Define suspicion and how will the Secretarial Auditor proceed in case he has sufficient reasons to believe that there is any commission of fraud in the company?

'Suspicion' is a state of mind more definite than speculation, but falls short of knowledge based on evidence. It must be based on some evidence, even if that evidence is tentative – simple speculation that a person may be engaged in fraud is not sufficient grounds to form a suspicion. Suspicion is a slight opinion but without sufficient evidence. Examples of information which could be classified as suspicion are provided below: Recurring negative cash flows from operations or Inability to generate cash flows from operations while reporting earnings and earnings growth. The practice by management in maintaining or increasing the entity's stock price or earnings trend. Duty of Secretarial Auditor: The Auditor may communicate directly with the internal auditors and statutory auditors to verify whether they have suspected/identified any fraud during the course of their audit. The Auditor shall ensure to collect sufficient evidence which substantiates his suspicion of the commission of the fraud against the Auditee by its employees and officers. During the course of the audit, if the auditor suspects any commission of fraud, he shall endeavour to collect further evidence for the same. The suspicion may arise on perusal of internal control systems, perusal of any complaints under whistle blower mechanism, reports of the other auditors, etc. The auditor shall ensure to collect sufficient evidence which substantiates his suspicion of the commission of the fraud against the Company by the employees and officers of the company. Conclusion: The auditor shall ensure that he has sufficient reason to believe that there is commission of fraud and should have justifiable grounds for the same.