Physical verification of fixed assets for CARO 2020
By Blacrex · Not tax or audit advice.
What the Order asks
“whether the company is maintaining proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment;”
Companies (Auditor's Report) Order, 2020, paragraph 3(i), Gazette of India, S.O. 849(E), 25 February 2020
“whether these Property, Plant and Equipment have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;”
Companies (Auditor's Report) Order, 2020, paragraph 3(i), Gazette of India, S.O. 849(E), 25 February 2020
Your auditor reports on this. Doing the verification is management’s job.
Who it applies to
Every company, including a foreign company, except:
- banking companies
- insurance companies
- Section 8 companies
- one person companies and small companies
- a private limited company that is not a subsidiary or holding company of a public company, with paid-up capital plus reserves and surplus of one crore rupees or less, bank or financial-institution borrowings never above one crore rupees in the year, and revenue of ten crore rupees or less
Ask your CA which applies to you.
What “reasonable intervals” means
The Order does not define it.
ICAI’s Guidance Note says it depends on things like how many assets you have, what they are and where they are, and that a verification programme should mean
“all assets are verified at least once in every three years”
ICAI, Guidance Note on the Companies (Auditor's Report) Order, 2020, GN (A & AS) 35 (Revised 2020), Second Edition June 2020, para 42(e), p. 31
This is guidance, not the law.
Planning a rotation
- Plan by location, or by class of asset.
- Number every movable asset, so a scan can find it again.
- Count assets that have never been counted first.
- Blacrex’s verification report uses 36 months by default, and you can change it.
Running the count
- Matched: scanned where the register said
- Wrong location: scanned, but the register had it elsewhere
- Missing: expected here, not scanned
- Unexpected: a tag the register does not know
After the count
- Whether a discrepancy is material is your auditor’s judgement.
- Putting it right in the books of account means accounting entries, which are yours and your CA’s.
- Accepting a count in Blacrex updates where assets are. It never touches the books, and it never adds an unexpected tag on its own.
Evidence to keep
- The last-seen date for every asset.
- Coverage by location.
- The never-counted list.
- Discrepancies, resolved and unresolved.
How the register does it
Phone scanning and the verification coverage report, both on the free plan.