned during the year, the incoming auditor must report whether the issues, objections or concerns raised by the outgoing auditors were considered. ICAI Code of Ethics also requires the incoming auditor to communicate with the outgoing auditor before accepting the engagement.
The NFRA inspection reports and ICAI Quality Review Board publications regularly highlight these deficiencies. Reviewing them before each CARO sign-off is a practical safeguard.