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CS Executive · Company Law and Practice · Accounts and Auditors

The auditor of Meru Pharma Ltd, an unlisted company, has reason to believe that an employee committed a fraud against the company, but the amount is below the specified amount. Which course is consistent with Section 143(12) and (15)?

The auditor reports to the audit committee, or to the Board where no committee exists, within the prescribed time and manner. The company then discloses the fraud in the Board's report. Only larger frauds go to the Central Government.

  1. AReport to the audit committee, or to the Board where there is no audit committee, within the prescribed time and manner; the company must disclose it in the Board's reportCorrect
  2. BReport immediately to the Central Government in every case
  3. CIgnore it as the amount is below the threshold
  4. DReport only to the Registrar at the next annual filing

Explanation

The first proviso to Section 143(12) says that for fraud below the specified amount, the auditor reports to the audit committee or to the Board in other cases. The second proviso requires the company to disclose such frauds in the Board's report. Reporting to the Central Government is for fraud at or above the specified amount. Non-compliance attracts a penalty of Rs one lakh for an unlisted company.

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