SA-240(auditor's responsibility in case of fraud)

Conducting audit or certifying Financials are as per statutory laws.

If the frauds are apparent and with explanation it is duty of auditor to declare in his audit report.

further company / share holders are the owners who ultimately to take corrective measures and put in order.

Due to such frauds any damages certifying auditors or not responsible under Company Laws etc.

But following  accounting standards , statutory declarations, reporting to the shareholders , Income tax authorities are the first responsibility of certifying auditors which please note