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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Disclosures and Website Disclosures

Himalaya Foods Ltd, a listed company, is finalising its Board's report. Its statutory auditor reported a fraud under section 143(12), and the matter is below the threshold for reporting to the Central Government. How should the Board's report treat it?

The Board's report must include details of the fraud. Section 134(3)(ca) requires disclosure of frauds reported by the auditor under section 143(12) other than those reportable to the Central Government, and this fraud is not reportable to the Centre, so it is disclosed there.

  1. ANot mention it, since fraud details go only to the audit committee
  2. BInclude the details of the fraud reported by the auditor, as it is not reportable to the Central GovernmentCorrect
  3. CMention it only if the fraud involved a director
  4. DDisclose it only in the Directors' Responsibility Statement

Explanation

Section 134(3)(ca) requires the Board's report to include details of frauds reported by auditors under section 143(12) other than those reportable to the Central Government. The fraud here is of the kind that is not reportable to the Central Government, so it must be disclosed in the report. Limiting disclosure to cases involving a director adds a condition that the clause does not contain.

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