Resignation does not absolve Auditor of onus of reporting fraud: NFRA

The National Financial Reporting Authority (NFRA) said the resignation does not relieve the auditor of his responsibility to report fraud or suspected fraud as provided by law. The National Financial Regulatory Authority (NFRA) said in a June 26 bulletin that it noted auditors were not fulfilling their legal responsibilities to report fraud as required by the Companies Act.

The NFRA said statutory auditors are obligated to report fraud or suspected fraud if they observe suspicious activities, transactions or operating conditions at a company that indicate reasons to believe that a crime of fraud has been or has been committed against the company by it. officers or employees.

“The statutory auditor is under a duty to file ADT-4 Form 143(12) with Central Government even in cases where the statutory auditor is not the first person to identify the suspected fraud/fraud,” the NFRA said in its circular. .

The Financial Reporting Authority also cited a Supreme Court order to underscore its view, “It is noted that in a particular case the auditor has, in fact, directly or indirectly, acted fraudulently, to avoid any further consequences under the second clause of Section 140(5). ), resigns to avoid any consequences under the second clause of Article 140(5), this cannot be allowed.”

Corporate Auditor’s Report Order also named CARO 2013 states that if the auditor has reason to believe that an offense of fraud, which individually involves or is expected to involve an amount of Rs 1 crore or more, has been or has been committed against the company by its officers or employees . The auditor is required to report on the matter to the board of directors or audit committee and to the central government in the form of a statement.