Page 253 - CA Inter Audit PARAM

CA Ravi Taori
• Every company shall, at the first annual general meeting appoint an individual or a firm as
an auditor who shall hold office from the conclusion of that meeting till the conclusion of its
sixth annual general meeting and thereafter till the conclusion of every sixth meeting

Part III – Case Discussion
➢ In the present case, the board has appointed branch auditors. The board had appointed the
auditor where it did not have authority to do so.
Part IV – Conclusion
As such, the appointment is invalid. The shareholder’s complaint is right. The branch auditor should
ascertain before accepting the audit whether his appointment is valid

QNO Sec-143(12) & Rule 13 -Fraud Reporting Old Course--
CoAud.76 Bhaskar CNO - CA.420 (M17R/M20R/M21E/M21M/M18E/N20R/M21M/M22R)
Mr. A is appointed as statutory auditor of a company for the Financial Year ended 31st March 2018.
During the course of audit, it was found that few doubtful transactions had been committed by finance
manager who retired in March 2018. The fraud was going on since last 2-3 years and the total amount
misappropriated exceeding Rs 100 lakhs. As a statutory auditor, what would be reporting
responsibilities of Mr. A?
OR
Auditor of A Ltd while conducting audit in the course of the performance of his duties as auditor,
believes with reasons that “an offence of fraud involving such amount or amounts 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”. Analyse and also explain the manner of reporting the matter to the Central Government.
OR
If an auditor of a company has reason to believe that an offence of fraud is being or has been committed
in the company by its officers or employees, the auditor shall report the matter to the Central
Government. Explain. Also state the manner of reporting the same.
Answer Part I -- Relevant Standards & Laws
▪ Section 143(12) of the Companies Act, 2013
▪ Rule 13 of the Companies Act, 2013
▪ Clause (x) of paragraph 3 of Companies (Auditor’s Report) Order, 2016 [CARO, 2016]
Part II -- Requirements of Relevant Standards & Laws
➢ Reporting to the Central Government-
• As per section 143(12) of the Companies Act, 2013 read with Rule 13 of the Companies
(Audit and Auditors) Rules, 2014,
• If an auditor of a company in the course of the performance of his duties as
auditor, has reason to believe that an offence of fraud, which involves or is
expected to involve individually an amount of Rs 1 crore or above, 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 prescribed.

• 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

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