The statutory auditor must report on all three of the following:
(a) Fraud noticed or reported during the year:
Whether any fraud by the company or any fraud on the company has been noticed or reported during the year.
If yes → indicate the nature and amount involved.
(b) Filing of Form ADT-4:
Whether any report under Section 143(12) of the Companies Act has been filed by the auditors in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government.
(c) Whistle-blower complaints:
Whether the auditor has considered whistle-blower complaints, if any, received during the year by the company.
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### Two Directions of Fraud
Fraud BY the company — management or employees committing fraud against outsiders/stakeholders
Fraud ON the company — third parties (or employees) defrauding the company itself
Both directions must be checked and reported.
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### Relationship with Section 143(12)
Section 143(12) requires the auditor to report fraud to the Central Government if the fraud involves ₹1 crore or more. CARO Clause xi(b) requires confirmation of whether this statutory reporting was done via ADT-4.
Worked example
### Example 1
Q (MTP 6): During your statutory audit of a limited company, you discover a fraud of ₹5 lakhs committed by the company. What are the reporting requirements under CARO 2020?
The fraud must be reported under Clause (xi) of Paragraph 3 of CARO 2020 as follows:
(a) Report that a fraud of ₹5 lakhs has been noticed — indicate its nature (e.g., misappropriation, falsification of records) and amount (₹5 lakhs).
(b) Confirm whether Form ADT-4 was filed with the Central Government under Section 143(12). Note: Section 143(12) reporting to the Central Government is mandatory only when the fraud amount is ₹1 crore or more. Since this fraud is ₹5 lakhs (below the threshold), ADT-4 would NOT be required — but the auditor must still address this sub-clause in the report (by stating it was not applicable/required).
(c) State whether any whistle-blower complaints received by the company during the year were considered by the auditor.
⚠️ Common exam mistakes
Reporting only the existence of fraud without specifying nature and amount — both are required.
Confusing fraud reporting under CARO Clause xi with the separate statutory obligation under Section 143(12) — CARO xi(b) asks whether ADT-4 was filed; it does not create the filing obligation itself.
Ignoring the whistle-blower complaints sub-clause xi(c) — this is a distinct and separate reporting requirement.
Assuming only 'fraud by the company' needs to be reported — fraud ON the company (e.g., by third parties or employees against the company) is equally reportable.
Bare-Act text Paragraph 3, Clause (xi) · Companies Auditor's Report Order, 2020 · click to expand
Clause (xi): (a) whether any fraud by the company or any fraud on the company has been noticed or reported during the year, if yes, the nature and the amount involved is to be indicated; (b) whether any report under sub-section (12) of section 143 of the Companies Act has been filed by the auditors in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government; (c) whether the auditor has considered whistle-blower complaints, if any, received during the year by the company.