# CARO 2020 — Clauses (x) to (xiii)

## Clause (x) — Public Offers & Private Placements

(a) IPO/FPO end-use — Whether money raised by IPO or FPO (including debt) was applied for the purpose raised. If not — report details with default and subsequent rectification.

(b) Preferential/Private placement — Whether the company made preferential allotment or private placement of shares or convertible debentures (fully/partially/optionally) during the year. If yes:

Compliance with Section 42 (private placement) and Section 62 (further issue)
Whether funds were used for the purpose raised
Details of any non-compliance

## Clause (xi) — Fraud

(a) Whether any fraud by the company or fraud on the company was noticed or reported during the year. If yes — nature & amount.

(b) Whether any report under Section 143(12) was filed by auditors in Form ADT-4 with the Central Government.

(c) Whether the auditor has considered whistle-blower complaints received during the year by the company.

## Clause (xii) — Nidhi Company

(a) Compliance with Net Owned Funds to Deposits ratio of 1:20

(b) Maintenance of 10% unencumbered term deposits

(c) Any default in payment of deposits or interest — give details.

## Clause (xiii) — Related Party Transactions

Whether all transactions with related parties are as per:

Section 177 (Audit Committee approval)
Section 188 (Board/shareholder approval)

And whether details are disclosed in FS as required by applicable accounting standards (Ind AS 24 / AS 18).

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## Memory Anchor: "IPF-NR"

IPO → Fraud → Nidhi → Related Party

Worked example

### Example 1

Example — Clause (x)(a):

Company raised ₹100 crore via FPO for plant expansion. ₹70 crore used as intended, ₹30 crore parked in mutual funds for general purposes.

Reporting: Default of ₹30 crore from stated purpose; whether subsequently deployed for the original purpose by year-end.

### Example 2

Example — Clause (xi)(b):

During audit of FY 2024-25, auditor uncovered employee fraud of ₹1.5 crore.

Action: Since amount ≥ ₹1 crore, auditor must file Form ADT-4 with Central Government under Sec 143(12), AND report this filing under clause (xi)(b).

### Example 3

Example — Clause (xii)(a):

Nidhi Company X has Net Owned Funds of ₹10 crore and Deposits of ₹250 crore.

Required ratio: 1:20 → Deposits should not exceed 10 × 20 = ₹200 crore.

Actual ratio: 1:25 — Non-compliance to be reported.

⚠️ Common exam mistakes

Under clause (x)(b), forgetting to check both Section 42 AND Section 62 — students often quote only one
Confusing 'fraud by the company' vs 'fraud on the company' under clause (xi)(a) — both must be reported
For clause (xii), forgetting that the 1:20 ratio is Net Owned Funds : Deposits, not the reverse
Reporting all RPTs under clause (xiii) — only check Sec 177 & 188 compliance and FS disclosure

Bare-Act text 143(12) · Companies Act, 2013 · click to expand

Section 143(12) — If an auditor of a company, in the course of performance of his duties, has reason to believe that an offence of fraud involving such amount as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as may be prescribed.

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CARO 2020 - IPO, Fraud, Nidhi & Related Party (Clauses x-xiii)

Worked example

⚠️ Common exam mistakes