Page 201 - CA Final PARAM Digital Book.

Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in
confirmation of the same
the report shall be on the letterhead 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
the report shall be in the form of a statement as specified in Form ADT-4.

The provisions of this section shall mutatis mutandis apply to—
(a) cost accountant conducting cost audit under section 148; or
(b) the company secretary in practice conducting secretarial audit under section 204
➢ Clause 11 of CARO 20
The auditor is required to report - Whether any fraud by the company or any fraud on the
company by its officers or employees has been noticed or reported during the year; If yes, the
nature and the amount involved is to be indicated.

Part III – Case Discussion ( Case 1 & 2)
➢ Auditor observed a fraud committed by an employee of the company.

Part IV – Conclusion ( Case 1 & 2)
➢ Therefore, reporting of fraud should be done in accordance with section 143(12) of the Act and
under Clause 11 ,CARO 20
Author’s Note

( Case 3)
Part III – Case Discussion
➢ In the given case, a statutory auditor appointed by 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.

Part IV – Conclusion
➢ In the instant case, a fraud had been committed by a general manager and the amount involved
for such misappropriation is exceeding 100 Lakh rupees i.e. 1 crore.
Therefore, reporting of fraud should be done to Central Government in accordance with section
143(12) of the Act and under Clause 11 ,CARO 20

(Case 4)
CARO reporting will not be applicable as Mr. Suresh is a Cost auditor. But reporting to central
government will be required under Sec 143(12).
Part III – Case Discussion
➢ In the instant case, 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.
Part IV – Conclusion
➢ In the given case, Mr. Suresh, being the cost auditor of RX Ltd., found misstatement resulting into
fraud amounting 1.5 crore committed by the officers of the company, was required to report the
fraud to the Central Government which he failed to do so.

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