Under Section 143(12) of the Companies Act, 2013, the auditor is required to report any fraud involving management or employees as soon as he has reason to believe that such fraud has occurred or is occurring. In practice, this means:

• Immediate Reporting:
  As soon as the auditor detects or has reason to believe that fraud has taken place, he must bring this to the attention of the Board of Directors in his audit report.

• Inclusion in the Audit Report:
  The auditor must clearly disclose the fraud and its materiality in the audit report under Section 143(12). This disclosure serves as an alert for the Board to take remedial measures.

• Further Action if Required:
  If the Board fails to act on the auditor’s report, the auditor may be compelled to report the fraud to the appropriate regulatory authority as prescribed under the Act.

refer the Section 143(12) of the Companies Act, 2013:

“If the auditor has reason to believe that any fraud involving management or employees of the company has occurred or is occurring, he shall report the same to the Board of Directors in his audit report.”