During the course of performance of their duties as auditor.
## Trigger
If the auditor has reason to believe that an offence of fraud is being or has been committed:
Against the company
By officers or employees of the company
## Reporting Mechanism — Two Categories
### A. Fraud Amount ≥ ₹1 Crore (Material Fraud)
Report to Central Government (Secretary, MCA)
Step
Action
Timeline
1
Report the matter to Board / Audit Committee
Within 2 days of knowledge, seeking reply within 45 days
2
After receipt of reply (or no reply within 45 days), forward report + reply + comments to Central Government
Within 15 days
3
Mode: sealed cover by Registered Post with A.D. or Speed Post followed by e-mail
—
4
Format: Form ADT-4 on auditor's letterhead, signed with seal and membership number
—
### B. Fraud Amount < ₹1 Crore
Report to Audit Committee / Board (No reporting to Central Govt)
Disclose in Board's Report:
Nature of fraud with description
Approximate amount involved
Parties involved — if remedial action not taken
Remedial action taken
## Important Notes
Reporting under Sec 143(12) is NOT a breach of duty of confidentiality.
Cost auditor and Secretarial auditor have the same reporting obligation under Rule 13.
Reporting is only required if fraud is against the company by officers/employees — not by third parties.
Worked example
### Example 1
Q: During audit of XYZ Ltd, the auditor discovers an embezzlement of ₹1.5 crore by the CFO. State the auditor's reporting duty.
A: Since amount ≥ ₹1 crore, it is a material fraud under Sec 143(12):
1. Report to Audit Committee/Board within 2 days seeking reply within 45 days.
2. On receipt of reply (or after 45 days), forward to Central Govt within 15 days in Form ADT-4.
3. Sent by Registered Post AD/Speed Post followed by e-mail, on letterhead.
### Example 2
Q: Auditor of PQR Ltd suspects fraud of ₹40 lakh by an accountant. To whom does he report?
A: Since amount < ₹1 crore, the auditor reports to the Audit Committee/Board only. Disclosure is required in the Board's Report (nature, amount, parties if remedial action not taken, remedial action taken). No reporting to Central Government.
### Example 3
Q: An auditor learns of a fraud committed by a vendor against the company. Does Sec 143(12) reporting apply?
A:No. Sec 143(12) applies only when fraud is committed by officers or employees of the company. Fraud by third parties is not reportable under Sec 143(12).
⚠️ Common exam mistakes
Reporting fraud of any amount directly to Central Government — only ≥ ₹1 crore is reported to CG.
Forgetting the 2-day initial reporting to Board and the 45-day reply window before sending to CG.
Reporting fraud committed BY the company against others — Sec 143(12) covers frauds AGAINST the company.
Missing the ADT-4 form and letterhead requirement.
Not disclosing < ₹1 crore frauds in Board's Report — disclosure is mandatory even when CG is not informed.
Bare-Act text Section 143(12) · Companies Act, 2013 read with Rule 13 of Companies (Audit & Auditors) Rules, 2014 · click to expand
Section 143(12) — Notwithstanding anything contained in this section, if an auditor of a company in the course of performance of his duties as auditor, has reason to believe that an offence of fraud involving such amount or amounts as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as may be prescribed. Provided that in case of a fraud involving less than the amount prescribed, the auditor shall report the matter to the audit committee or to the Board within such time and in such manner as may be prescribed. Provided further 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.