The charges levelled at Stadler are in stark contrast to Volkswagen Group's claims that only lower-level management knew of the emissions cheats.
In May, a federal grand jury in Detroit indicted Winterkorn on charges stemming from the diesel emissions cheating scandal in a plot that prosecutors allege reached the top of the world's largest automaker.
As recently as April, Stadler's position was even strengthened by the board when it gave him responsibility for coordinating group sales and distribution in addition to his duties as Audi CEO. Stadler, who has worked with Audi since 1990 and became chairman of the board in 2007, is under investigation for alleged "fraud and indirect improprieties with documents", reports The Associated Press.
Audi has also been embroiled in the emissions scandal that has plagued Volkswagen. The longtime Audi boss is officially the highest ranking employee of Volkswagen to be arrested thus far, and also had his home searched by investigators.
The Volkswagen group was forced to admit that the worldwide it sold 11 million vehicles in which the software was installed that allowed to manipulate the tests for compliance of engines with environmental standards.
The CEO was arrested at his home in Ingolstadt, in the early hours on Monday, Munich prosecutors told Reuters.
He has been indicted by USA authorities but is unlikely to face the charges as Germany doesn't extradite nationals to the US. That other member is said to be Audi's head of purchasing Bernd Martens, according to a person familiar to the investigation, who declined to be named because prosecutors had yet to disclose the name, Reuters reported. Last week, German prosecutors fined VW 1 billion euros ($1.2 billion) over the scandal.
In a statement issued earlier this year, Audi said that the models A6 and A7 were included in a voluntary recall of 850,000 diesel vehicles with V6 and V8 TDI engines announced in July 2017. Two managers are serving prison terms in the US.