Secretarial Audit
Examine and evaluate your company’s compliance with rules and regulations as stated under various laws. Contact one of our experts to learn more about how it might benefit your business.
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What is a Secretarial Audit?
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A Secretarial Audit is an independent examination done by a professional to review whether the company is in compliance with the provisions and rules of various laws and standards applicable to the company. The auditor examines whether the governance, internal control and risk management are working efficiently in the organization or not. Every company is subject to various rules and regulations which are complicated but at the same time are crucial. In case of non-compliance, there are heavy penalties levied by the government officials on these companies. So to avoid any non-compliance and to take corrective measures, the Companies Act has made it mandatory for certain companies to conduct a secretarial audit.
Table Of Contents
Overview
For checking whether the company has complied with the provisions of various laws applicable to it, an independent professional who is a practicing Company Secretary (CS) is appointed by the Board of Directors who ensures that all the legal and procedural requirements are complied with and there are proper mechanisms to monitor the compliances as per various laws.
- Applicability
- Listed Company
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Public Company having
- Turnover more than ₹ 250 crore
- Paid up share capital more than ₹ 50 crore
- To safeguard the interest of customers, employees, bankers etc.
- Amount of turnover, paid up share capital or loans or borrowings shall be taken into account from the latest audited financial statement.
Related read: How To Register A Company In India: A Step By Step Guide
What is the Scope of Secretarial Audit?
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- 1. A CS has to report whether the company is in compliance with the following laws (If applicable) :-
- Companies Act, 2013
- Depositories Act, 1996
- Foreign Exchange Management Act,1999
- Securities and Exchange Board of India Act, 1992
- Securities Contracts (Regulation) Act, 1956
- 1. A CS has to report whether the company is in compliance with the following laws (If applicable) :-
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- 2. Along with the above 5 laws, CS also has to report on the following in his Secretarial Audit Report
- Compliances as per the Listing agreement
- Company specific laws such as laws applicable to banking industry, insurance industry, petroleum industry, pharmaceutical industry etc.
- Examination of internal controls efficiency for compliances under various laws
- Examination of general laws such as labor laws, competition laws and environment laws
- 2. Along with the above 5 laws, CS also has to report on the following in his Secretarial Audit Report
Objective
- Review and report on applicable compliances and standards as per various laws
- To report all the non-compliances and deficient compliances
- To prevent the enforcing agencies to take any legal action against the company
- To safeguard the interest of customers, employees, bankers etc.
Benefits
- Boosts confidence of various stakeholders.
- It makes sure that the company is compliant.
- Builds good reputation for the company
- Avoids any legal action and financial penalties from the government agencies
- Rectification of mistakes
- Establish an efficient compliance mechanism
- Management can focus on important matters rather than ensuring that all the compliances are completed.
Documents Required
- Company’s nature of business
- Management structure
- Details of laws applicable to the company
- Copy of all the documents filed under different laws
- Details of Internal control of the company
- Management representations as needed in various areas of audit
- Other documents, as required
Process
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Step 1
Appointment of secretarial auditor- Obtain consent
- Pass resolution in board meeting for appointment and fix the remuneration
- File form with ROC to inform about the appointment
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Step 2
Secretarial Auditor shall provide a list of checklist and required documents depending on the business activities carried on by the company -
Step 3
Company’s Management shall fill in the checklist and provide documents to the Secretarial Auditor. The Board of Directors shall also provide all facilities and assistance to the auditor for conducting their audit in the best possible manner. -
Step 4
Based on the documents received, auditor shall prepare an Audit report in Form MR3 -
Step 5
In case of any adverse remarks in the auditor’s report, company’s management is liable to furnish an explanation. -
Step 6
Auditor’s report is shared with various stakeholders of the company
How will we help you?
- At ICI, we can help you with in two ways:-
- Conducting your secretarial audit and preparing the audit report as per the provisions of law.
- In case, your company is subject to the provisions of Secretarial Audit, preparation of all the documents which you have to submit to the secretarial auditor and replies to the queries raised by the secretarial auditor.
FAQs
No, only a practicing Company Secretary (CS) who is a member of the Institute of Company Secretary (ICSI) having a valid Certificate of Practice (COP) can conduct a secretarial audit.
In case of any contravention, the defaulting person will be punished with a minimum fine of ₹ 1,00,000 and a maximum fine of ₹ 5,00,000.
Yes, private limited or small companies are allowed to voluntarily opt for secretarial audit for ensuring compliances with different laws applicable to them and mitigate the risk associated with non-compliances.
Listed companies and other large companies should conduct a secretarial audit every quarter and for smaller companies secretarial audit can be conducted at the end of the year
Speak to our experts who shall solve all your doubts.
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