← All posts · 20 August 2026 · 6 min read
CARO 2020 without the last-minute scramble
A practical walkthrough of the CARO 2020 clauses that consume the most audit time, and how to prepare the evidence for each one from the client’s books instead of from memory.
CARO 2020 turned the auditor’s report annexure into a 21-clause examination. Most of it is answerable directly from the books — if the books are current and you know where to look. Here are the clauses that consume the most time in practice, and the ledger evidence each one needs.
Clause 3(ii): Inventory and working-capital limits
You need physical-verification coverage and, where working-capital limits exceed ₹5 crore, agreement between quarterly statements filed with banks and the books. That means stock summaries and drawing-power statements reconciled to closing stock ledgers — not estimated at year-end.
Clause 3(vii): Statutory dues
The workhorse clause. Undisputed GST, PF, ESI, income tax and other statutory dues outstanding for more than six months must be reported. The evidence is simply the duties-and-taxes ledgers, month by month — which is why liabilities that accrued but were never remitted should surface during scrutiny, not while drafting the annexure.
Clauses 3(iii) and 3(ix): Loans and borrowings
Loans granted to related parties, terms and repayment regularity, and whether borrowings were applied for their stated purpose. Loan ledgers with debit balances, repayment patterns, and diversion into sister-concern ledgers are all visible in the books if they are examined completely.
The pattern
Almost every clause resolves to the same discipline: current books, examined completely, with exceptions surfaced early. EasyAnk drafts clause-wise CARO annexures from the synced books and keeps the underlying scrutiny running all year, so the annexure is a review exercise instead of an archaeology project.