What is Secretarial Audit? Secretarial Audit Applicability and Appointment of Secretarial Auditor

Introduction 

A compliance audit is a secretarial audit. It is an aspect of an organization’s overall compliance management. It is a useful tool for corporate compliance management, as it aids in the detection of non-compliance and the implementation of corrective actions. An article on “What is Secretarial Audit?”, Secretarial Audit Applicability, information on Appointment of Secretarial Auditor, and Its advantages & Features of company Secretarial Audit.

What is a Secretarial Audit?

The Secretarial Audit offers a judgment 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.

It provides an independent review that helps improve the company’s operations. By assessing risk management, control, and governance, it supports the organization’s goals. The secretarial audit assures stakeholders, regulators, and management that the company follows good governance, complies with laws, and has effective systems in place.

Features of Company Secretarial Audit

• It aids in the detection of non-compliance and the implementation of corrective actions.

• It examines the company’s adherence to good corporate practices.

• The procedure stands alone to create value and improve the Company’s operations.

• It aids in the achievement of the company’s goals by using a systematic, productive method to evaluate the performance of risk management, control, and governance systems.

Documents required to conduct Secretarial Audits.

1. Memorandum and Articles of Association – Company’s constitution and rules.

2. Board and General Meeting – Records of board decisions.

3. Annual Reports – Financial statements and disclosures.

4. Statutory Registers – Registers like members, directors, and charges.

5. Shareholders’ Meeting – Records of annual and extraordinary general meetings.

6. Compliance Certificates – Evidence of statutory filings.

7. Agreements and Contracts – Contracts entered by the company.

8. Filings with regulatory authorities – Documents submitted to SEBI, RBI, etc.

9. Policies and Procedures – Internal policies on governance and compliance.

10. Audit Reports – Previous financial and secretarial audits.

Objectives of Company Secretarial Audit

1. To verify and report on compliance with applicable laws and Secretarial Standards.

2. To safeguard the interests of various stakeholders.

3. To identify non-compliances and inadequate compliances.

4. To avoid unjustified legal actions/ penalties by law enforcement agencies and others.

Advantages of Company Secretarial Audit

• An effective technique ensures that legal and procedural requirements are met.

• Provides directors and key management personnel with a sense of security.

• The Secretarial Audit ensures compliance with legal and procedural requirements, allowing directors to focus on more important business matters.

• Increase a company’s goodwill with regulators and stakeholders.

• Secretarial auditing is a useful technique for risk management in governance and compliance.

• It aids the investor in determining the level of company compliance, ultimately enhancing the company’s reputation.

Secretarial Audit Applicability

A secretarial Audit is required for the following businesses. In addition, to other annual reports organizations must prepare a Secretarial Audit Report.

• Every Company with a debt of at least 100 crores rupees.

• Each and every Listed Company

• A publicly traded firm with a turnover of at least INR 250 crore.

• Every Public Company that has a paid-up share capital of at least 50 crore rupees.

Appointment of Secretarial Auditor

ICSI members with a certificate of practice can only conduct Secretarial Audits and prepare Reports.

According to rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014, the board must appoint a secretarial auditor by resolution. Within 30 days of passing the resolution, it must be filed with the Registrar in e-form MGT-14.

It is suggested that a Secretarial Auditor be hired at the start of the fiscal year. The Secretarial Auditor can provide the Board with quarterly reports on the compliance of numerous laws and regulations.

Conclusion 

Private companies and small public companies are not required to conduct Secretarial Audits. These businesses might use secretarial auditing to ensure compliance and avoid the risks that come with non-compliance. It improves a company’s image and goodwill in the eyes of regulators and stakeholders. It can be used as a governance tool or a compliance risk management tool.

FAQs (Frequently Asked Questions)

1. Does the Secretarial Auditor require a Letter of Representation from the Auditee Company?

The Company Secretary in Practice strongly recommends that the Auditee company provide a management representative letter. Senior management (Company Secretary/Senior Management/Managing Director) may sign the letter, as they would ordinarily have the authority to do so. This letter of representation can be used by the Secretarial Auditor as part of his audit evidence.

2. How often does a Secretarial Audit occur?

The Prescient Secretarial Audit would assist the organization in implementing corrective actions and enhancing its compliance mechanisms and processes on a regular basis. As a result, the Secretarial Audit should be completed- Quarterly, Half-year, and Annually are all examples of periodicity.

The auditor immediately communicates any negative findings to the Board on an interim basis. The Secretarial Audit Report, which will be attached to the Board’s report, must be provided before the Board prepares its report.

3. What is the Secretarial Audit Report’s format?

You must submit the Secretarial Audit Report in the format outlined in Form MR-3.

4. Under the Companies Act of 2013, what are the rights and responsibilities of the Secretarial Auditor?

Section 143 of the Companies Act of 2013 outlines the functions and responsibilities of Auditors. Subsection (14) applies these provisions, with necessary changes, to the Company Secretary in Practice conducting Secretarial Audits under Section 204.