CARO 2020 Self-Assessment Tool — Applicability Check & 21-Clause Readiness
This free tool answers two questions for any company: does the Companies (Auditor's Report) Order 2020 apply to you, and how ready are you for it? Step 1 runs the statutory exemption tests — entity type, small company, and the three-condition private company test. Step 2 lets you tick off readiness across all 21 CARO 2020 clauses and gives a preparedness score. Built and reviewed by Chartered Accountants at Patron Accounting LLP, it runs entirely in your browser so your company data never leaves your device.
CARO 2020 Applicability & Readiness Check
Tick each clause your company is documented and ready to be reported on. Then score readiness.
How to Use the CARO 2020 Self-Assessment Tool
This tool is built for directors, finance teams and auditors of Indian companies who need a quick read on whether CARO 2020 applies and how prepared the company is for clause-level reporting before the statutory audit begins.
- Select your entity type. Banking, insurance, Section 8, OPC and small companies are exempt outright; LLPs are outside CARO entirely.
- Set the group status and threshold figures. For a private company, enter paid-up capital plus reserves, the maximum borrowings at any point in the year, and total revenue. The tool runs the three-condition private company exemption test.
- Check applicability. You get a clear verdict — CARO 2020 applies or the company is exempt — with the specific reason.
- Score 21-clause readiness. Tick the clauses your company is documented for, then generate a readiness percentage and band to prioritise audit preparation.
CA Tip: Applicability is tested afresh every financial year. A company that was exempt last year can be pulled into CARO 2020 simply by crossing the borrowings or revenue line mid-year, so re-run this check each year before the audit.
CARO 2020 Applicability Rules
CARO 2020 is issued under Section 143(11) of the Companies Act 2013 and applies to the statutory audit report of every company, including a foreign company under Section 2(42), unless a specific exemption applies. It is effective for financial years commencing on or after 1 April 2021.
The exemptions fall into two groups: blanket exemptions by entity type, and a conditional exemption for smaller private companies that must satisfy all three thresholds.
| Category | CARO 2020 Status |
|---|---|
| Banking company | Exempt |
| Insurance company | Exempt |
| Section 8 (charitable) company | Exempt |
| One Person Company (OPC) | Exempt |
| Small company (Sec 2(85)) | Exempt |
| Eligible small private company (all 3 tests met) | Exempt |
| LLP | Outside CARO (LLP Act 2008) |
| All other companies + foreign companies | Applicable |
The Three-Condition Private Company Test
A private company (not a holding or subsidiary of a public company) is exempt only if it meets every one of the following on the relevant dates:
Condition 2: Total borrowings from banks/FIs ≤ ₹1 crore (any time in FY)
Condition 3: Total revenue (Schedule III) ≤ ₹10 crore (during FY)
Exempt only if ALL three are satisfied — breach any one ⇒ CARO 2020 applies
Source references: the Order is notified by the Ministry of Corporate Affairs under the Companies Act 2013, available via India Code, and the ICAI has published a Guidance Note on its application.
The 21 Clauses of CARO 2020
CARO 2020 expanded CARO 2016 from 16 to 21 clauses, adding seven new requirements and redrafting existing ones for more detailed auditor comment, in consultation with the National Financial Reporting Authority (NFRA). Each clause requires the auditor to state a specific factual position in the audit report.
| Clause | Subject |
|---|---|
| (i) | Property, plant & equipment and intangible assets |
| (ii) | Inventory and working capital limits |
| (iii) | Loans, investments, guarantees and security given |
| (iv) | Compliance with Sec 185 & 186 (loans/investments) |
| (v) | Deposits and deemed deposits (Sec 73–76) |
| (vi) | Cost records maintenance |
| (vii) | Statutory dues (GST, PF, ESI, income tax, etc.) |
| (viii) | Unrecorded income surrendered/disclosed in tax |
| (ix) | Default in repayment of borrowings; end-use of funds |
| (x) | IPO/FPO and preferential allotment/private placement |
| (xi) | Fraud reporting, including whistle-blower complaints |
| (xii) | Nidhi company compliance (if applicable) |
| (xiii) | Related party transactions (Sec 177 & 188) |
| (xiv) | Internal audit system |
| (xv) | Non-cash transactions with directors (Sec 192) |
| (xvi) | RBI registration (NBFC/CIC, Sec 45-IA) |
| (xvii) | Cash losses in current and preceding year |
| (xviii) | Resignation of statutory auditors |
| (xix) | Material uncertainty on going concern (financial ratios) |
| (xx) | CSR unspent amount transfer compliance |
| (xxi) | Qualifications/adverse remarks in group CARO reports (CFS) |
Note: Clause (xxi) applies only to the audit of consolidated financial statements. Even where a clause response is "not applicable" or "no adverse findings", the auditor must document a reasonable basis for that negative conclusion — NFRA and peer reviewers specifically test the basis, not just the conclusion.
Common Applicability Mistakes to Avoid
Misjudging CARO 2020 applicability is a frequent audit-planning error. The most common mistakes seen in practice are worth checking against your own assessment.
Treating "Small Company" Loosely
The small company exemption is precise. A company ceases to be a small company if it is a public company, a holding or subsidiary, or breaches the capital or turnover ceilings the CARO Guidance Note caps at ₹4 crore paid-up capital and ₹40 crore turnover. Always test against the rules of the specific financial year, as thresholds can change by notification.
Forgetting the Borrowings Test Is "Any Point in Time"
For the private company exemption, the ₹1 crore borrowings condition is tested at any point during the year, not just at year-end. A short-term working capital facility that briefly crossed ₹1 crore mid-year is enough to make CARO 2020 applicable, even if the year-end balance is nil.
Assuming Group Companies Are Automatically Exempt
A private company that is a subsidiary or holding company of a public company cannot use the private company exemption at all, regardless of its size. Group structure must be checked before relying on the thresholds. For audit-readiness across entities, see our statutory audit and private limited company compliance services.
Auditor's Duty and Documentation Under CARO 2020
CARO 2020 reporting is the statutory auditor's responsibility under Section 143(11). The auditor must address every applicable clause with a clear factual statement, and where the answer is unfavourable or qualified, give the basis for that answer. Where no opinion can be formed, the report must say so with reasons.
Negative Reporting Still Needs Evidence
A frequent misconception is that "nil" or "not applicable" responses need no work. In fact, the auditor must hold sufficient appropriate evidence and specific management representations for clauses such as fraud awareness, benami property, wilful default and unrecorded transactions. Professional standards are issued by the ICAI, and audit quality is overseen by the NFRA.
Why Preparation Matters
Companies that prepare clause documentation in advance — fixed asset registers, statutory dues reconciliations, related party schedules, going concern ratio working — significantly shorten the audit and reduce the risk of qualifications. The readiness score in this tool is designed to surface gaps early.
CA Tip: Build a CARO file alongside the financial statements, mapping each of the 21 clauses to its supporting working paper and management representation. This is the single most effective way to avoid last-minute audit qualifications. Patron's team conducts statutory audits for private limited companies with full CARO documentation.
Note: This tool gives an indicative assessment for planning only. The binding determination of CARO 2020 applicability and clause-by-clause reporting rests with the statutory auditor, based on the company's actual books, group structure and the rules for the specific financial year. Confirm with a Chartered Accountant.
Need a CARO 2020 Compliant Statutory Audit?
Patron Accounting LLP conducts statutory audits with full 21-clause CARO documentation — for Pune, Mumbai, Delhi, Gurugram and pan-India clients.