Reporting of frauds by auditor of Company

By | December 21, 2015

Reporting of frauds by Auditor

Reporting of frauds by auditor of Company

What is the limit of Reporting of frauds by auditor of Company to the Central Government ?

Reporting of frauds by auditor and other matters:

(1) If an auditor of a company, in the course of the performance of his duties as statutory auditor, has reason to believe that an offence of fraud, which involves or is expected to involve individually an amount of rupees one crore or above, is being or has been committed against the company by its officers or employees, the auditor shall report the matter to the Central Government. (Rule 13 of Companies (Audit and Auditors) Amendment Rules, 2015 )

What is the procedure of  Reporting of frauds by auditor of Company to the Central Government ?

The auditor shall report the matter to the Central Government as under:-

(a) the auditor shall report the matter to the Board or the Audit Committee, as the case may be, immediately but not later than two days of his knowledge of the fraud, seeking their reply or observations within forty-five days;

(b) on receipt of such reply or observations, the auditor shall forward his report and the reply or observations of the Board or the Audit Committee along with his comments (on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days from the date of receipt of such reply or observations;

(c) in case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated period of forty-five days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he has not received any reply or observations;

(d) the report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same;

(e) the report shall be on the letter-head of the auditor containing postal address, e-mail address and contact telephone number or mobile number and be signed by the auditor with his seal and shall indicate his Membership Number; and

(f) the report shall be in the form of a statement as specified in Form ADT-4.

How should Reporting of frauds by auditor of Company be done in case frauds in the company is less than Rs 1 Crore ?

The auditor shall report the matter to Audit Committee constituted under section 177 or to the Board immediately but not later than two days of his knowledge of the fraud .

What should be included in report while Reporting of frauds by auditor of Company to the Audit Committee or to the Board ?

Auditor shall report the matter specifying the following:-

(a) Nature of Fraud with description;

(b) Approximate amount involved; and

(c) Parties involved.

How should  Reporting of frauds be done by the Board of the company ?

The following details of each of the fraud reported to the Audit Committee or the Board during the year shall be disclosed in the Board’s Report:-

(a) Nature of Fraud with description;

(b) Approximate Amount involved;

(c) Parties involved, if remedial action not taken; and

(d) Remedial actions taken

To whom does the provisions of Reporting of frauds apply in addition to Auditor ?

The provision of Rule 13 of Companies (Audit and Auditors) Amendment Rules, 2015  shall also apply, mutatis mutandis, to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively

 

Source : As per the MINISTRY OF CORPORATE AFFAIRS NOTIFICATION No [F. No. 1/33/2013-CL-V]  dated  14th December, 2015 

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