CMA Intermediate · Corporate Accounting and Auditing · Statutory Audit under the Companies Act, 2013
The statutory auditor of Rohini Steels Ltd, which is neither a Government company nor a listed company, has reason to believe that an offence involving fraud is being committed against the company by its employees. The amount involved is below the specified amount. As per section 143, what must the auditor do?
For a fraud below the specified amount, the auditor must report to the audit committee constituted under section 177, or to the Board where there is no such committee, within the prescribed time and manner. Reporting to the Central Government applies only to frauds at or above the specified amount.
- AReport the matter to the Board, or to the audit committee where one is constituted under section 177, within the prescribed time and mannerCorrect
- BReport the matter to the Central Government immediately, whatever the amount
- CRemain silent, since a fraud below the specified amount is outside the auditor's duty
- DReport only to the members at the next general meeting
Explanation
Under the first proviso to section 143(12), a fraud involving less than the specified amount is reported to the audit committee (constituted under section 177) or, in other cases, to the Board. The Central Government is the recipient only for frauds at or above the specified amount. Silence would attract the penalty in section 143(15), which is Rs 1 lakh for a company that is not listed.
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