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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Governance Influencers

During the audit of Sahyadri Power Ltd, the auditor has reason to believe that an offence involving fraud of Rs 2 crore is being committed against the company by its officers. What must the auditor do under the Companies Act, 2013, as a gatekeeper?

The auditor must report the suspected fraud to the Central Government in the prescribed manner, after informing the board or audit committee and seeking its reply within the stated time. Because the amount is Rs 1 crore or more, this gatekeeper duty applies.

  1. AReport the matter to the Central Government in the prescribed manner, after seeking the board's reply within the prescribed periodCorrect
  2. BIgnore it, as fraud reporting is the audit committee's duty alone
  3. CReport it directly to the stock exchange only
  4. DWait for the next annual general meeting to disclose it orally

Explanation

For fraud of Rs 1 crore or more, the auditor must report to the Central Government following the prescribed procedure, which includes informing the board or audit committee and awaiting a reply within the stipulated time. Reporting only to the exchange or waiting for the AGM does not meet the duty.

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