Page 200 - CA Final PARAM Digital Book.

Sec 143--Fraud Reporting Cost Old Course – (M16M,N17E, M18M, M19R)
QNO Accountant Did Not Report to
340.000 Government
TITANIUM CNO—CA.040
An auditor observed a fraud committed by an employee of the company. State the manner and timing of
reporting of the fraud by the auditor.
OR
In the course of audit of Kishan Ltd. for the financial year 2015-16, its auditor M/s Zen & Co. observed
that the management has passed certain forged transactions against the company amounting to Rs. 50
lakh at the year end. Suspecting fraud, the auditors requested explanations and documentary
supporting, for which the management remained silent. You are required to guide the auditor of the
company stating the fraud reporting requirements as provided under the Companies Act, 2013.
OR
QNO 341.000 Sec 143--Fraud Reporting Case of General Manager
Q You have been appointed statutory auditor of a company for the financial year ended 31st March 2017
in place of the retiring auditor. During the course of audit, you observe that a fraud had been committed
by a general manager who retired in March 2017. While going into further details, it was found that the
fraud was going on since last 2-3 years and the total amount misappropriated was likely to exceed ` 100
lakhs. As statutory auditor, what would be your reporting responsibilities to the government?
OR
QNO 341.100 Sec 143--Fraud Reporting Cost Accountant Didn’t Not Report to Government;
Q RX Ltd. is a sugar manufacturing company. The company appointed Mr. Suresh, a practicing cost
accountant, to conduct cost audit of its cost records under section 148 of the Companies Act, 2013. While
conducting audit, Mr. Suresh found some misstatement resulting into fraud committed by the officers of
the company amounting rupees 1.5 crore. However, he did not report the matter to the Central
Government believing that liability for such reporting lies only with statutory auditor of the company.
Advise.
Answer Part I -- Relevant Section & Laws
▪ As per Section 143(12) of the Companies Act, 2013 to be read with Rule 13,Companies (Audit and

Auditors)Rules, 2014.
Part II -- Requirements of Relevant Section & Laws
➢ Section 143(12) of the Companies Act, 2013 to be read with Rule 13,Companies (Audit
and Auditors)Rules, 2014.
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 involving fraud is being or has been committed against the
company by officers or employees of the company, he shall immediately report the matter to the
audit committee (in case amount involved in is less than ` 1 crore) within 2 days of his knowledge
and he shall report the matter specifying the Nature of Fraud with description, Approximate
amount involved; and Parties involved.

Further, if the offence of fraud, which involves or is expected to involve individually an amount of `
1 crore or above, the auditor shall report the matter to the Central Government.

The manner of reporting the matter to the Central Government is as follows:
The auditor shall report the matter to the Board or the Audit Committee, as the case may
be, immediately but not later than 2 days of his knowledge of the fraud, seeking their
reply or observations within 45 days;
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 15 days from the date of receipt of such reply or observations;
In case the auditor fails to get any reply or observations from the Board or the Audit
Committee within the stipulated period of 45 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;
the report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by

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