CARO clause 3(i)(d) requires the auditor to report whether the company has revalued its property, plant and equipment, including right-of-use assets, or intangible assets, or both, during the year, and if so, whether the revaluation is based on the valuation by a registered valuer, with specified disclosure if the aggregate change in net carrying value exceeds a stated percentage of the net carrying value before revaluation; this means independently confirming the valuer's registration status and re-performing the aggregate variance calculation rather than accepting management's figure, and the exact threshold percentage should be confirmed against the current order.
What triggers this clause
Any upward or downward revaluation of PPE, right-of-use assets or intangible assets recognised during the year triggers the clause, whether it is a one-off exercise or part of a stated revaluation policy applied class by class. A fair value remeasurement required under a specific Ind AS, such as held-for-sale classification, is a separate matter; the clause is concerned with a deliberate revaluation exercise, typically under the revaluation model permitted for PPE.
Testing approach
- 01Identify whether any revaluation occurred during the yearCheck minutes of the board and audit committee, the fixed asset register for a revaluation reserve movement, and the notes to accounts for a stated change in accounting policy or a one-time exercise.
- 02Confirm the valuer is a registered valuer under the Companies ActCheck the valuer's registration number and category against the Insolvency and Bankruptcy Board of India's register of registered valuers; a chartered engineer's certificate alone, without registration under the applicable rules, does not satisfy this clause.
- 03Obtain the valuation report and assess its basisConfirm the valuation date, the assets covered, the valuation approach used (cost, market or income approach) and that it covers the full class of assets being revalued, not a selective subset chosen to produce a particular result.
- 04Re-compute the aggregate variance independentlyCalculate the aggregate change in net carrying value across the revalued class against the pre-revaluation net carrying value, and compare the result to the disclosure threshold set in the current order, rather than relying on management's stated percentage.
- 05Check accounting treatment of the revaluation surplus or deficitA surplus generally goes to other comprehensive income and a revaluation reserve; a deficit that reverses a previous surplus is adjusted against that reserve, with any remaining deficit through profit or loss. Mismatched treatment is itself a reportable inconsistency.
A revaluation carried out close to the balance sheet date, covering only assets where an upward revision improves ratios used in a covenant test or director remuneration calculation, is a pattern worth scrutinising independently of whether the valuer was properly registered.
Regulatory requirement
The exact clause number, the definition of registered valuer, and the disclosure threshold percentage for aggregate variance are set out in the Companies (Auditor's Report) Order and the Companies Act rules on valuation as currently in force. Confirm all of these against current source material before drafting the report.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- CARO & Companies ActCARO fixed asset and inventory clauses: what auditors testWhat the fixed asset and inventory points under CARO actually require in evidence: physical verification, title deeds, revaluation, and count discrepancies.
- Fixed assets & capexInd AS 16: property, plant and equipment — recognition, componentization and derecognitionA single asset with parts that wear out on different schedules isn't one depreciation calculation — Ind AS 16 requires splitting it, and a lot of fixed asset registers still don't.
- Fixed assets & capexImpairment testing for fixed assets: a practical approachThe impairment indicators that actually matter for a mid-market client, when a formal test is genuinely warranted, and how to test management's recoverable amount workings.
- Fixed assets & capexFixed asset register audit: completeness and accuracy checksWhat a fixed asset register must contain, how to tie it to the general ledger, and the gaps that quietly survive year after year if nobody checks for them.
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