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CS Executive · Company Law and Practice · Accounts and Auditors

During the audit of Ganga Logistics Ltd, an unlisted company, the auditor suspects an offence involving fraud against the company by employees, and the amount is below the specified threshold. Under Section 143(12) provisos, to whom does the auditor report, and what follows?

For a fraud below the specified amount, the auditor reports to the audit committee or, where there is none, the Board. The company must then disclose details of that fraud in the Board's report, since it was not reported to the Central Government.

  1. ATo the Central Government immediately; the Board need not be told
  2. BTo the audit committee or, in other cases, the Board; the company then discloses the details in the Board's report if not reported to the Central GovernmentCorrect
  3. CTo the Registrar of Companies, who informs the members
  4. DTo the members at the next general meeting only

Explanation

For a fraud below the specified amount, the first proviso to Section 143(12) directs the auditor to report to the audit committee under Section 177 or, in other cases, to the Board. The second proviso requires the company to disclose details of such frauds, not reported to the Central Government, in the Board's report. Reporting only to the Central Government applies to frauds at or above the specified amount.

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