Government of India
Ministry of Corporate Affairs


New Delhi, dated the 14th December, 2015

G.S.R. 972(E). – In exercise of the powers conferred by sub-section (12) of section 14  read with sub-section (1) of section 469 of the Companies Act’ 2013 (18 of2013)’ the Central Government hereby makes the following rules further to amend the Companies (Audit and Auditors) Rules, 2014 namely:-

1. (1) These rules may be called the Companies (Audit and Auditors) Amendment Rules, 2015.

    (2) They shall come into force on the date of their publication in the Official Gazette

2. In the Companies (Audit and Auditors) Rules, 2014 (hereinafter referred to as the principal rules),- (i) For rule 13, the following rule shall be substituted’ namely:-

“13. Reporting of frauds by auditor and other matters: (1) lf an auditor of a company, in the course of the performance of his duties as statutory auditor, has reason to believe that an offence of fraud, which involves or is expected to involve individually an amount of rupees one crore or above, is being or has been committed against the company by its officers or employees, the auditor shall report the matter to the Central Government.

(2) The auditor shall report the matter to the Central Government as under:-

(a) the auditor shall report the matter to the Board or the Audit Committee, as the case may be, immediately but not later than two days of his knowledge of the fraud seeking their reply or observations within forty-five days;

(b) 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 fifteen days from the date of receipt of such reply or observations;

(c) in case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated period of forty-five days, he shall forward his report lo 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 has not received any reply or observations;

(d) 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;

(e) the report shall be on the letter-head of the auditor containing postal address, email address and contact telephone number or mobile number and be signed by the auditor with his seal and shall indicate his Membership Number; and

(f) the report shall be in the form of a statement as specified in Form ADT-4

(3) In case of a fraud involving lesser than the amount specified in sub-rule (1), the auditor shall report the matter to Audit Committee constituted under section 177 or to the Board immediately but not later than two days of his knowledge of the fraud and he shall report the matter specifying the following:-

(a) Nature of Fraud with description;

(b) Approximate amount involved: and

(c) Parties involved.

(4) The following details of each of the fraud reported to the Audit Committee or the Board under sub-rule (3) during the year shall be disclosed in the Board’s Report:-

(a) Nature of Fraud with description;

(b) Approximate Amount involved;

(c) Parties involved, if remedial action not taken: and

(d) Remedial actions taken.

(5) The provision of this rule shall also apply, mutatis mutandis, to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively.”;

(ii) In the principal rules, after rule 14 and before FORM NO. ADT-1, insert the word “Annexure”;

(iii) In the principal rules, in Forrn No. ADT-4,-

(A) in line 3, for the word, figures and brackets “rule 13(4)” the word, figures, letter and brackets “rule 13(2)(f)” shall be substituted; and

(B) in line 25, in item No. (10), for the word, figures and brackets, rule 13(1),’, the word, figures, letter and brackets “rule 13(2)(a),’shall be substituted.

[F. No. 1/33/2013-CL-V]

(Amardeep Singh Bhatia)
Joint Secretary to the Government of India

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part 11, Section 3, Sub-section (i), vide number G.S.R. 246(E), dated the 31st March, 2014 and were subsequently amended vide G.S.R. 722(E) dated 14th October, 2014.

GST Course Join

More Under Company Law

Posted Under

Category : Company Law (4011)
Type : Notifications (15928) Notifications/Circulars (32218)

0 responses to “MCA notifies rules for Reporting of frauds by auditor”

  1. abhijeet chowdhury says:


  2. DEEPAK DANG says:

    The Govt. is complicating issues by creating new laws & wasting precious time of all statutory bodies. As Institute of Chartered Accountants, any misreporting/ concealment of facts may cancel the licence to practice. Further, overlooking any fraud, which is clear in the accounts is punishable offence for all, who dealt with it including CA. The institute has powers to recheck the audit reports of CAs on sample basis. If all are complied then no change is required. At the most the institute may remind its powers to all or issue separate A.S. to handle the issue more stringently. Secretary to Board are already responsible for non- compliance of any law/ guidelines of Board.

  3. vsnmurty says:

    a BIG question is how to quantify the amount of fraud?Deemed or actual:
    In a case where an employee claims even one rupee more than his entitlement in his TA bill it fits in to the definition of Fraud.Not possible to invoke materiality.Professionals please ponder over


    For reporting fraud the secretarial auditor is made on par with statutory auditor and cost auditor. But provisions relating to qualification, disqualification, rights, duties and obligations applicable to statutory auditors are not extended for secretarial auditor though it has been rightly extended to Cost Auditor vide S. 148(5).
    The provisions similar to S. 148(5) may be rightly considered for secretarial auditor under S. 204 also, so as to maintain the independence and improve performance of Secretarial auditor also.

  5. bobjee kurien says:

    A small but significant amendment to the law which ensures that any financial irregularity is snipped in the bud .

Leave a Reply

Your email address will not be published. Required fields are marked *

Featured Posts