Certification course on Balance Sheet Finalisation

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1. Introduction





Sec 447

fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner,

with intent to deceive,

to gain undue advantage from,

or to injure the interests of, the company or its shareholders or its creditors

or any other person,

whether or not there is any wrongful gain or wrongful loss;

“wrongful gain” means the gain by unlawful means of property to which the person gaining is not legally entitled;

(iii) “wrongful loss” means the loss by unlawful means of property to which the person losing is legally entitled.

Punishment includes :

6 months to 10 years imprisonment ( not less than 3 years if question of public interest is involved

Fine – fraud amount to three times the amount

Sec 448

Save as otherwise provided in this Act, if in any return, report, certificate, financial

statement, prospectus, statement or other document required by, or for, the purposes of any

of the provisions of this Act or the rules made thereunder, any person makes a statement,—

a) which is false in any material particulars, knowing it to be false; or

(b) which omits any material fact, knowing it to be material,


He shall be liable under section 447.

2. Fraud reporting by Auditors      

Sec 143 (12) states: Notwithstanding anything contained in this section, if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed.

Sec 143 ( 13 ): No duty to which an auditor of a company may be subject to shall be regarded as having been contravened by reason of his reporting the matter referred to in sub-section (12) if it is done in good faith.

3. Mode of Fraud reporting by Auditors    

Grounds for reporting

If an auditor has sufficient reason to believe that an offence involving fraud has been or is being committed against the Company or by officers or employees of the company,

Report to whom

He shall report the matter to the Central Government.  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.

To report by when

immediately but not later than sixty days of his knowledge


Auditor shall forward his report to the Board or the Audit Committee, as the case may be, immediately after he comes to knowledge of the fraud, seeking their reply or observations within forty-five days;

Receive reply from BoD or Audit Committee

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 to 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 failed to receive any reply or observations within the stipulated time. 


The report shall be on the letter-head of the auditor containing postal address, e-mail address and contact number and be signed by the auditor with his seal and shall indicate his Membership Number. The report shall be in the form of a statement as specified in Form ADT-4

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

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Published by

CA Sripriya K
(Finance Professional)
Category Corporate Law   Report

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