4 key difference between Secretarial Audit and Statutory Audit
Table of Content
Introduction
A compliance audit is a secretarial audit. It is a component of an organization’s overall compliance management. On the other hand, a statutory audit is a legally mandated examination of the correctness of a company’s or government’s financial accounts and records. Here on this blog there is detailed information on the meaning of Secretarial Audit and Statutory Audit, and “What is the difference between Statutory Audit and Secretarial Audit?”
What is Statutory Audit?
As previously mentioned, a statutory audit is a legally mandated examination of the truthfulness of a company’s or government’s financial records and claims. A Statutory Audit looks at data including financial transactions, bank balances, and accounting records to assess whether an organization provides an honest and accurate portrayal of its financial status.
Advantages of Statutory Audit
- It improves the credibility of financial reports because the auditor properly verifies the statements.
- It aids management in performing their duties more effectively.
- Because the financial reports are free of errors, fraud, misrepresentation, and inaccuracies, the organization’s reputation improves.
- Reduce the likelihood of fraud in an organisation.
- It enhances the organization’s reputation because financial reports are free of errors, fraud, misrepresentation, and inaccuracy.
What is Secretarial Audit?
The Secretarial Audit offers a judgement on whether the firm has suitable systems and processes in place to monitor and assure compliance with applicable rules, regulations, laws, and guidelines, consistent with the organization’s size and operations. Secretarial auditing aids in the detection of non-compliance and the implementation of corrective actions. It examines the company’s adherence to good corporate practices. Secretarial Audit gives stakeholders, regulators, and management the essential assurances about good governance, statutory compliance, and the existence of competent and adequate systems and processes.
Advantages of Secretarial Audit
- An effective technique for ensuring that legal and procedural requirements are met.
- Provides directors and key management personnel with a sense of security.
- Secretarial Audit ensures that legal and procedural requirements are met, allowing directors to focus on more critical business issues.
- Increase a company’s goodwill with regulators and stakeholders.
- Secretarial auditing is a useful technique for risk management in governance and compliance.
What is the difference between Secretarial Audit and Statutory Audit?
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Secretarial Audit |
Statutory Audit |
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Appointment of Auditor |
The Company’s Board of Directors must appoint a secretarial auditor during a board meeting. |
A statutory auditor is appointed by shareholders or at the AGM (Annual General Meeting). |
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Qualification |
Only a member of the Institute of Company Secretaries of India holds a certificate of Practice (i.e. PCS) is qualified to undertake a secretarial audit of the company. |
A Chartered Accountant, or member of the ICAI, is required to qualify as a statutory auditor. In the case of a firm, the majority of the employees must be independent chartered accountants. The company may then be qualified to oversee a statutory audit of a company. |
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Legal rights |
Secretarial audits ensure that all legal and procedural requirements are met so that directors can focus on crucial business issues. a company’s reputation among its stakeholders and regulators should be improved. Secretarial auditing is a powerful tool for managing governance and compliance risks. |
All of the company’s financial accounts, records, and data are open to statutory auditors. Additionally, he is free to look for any other material that he feels is required for his audit. It is his responsibility to prepare an auditor’s report. |
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Mandatory requirement |
For Private Limited Companies and small companies, secretarial audits are not required. |
On the other hand, a statutory audit of the companies’ financial statements is a mandatory requirement for the company. |
Final Thoughts
Companies and organizations engage in a variety of audit processes to ensure that they are in compliance with the law. While some of these audits are explained here, such as secretarial audits and statutory audits. The main difference between these terms is that secretarial audits are performed by Secretaries of India holding a certificate of Practice, whereas statutory audits are performed by external entities such as chartered accountants.
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