Page 265 - CA Inter Audit PARAM

CA Ravi Taori
whether moneys raised by way of initial public offer or further public offer (including debt
instruments) during the year were applied for the purposes for which those are raised, if not, the
details together with delays or default and subsequent rectification, if any, as may be applicable, be
reported;

QNO CARO (Cl 11 - Clause Details) Old Course--(M21R)
CARO.26 Bhaskar CNO - CARO.170
Where the auditor notices that any fraud by the company or on the company by its officers or employees
has been noticed by or reported during the year, the auditor should, apart from reporting the existence
of fraud, also report under clause (x) of paragraph 3 of Companies (Auditor’s Report) Order, 2016, the
nature of fraud and amount involved. Explain the considerations an auditor would keep in mind for
reporting under this clause.
Answer Where the auditor notices that any fraud by the company or on the company by its officers or employees
has been noticed by or reported during the year, the auditor should, apart from reporting the existence of
fraud, also required to report under clause (x) of paragraph 3 of Companies (Auditor’s Report) Order, 2016,
the nature of fraud and amount involved. For reporting under this clause, the auditor may consider the
following:
(i) This clause requires all frauds noticed or reported during the year shall be reported indicating the nature
and amount involved. As specified the fraud by the company or on the company by its officers or employees
are only covered.
(ii) Of the frauds covered under section 143(12) of the Act, only noticed frauds shall be included here and
not the suspected frauds.
(iii) While reporting under this clause with regard to the nature and the amount involved of the frauds
noticed or reported, the auditor may also consider the principles of materiality outlined in Standards on
Auditing.

QNO Cl 11- Auditor’s Responsibility w.r.t fraud- fake invoices Old Course -- (M20R/M23E)
CARO.29 of credit purchases by head accountant- Brief
Bhaskar CNO - CARO.170
"The head accountant of a company entered fake invoices of credit purchases in the books of account

aggregate of Rs 50 lakh and cleared all the payments to such bogus creditor. How will you deal as an auditor?"
Answer ➢ Report the fraudulent activity to the Board or Audit Committee {Sec 143(12)}
Here, the auditor of the company is required to report the fraudulent activity to the Board or Audit

Committee (as the case may be) within 2 days of his knowledge of fraud.

➢ Disclosure in Board Report
Further, the company is also required to disclose the same in Board’s Report.

➢ Reporting to the central government- Not Required
It may be noted that the auditor need not to report the central government as the amount of fraud
involved is less than Rs 1 crore, however, reporting under Clause (xi), CARO, 2020 is required.
Author’s Note
In this question ICAI has given reference to CARO “clause ix”. Students can mention the whole clause.

QNO Cl 14 – Requirements Old Course -- (N22M/M23M)
CARO.35 Bhaskar CNO - CARO.200
Discuss the reporting requirements regarding statutory dues and Internal Audit as per CARO, 2020

Answer Matters to be included as per CARO, 2020:

➢ Statutory dues
Clause (vii) (a) whether the company is regular in depositing undisputed statutory dues including
Goods and Services Tax, provident fund, employees' state insurance, income tax, sales -tax, service
tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the
appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as on the
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