Income Tax


Friday 7 July 2017

Forensic Audit & Auditor's Duty to Report on Fraud (PPT)

Forensic auditing is a blend of accounting, auditing and investigative skills. The information technology has led to innumerable benefits to businesses but at the same time it has made the businesses vulnerable to serious complicated frauds. Fraud means wrongful or criminal deception intended to result in financial or personal gain. Fraud always undermines the confidence of stakeholders. 

There is a strong nexus between prevention of fraud & good corporate governance. The total loan amount in fraud cases was increases every year. So it is our duty to detect fraud for that reason section 143(12) provides that an auditor has to report to the central Government. If fraud is less than specified amount, the report was made to Audit Committee or Board. Fraud committed by officers or employees of the company are to be reported only and not by the third parties. 

As per Section 143(12) an auditor has to report a fraud if fraud involves the amount as per rule 13(1) in the manner as per rule 13(2). As per 1st proviso auditor has report to the audit committee in the manner as per Rule 13(3). 2nd proviso requires company to report the details of frauds in Board Report in the manner specified in Rule 13(4). Rule 13(1) was introduced in Companies (Audit & Auditors) Rule 2014.

As per the Rule the specified amount is Rs. 1Crore. As per (Institute of Chartered Accountants of India) ICAI’s revised guidance note which was published in February -2016, an auditor reports a matter to audit committee immediately but not more than 2days of his knowledge & seeking their reply within 45 days.  Also auditor must specify the nature of fraud, amount and parties involved in fraud. 

If reply was not received then the auditor has to forward his report to The Secretary, Ministry of Corporate Affairs by speed post. While reporting to the Central Government auditor must sent his own details along with Form ADT-4. Here I made a power point presentation to explain the basic provisions of the Act.

-          Tushar G. Agrawal


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