PART – I (Amount involved > Rs. 1 crore)
The auditor of a company, in the course of performance of his duties as statutory auditor, has reason to believe that an offense of fraud, which involves or is expected to involve individually an amount of Rs 1 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.
Points to be taken care of:
- Inform to Company’s Board or Audit Committee within 2 days of coming to know about the fraud
- Audit Committee / Board to reply in 45 days
- Auditor to forward the above reply along with his report to Central Government in 15 days.
- In case, auditor fails to get any reply or observations from the board or the audit committee within the stipulated period of forty-five days, auditor shall forward his report to central government.
- Such reports should be accompanied by a note having details of the auditor’s report that was earlier forwarded to the board or the audit committee
- Send such reports to the Corporate Affairs Ministry Secretary
These Provisions will be applicable to Cost and Secretarial Auditors also
PART –II ( Amount involved < Rs 1 Crore)
Points to be taken care of:
- Auditor should report the matter to the audit committee within two days of coming to know about such an incident.
- Report should have details about the nature of fraud with description, approximate amount involved and parties involved.
PART - III
- To ensure more transparency, all the frauds should be mentioned in the firm’s board report.
- The Board report should mention remedial actions taken in that regard.
