Under Clause 3(i) of CARO 2020, statutory auditors report on a company’s records of Property, Plant and Equipment, the physical verification carried out by management, title deeds of immovable property, revaluations and benami proceedings. Many CARO observations arise not because physical verification was skipped, but because companies cannot produce complete, audit-ready evidence to support it. This CARO 2020 fixed asset verification checklist converts the reporting requirements into working preparation steps — the records to maintain, the verification to perform and the evidence to keep ready before the auditor asks.
It is written for CFOs, finance controllers and internal auditors preparing for a statutory audit. For the operational side — how to actually plan and run the verification exercise — use our fixed asset verification checklist (with a downloadable PDF), and for the legal background see our CARO 2020 fixed asset verification explainer.
What Clause 3(i) of CARO 2020 Actually Requires
The auditor’s report addresses five specific matters relating to fixed assets. Each row below is something the auditor must comment on — which means each row is something the company must be able to evidence:
| Clause | What the auditor reports on | What the company must have |
| 3(i)(a)(A) | Whether proper records of Property, Plant and Equipment are maintained, showing full particulars including quantitative details and situation | A FAR with asset-wise quantitative details and location (situation) for every asset |
| 3(i)(a)(B) | Whether proper records of intangible assets are maintained | A register of intangible assets with full particulars |
| 3(i)(b) | Whether physical verification was conducted by management at reasonable intervals, and whether material discrepancies were properly dealt with in the books | A documented verification exercise, exception report and accounting treatment of material discrepancies |
| 3(i)(c) | Whether title deeds of immovable properties are held in the name of the company | Title deeds (or lender confirmations where mortgaged) matching the FAR |
| 3(i)(d) | Whether the company has revalued PPE or intangible assets and, if so, whether the revaluation was by a registered valuer; specified disclosures where the change is 10% or more | Registered valuer’s report and disclosure workings for any revaluation |
| 3(i)(e) | Whether any proceedings are pending against the company for holding benami property, and whether disclosed | A management representation and disclosure where applicable |
The compliance flow at a glance
FAR (cleaned) → Asset Tagging → Physical Verification → Exception Report → FAR Reconciliation → Management Approval → Journal Entries → CARO Reporting
CARO reporting on these matters should also be read alongside the applicable Standards on Auditing and the guidance issued by ICAI from time to time — the checklist below reflects the record-keeping and evidence expectations that flow from them. For the operational side of running the exercise itself, use our step-by-step fixed asset verification checklist. A printable one-page version of this CARO 2020 fixed asset verification checklist is available here https://tagmyassets.com/wp-content/uploads/2026/07/TagMyAssets-CARO-2020-Compliance-Checklist-1.pdf
Audit tip: A completed verification without signed location sheets, reconciliation workings and management approvals is often insufficient as audit evidence. Keep the supporting documentation together in a single indexed evidence file.
The Compliance Checklist, Clause by Clause
Records of PPE and intangibles — 3(i)(a)
- The FAR shows, for every asset: description, identification/tag number, quantity, location (situation), cost, capitalisation date and depreciation
- Grouped entries (“machinery — various”) have been broken down so quantitative details are asset-wise
- Locations in the FAR correspond to real, current physical locations — not old office addresses or closed units
- A separate register of intangible assets (software, licences, brands) is maintained with full particulars
Physical verification and discrepancies — 3(i)(b)
- A written verification policy exists, stating the frequency and method (full count, sampling or cyclical) adopted by management
- The most recent verification is documented: scope, cut-off date, methodology and locations covered
- Verification worked in both directions — sheet-to-floor for existence and floor-to-sheet for completeness
- An exception report classifies every discrepancy: not found, unrecorded, location mismatch, condition issue
- Material discrepancies were investigated and adjusted in the books with management approval — not simply noted and carried forward
- Signed location sheets, photographs and verifier details are retained as evidence of the exercise
Resolving the discrepancies this clause reports on — shortages, unrecorded assets and location mismatches — is the job of FAR reconciliation, which converts the exception report into corrected books with an approval trail.
Title deeds of immovable property — 3(i)(c)
- A schedule of all immovable properties in the FAR, matched to title deeds held in the company’s name
- Where originals are with lenders, confirmation letters from the lenders are on file
- Where deeds are not in the company’s name (e.g. pending registration, merged entities), the reason, holder details and period are documented — CARO requires these specifics to be reported
Revaluation — 3(i)(d)
- Any revaluation of PPE or intangibles during the year was carried out by a registered valuer
- Where the revaluation changes the value by 10% or more in aggregate of the net carrying value of that class, the amount of change is separately disclosed
Benami proceedings — 3(i)(e)
- Management has confirmed in writing whether any proceedings under the Benami Transactions (Prohibition) Act are pending
- Where proceedings exist, the details are disclosed in the financial statements
CARO Preparation Timeline: Working Back from the Audit
Most CARO findings are not caused by missing work — they are caused by work done too late to fix what it uncovers. An indicative preparation sequence (adjust the spans to your size and locations):
| When | Activity |
| 30 days before audit fieldwork | Extract and clean the FAR: break down grouped entries, remove duplicates, map locations |
| 20 days before | Tag untagged assets so verification results can be tied to specific register entries |
| 15 days before | Update locations and custodians for known transfers |
| 10 days before | Conduct the physical verification — both directions |
| 7 days before | Reconcile: classify exceptions and investigate each with supporting documents |
| 5 days before | Obtain management approvals and pass the adjustment entries |
| Audit fieldwork begins | Hand over the evidence file — complete, signed and indexed |
The sequence matters more than the exact number of days: verification performed after the audit has started leaves no time to deal with discrepancies properly — which is itself what Clause 3(i)(b) reports on.
The Evidence Matrix: What Proves Each Requirement
Auditors rely on evidence, not assurances. This matrix maps each CARO expectation to the document that evidences it and who typically prepares it:
| Requirement | Evidence that satisfies it | Typically prepared by |
| Records with quantitative details and situation — 3(i)(a) | FAR / ERP extract as on the balance sheet date, asset-wise, with locations | Finance / accounts |
| Verification at reasonable intervals — 3(i)(b) | Written verification policy + the verification report with scope, cut-off and methodology | Management / verification agency |
| Fieldwork actually performed | Signed location sheets, verifier details and asset photographs | Field team + location coordinators |
| Discrepancies identified | Exception report classifying not-found, unrecorded, location and condition items | Verification agency / internal team |
| Discrepancies properly dealt with | Reconciliation workings, management approvals and the journal vouchers passed | Finance, approved by management |
| Title deeds — 3(i)(c) | Title deed schedule with copies, or lender confirmations where mortgaged | Finance / secretarial |
| Revaluation — 3(i)(d) | Registered valuer’s report and the 10% disclosure workings | Registered valuer + finance |
| Benami proceedings — 3(i)(e) | Management representation letter and financial statement disclosure where applicable | Management / legal |
What This Looks Like in Practice
In one multi-location engagement (client anonymised), the company’s system records showed 19,134 assets; field verification could match 10,112 of them directly, and the reconciliation that followed identified value differences exceeding ₹10.5 lakh — ghost entries, grouped records that could not be tied to physical assets, and unrecorded additions. During reconciliation, assets transferred between locations without register updates were identified alongside grouped records that could not be individually verified — each classified, investigated and put to management for a documented decision. What made the exercise CARO-ready was not the count itself but the trail it produced: an exception report, management-approved treatments and the accounting entries that followed. The full engagement pattern is described on our FAR reconciliation services page.
Common Audit Observations — and What Usually Causes Them
Across engagements, the findings that most often lead to qualified or adverse CARO comments follow a recognisable pattern:
| Observation | Usual cause |
| Asset in FAR but not physically found | Disposed, scrapped or transferred without an accounting entry |
| Asset found but not in FAR | Capitalisation missed — project purchases, donations or inter-unit transfers never recorded |
| Asset in a different location than recorded | Inter-department or inter-unit transfer without a register update |
| Duplicate asset IDs | Same code issued twice, or the same asset entered under two codes |
| Grouped entries that cannot be verified individually | Bulk capitalisation (“computers — 50 nos.”) without asset-wise breakdown |
| Verification exists on paper but has no evidence | No signed sheets, photographs or verifier trail retained |
| Discrepancies noted in earlier years, never adjusted | Exception reports filed but the accounting treatment never completed |
Every one of these is preventable with the checklist above — provided it is completed before the audit, not during it.
Frequently Asked Questions
What does CARO 2020 require for fixed asset verification?
CARO 2020 fixed asset verification checklist covers Clause 3(i)(b) requires the auditor to report whether physical verification of Property, Plant and Equipment was conducted by management at reasonable intervals and whether material discrepancies noticed were properly dealt with in the books of account. The company must therefore be able to evidence both the verification and the treatment of discrepancies.
What are “reasonable intervals” under CARO 2020?
CARO does not define the term. It is a matter of management judgement based on the size of the company, the nature of its assets and how frequently they move. What matters to the auditor is that the interval is documented in the company’s policy, followed in practice and defensible for the asset profile.
Does CARO 2020 require asset tagging or geotagging?
No. CARO requires records showing quantitative details and situation of assets, and physical verification at reasonable intervals. Tagging is not mandated — but in practice, unique identification is how companies make verification repeatable and evidence-backed, which is why auditors view systematic tagging favourably. We cover this question in detail in Does CARO Require Asset Tagging?.
Does CARO 2020 apply to private companies?
Yes, CARO 2020 applies to most companies including private limited companies, subject to specific exemptions — among them banking and insurance companies, Section 8 companies, one person companies, and small companies and certain private companies meeting thresholds relating to capital, borrowings and turnover. Whether a particular private company is exempt depends on its numbers for the relevant year, so the exemption should be tested each year rather than assumed.
Can physical verification be outsourced under CARO?
Yes. Verification is management’s responsibility, but management may have it performed by an independent agency on its behalf. Independent verification can strengthen documentation and objectivity, provided management retains responsibility for the process and the auditor is satisfied with the evidence produced.
Can CARO reporting be completed without a Fixed Asset Register?
In practice, no. Clause 3(i)(a) requires proper records showing full particulars, including quantitative details and situation, of Property, Plant and Equipment. Without an up-to-date FAR there is nothing to verify against, no basis for classifying discrepancies and no way to demonstrate that material differences were dealt with in the books — so the register is the foundation on which every other item in this checklist rests.
What happens if material discrepancies are found during verification?
They must be investigated and properly dealt with in the books — ghost assets derecognised, unrecorded assets capitalised where appropriate, and locations corrected — with a documented approval trail. The auditor reports on whether this was done, so an exception report that was never acted upon is itself a finding.
What documents should be maintained for CARO fixed asset verification?
At minimum: the Fixed Asset Register with quantitative details and situation, a written verification policy, the latest verification report with its exception classification, signed location sheets and photographs, reconciliation workings with management approvals and the resulting journal entries, a title deed schedule (with lender confirmations where applicable), any registered valuer’s reports, and a management representation covering verification, title deeds and benami proceedings.
Preparing for a CARO-Compliant Verification?
TagMyAssets conducts fixed asset verification, tagging and FAR reconciliation across India — 250+ projects, 1500+ locations, 10 lakh+ assets — with documentation designed for statutory audit requirements. See our fixed asset verification services page, or start with the complete guide to fixed asset verification to understand the full process.
