CARO (Companies (Auditor's Report) Order)

CARO requires a statutory auditor to comment on a specific, prescribed list of matters, on top of the usual audit opinion on whether financial statements present a true and fair view. Under the current version, CARO 2020, that list covers areas like fixed asset records, inventory verification, loans and guarantees given, statutory dues, whether the company has defaulted on borrowings, and whether any fraud was noticed or reported during the audit.

It applies to most companies, with specific exemptions for smaller private companies, one-person companies, and a few other categories that fall below defined thresholds on paid-up capital, borrowings, and turnover. Where CARO applies, the auditor's report includes a separate CARO annexure addressing each applicable clause individually, rather than folding the commentary into the main audit opinion.

CARO 2020 expanded meaningfully on its predecessor, adding clauses on matters like resignation of statutory auditors, undisclosed income, and Benami property, reflecting a broader regulatory push toward auditors flagging red flags rather than only certifying the numbers. Getting the applicable clauses right, and gathering the specific documentation each one requires, is a distinct, often underestimated part of planning a statutory audit, covered in more depth in [our guide to CARO 2020 reporting requirements](/blog/caro-2020-reporting-requirements).