ICAI to guide chartered accountants on fraud reporting
December, 22nd 2014
The Institute of Chartered Accountants of India (ICAI) will soon come out with a guidance note for its members on fraud reporting by company auditors, along the lines of the amendments being effected to the Companies Act, 2013.
The move comes in the wake of the Companies (Amendment) Bill, 2014, which was passed by the Lok Sabha last week. The bill provides for a slew of amendments to the Act.
One of these amendments relates to Section 143 (12), which requires the statutory auditors of companies to report frauds to the central government. The section, in its present form, was one of the strong concerns of the ICAI as it required that a fraud involving even a minimal amount should be reported to the government.
The ICAI was pursuing the issue of amending the section with the ministry of corporate affairs, so that there would be a provision of certain threshold limits to report frauds. It also contended that the concept of fraud reporting be based on materiality.
K Raghu, ICAI president, said, "We welcome the amendment effected by the government. Now, the auditor would be required to report fraud to the government above the mandated threshold limit. Any fraud below the threshold limit would have to be reported to the company's audit committee/board."
The amendment also provides that the companies, whose auditors have reported frauds under this sub-section to the audit committee or the board but not reported to the central government, shall disclose the details about such frauds in the board's report, he said.
"We will soon come out with the guidance note on fraud reporting for our members," Raghu added.