CS DIVESH GOYAL

Mob: +918130757966

Practicing Company Secretary

csdiveshgoyal@gmail.com

GOYAL DIVESH& ASSOCIATE

FRAUD REPORTING BY AUDITOR TO GOVERNMENT:

FRAUD REPORTING BY AUDITOR COMPANIES ACT, 2013
GOYAL DIVESH & ASSOCIATES,
Practicing Company Secretary
SeriesSeries- 46

SERIES
NO- 46

Corporate fraud is a major problem that is increasing both in its frequency and severity.
Research evidence has shown that growing number of frauds have undermined the
integrity of financial reports, contributed to substantial economic losses, and eroded
investors confidence regarding the usefulness and reliability of financial statements.
The increasing rate of whitecollar crimes demands stiff penalties, exemplary
punishments, and effective enforcement of law with the right spirit. Our country has
also witnessed several corporate Frauds, few of them being the 5000 crore rupees
Harshad Mehta scam in 1992, 7000 crore rupees Satyam fiasco in 2009, the 27000
crore rupees Sahara fraud case which started in 2010 and is subjudice in Supreme
Court, till date.
Legal Language As per Section 143(12): Notwithstanding anything contained in this
section, if an auditor of a company, in the course of the performance of his duties as
auditor, has reason to believe that an offence involving fraud is being or has been
committed against the company by officers or employees of the company, he shall
immediately report the matter to the Central Government within such time and in such
manner as may be prescribed.
If Auditor, in the course of performing his duties as auditor, has reason to believe that
an offence involving fraud is being or has been committed against the Company by
officers or employees of the company, he shall immediately report the matter to Central
Government in prescribed time and manner.

Contact On csdiveshgoyal@gmail.com For Any Query Or Question Or Suggestions

CS DIVESH GOYAL
Practicing Company Secretary

Mob: +918130757966
csdiveshgoyal@gmail.com

GOYAL DIVESH& ASSOCIATE

However, section 143(13) of the Act, 2013 specifically provides that disclosures of
fraud to Central Government under Section 143(12) will not be considered as
contravention of his duty, if done in good faith.
NOTE DUTY IS WHEN THERE IS FRAUD AGAINST THE COMPANY AND NOT BY THE
COMPANY.
PROCEDURE FOR FRAUD REPORTING:
In case the auditor has sufficient reason to believe that an offence involving fraud, is
being or has been committed against the company by officers or employees of the
company, he shall report the matter to the Central Government.
The auditor will inform within 60 sixty days of his knowledge and after following the
procedure indicated herein below:
STEP-I
REPORT TO BOARD & AUDIT COMMITTEE:
Auditor shall forward his report to the Board of Directors or the Audit Committee, as
the case may be, immediately after he comes to knowledge of the fraud, seeking their
reply or observations within 45 forty-five days;
STEP-II
REPORT TO GOVERNMENT AFTER REPLY OF BOARD:
On receipt of such reply or observations the auditor shall forward his report and the
reply or observations of the Board or the Audit Committee along with his comments (on
such reply or observations of the Board or the Audit Committee) to the Central
Government within 45 fifteen days of receipt of such reply or observations;
STEP-III
REPORT TO GOVERNMENT IF NO REPLY RECEIVED

Contact On csdiveshgoyal@gmail.com For Any Query Or Question Or Suggestions

CS DIVESH GOYAL

Mob: +918130757966

Practicing Company Secretary

csdiveshgoyal@gmail.com

GOYAL DIVESH& ASSOCIATE

In case the auditor fails to get any reply or observations from the Board or the Audit
Committee within the stipulated period of 45 (forty-five days), he shall forward his
report to the Central Government along with a note containing the details of his report
that was earlier forwarded to the Board or the Audit Committee for which he failed to
receive any reply or observations within the stipulated time.

OTHER POINTS TO BE KEPT IN MIND:

The report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed
cover by Registered Post with Acknowledgement Due or by Speed post followed
by an e-mail in confirmation of the same.

The report shall be on the letter-head of the auditor containing
Postal Address,
e-mail address and
contact number and
signed by the auditor with his seal and shall
indicate his Membership Number.

Report shall be in the form of a statement as specified in Form ADT-4.
(Author CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in
Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com) Disclaimer: The
entire contents of this document have been prepared on the basis of relevant provisions
and as per the information existing at the time of the preparation. Though utmost efforts
has made to provide authentic information, it is suggested that to have better
understanding kindly cross-check the relevant sections, rules under the Companies Act,
2013. The observations of the author are personal view and the authors do not take
responsibility of the same and this cannot be quoted before any authority without the written

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