CARO 2020 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Clauses (xi) to (xvi) of paragraph 3 of CARO 2020 cover six areas: fraud and whistle-blower complaints, the Nidhi company ratios, compliance of related party transactions with sections 177 and 188, internal audit, non-cash transactions with directors, and registration with the Reserve Bank of India, including core investment companies. This article is based on the Order as amended up to the notification of 24 March 2020 per the MCA e-book. Later amendments should be checked.
Clause (xi) asks whether any fraud by or on the company was noticed or reported, whether the auditor filed a report under section 143(12) in Form ADT-4 under rule 13 of the Audit and Auditors Rules, and whether the auditor considered whistle-blower complaints. Clause (xii) applies to a Nidhi company (net owned funds to deposits in the ratio of 1:20; ten per cent unencumbered term deposits); clause (xiii) to related party compliance with sections 177 and 188; clause (xiv) to internal audit; clause (xv) to non-cash transactions with directors; and clause (xvi) to registration under the Reserve Bank of India Act, 1934.
Clause (xi): fraud and whistle-blower complaints
| Sub-clause | What the auditor reports |
|---|---|
| (a) | Whether any fraud by the company or any fraud on the company has been noticed or reported during the year; if yes, the nature and the amount involved |
| (b) | Whether any report under section 143(12) has been filed by the auditors in Form ADT-4, as prescribed under rule 13 of the Companies (Audit and Auditors) Rules, 2014, with the Central Government |
| (c) | Whether the auditor has considered whistle-blower complaints, if any, received during the year by the company |
Sub-clause (a) is wider than the fraud reporting rule: it covers a fraud "by the company" as well as a fraud "on the company", and it asks for the nature and amount. Sub-clause (b) ties into the rule on fraud reporting; the periods and thresholds of that rule are in Rules 13 and 14 of the Audit and Auditors Rules. The sub-clause (c) question concerns complaints received by the company, for example through its vigil mechanism.
Clause (xii): Nidhi companies
- (a) Whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1:20 to meet out the liability.
- (b) Whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability.
- (c) Whether there has been any default in payment of interest on deposits or repayment thereof for any period and, if so, the details.
This clause applies only to Nidhi companies. The ratio and the deposit limit are explained in Rules 9 and 11 of the Nidhi Rules, 2014: Net Owned Funds and Deposits up to Twenty Times.
Clause (xiii): related party transactions
Whether all transactions with the related parties are in compliance with sections 177 and 188 of the Companies Act where applicable and the details have been disclosed in the financial statements, etc., as required by the applicable accounting standards. The Act provisions are in Section 188: Related Party Transactions; the approval thresholds and disclosures are in Rule 15 of the Meetings of Board Rules, and the Audit Committee's approvals in Rules 5, 6 and 6A. Section 177 is the Audit Committee provision.
Clause (xiv): internal audit
- (a) Whether the company has an internal audit system commensurate with the size and nature of its business.
- (b) Whether the reports of the Internal Auditors for the period under audit were considered by the statutory auditor.
Which companies must appoint an internal auditor is in rule 13 of the Accounts Rules; see Internal Auditor Applicability Under Rule 13: Tests by Company Type.
Clause (xv): non-cash transactions with directors
Whether the company has entered into any non-cash transactions with directors or persons connected with him and, if so, whether the provisions of section 192 of the Companies Act have been complied with. See Sections 192 to 194: Director Restrictions.
Clause (xvi): Reserve Bank of India registration
| Sub-clause | What the auditor reports |
|---|---|
| (a) | Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and, if so, whether the registration has been obtained |
| (b) | Whether the company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India under the 1934 Act |
| (c) | Whether the company is a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India; if so, whether it continues to fulfil the criteria of a CIC, and, if it is an exempted or unregistered CIC, whether it continues to fulfil such criteria |
| (d) | Whether the Group has more than one CIC as part of the Group; if yes, the number of CICs which are part of the Group |
Sub-clause (d) looks at the whole Group, not only the company being audited, so the auditor needs information on other group companies. Our financial and legal due diligence service can help a group map its entities against these four questions.
A worked example
Jade Capital Limited (invented) is a holding company within a group. In the year, a fraud by an employee on the company is noticed and reported; the auditor states the nature and amount and confirms that Form ADT-4 was filed where required, and that whistle-blower complaints received during the year were considered. All related party transactions are reported as complying with sections 177 and 188 and disclosed under the accounting standards. The company has an internal audit system and the auditor considered the internal auditor's reports. No non-cash transactions with directors took place. Jade is a Core Investment Company, and the auditor reports on its continued fulfilment of the criteria and notes that the Group has two CICs.
Practical points
- Keep a log of all frauds noticed or reported, whether by or on the company, with nature and amount.
- Give the auditor the whistle-blower register and the vigil mechanism's findings.
- Maintain the Audit Committee's approvals and omnibus approvals for each related party transaction.
- Confirm the CoR position of each group company that lends or finances.
- Count the CICs in the Group before the audit begins.
Need help with fraud, related party and RBI-registration reporting?
Clauses (xi) to (xvi) cross-refer to other regimes and need information from across the group. We can map the group, review related party approvals and prepare the schedules through our financial and legal due diligence service.
Key takeaways
- Clause (xi): fraud by or on the company, ADT-4 filing, whistle-blower complaints.
- Clause (xii): Nidhi companies only: 1:20 ratio, ten per cent unencumbered term deposits and defaults on deposits.
- Clause (xiii): related party transactions and sections 177 and 188.
- Clause (xiv): internal audit system and the statutory auditor's consideration of internal audit reports.
- Clause (xvi): RBI registration, CIC status and the number of CICs in the Group.
Read next
- Rules 13 and 14 of the Audit and Auditors Rules: fraud reporting in ADT-4
- Rules 9 and 11 of the Nidhi Rules, 2014
- Clauses (vii) to (x): statutory dues, defaults and fund raising
- Clauses (xvii) to (xxi): cash losses, resignation, going concern and unspent CSR
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.