'Fraud reporting norms increase responsibility on auditors'

The responsibility on auditors will increase with the amended rules requiring them to report to the central government any fraud amounting to Rs one crore or more, says a report.
Under the Companies Act, 2013, auditors are required to report to the government when they come across instances of fraud at a firm, but the threshold was not specified.
"The amended rules for reporting of fraud by auditors increases responsibility of auditors", consultancy KPMG in India said in a report.
Immaterial frauds will now form a part of the annual report, and the requirement to report immaterial frauds to the central government has been done away with, it noted.

If "auditor of a company, in the course of 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 Rs 1 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", Corporate Affairs Ministry said in a recent notification.
In case an auditor comes across such instances, then it should be first informed to the company's board or audit committee within two days of coming to know about the fraud.

The auditor will have to seek reply of the board or audit committee on the matter within 45 days.
With regard to suspected fraud cases, where the amount involved is less than Rs 1 crore, the auditor should report the matter to the audit committee within two days of coming to know about such an incident.
The report should have details about the nature of fraud with description, approximate amount involved and parties involved.