Secretarial Audit is an independent process assuring to add value and improve an organization’s operations. It helps to bring a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control,
and governance processes.
An audit is to be on the principle of “Prevention is better than cure”. It strengthens the image and goodwill of a company in the minds of regulators and stakeholders. It acts as an effective compliance risk management tool or a governance
tool.
The benefits are available to the following stake holders of the company-
Promoters
Executive directors
Officers of the company
Regulators
Government authorities
Investors
Banks
Creditors and consumers and others
SECRETARIAL AUDIT IS A PROCESS
To check compliance with the provisions of various laws and rules/ regulations/procedures, maintenance of books, records etc
By an independent professional
To make sure that the legal and procedural requirements are complied with
Also followed the due process
It is essentially a mechanism to monitor compliance with the requirements of stated laws
SECRETARIAL AUDIT REPORT
Every company to which secretarial report applies –
It shall be prepared by a Company Secretary in Practice
It shall be prepared in Form MR 3
Annexed with Board’s Report, considering the increasing importance of Corporate Governance
SCOPE OF SECRETARIAL AUDIT
Companies Act, 2013 and the rules made thereunder
Securities Contracts (Regulation) Act, 1956 (‘SCRA’), and the rules made thereunder
Depositories Act, 1996, and the rules made thereunder
Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings
Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’)
Reporting on the compliance of secretarial standards issued by the Institute of Company Secretaries of India
Reporting on Compliances with the Listing Agreement
Reporting on compliance of ‘Other laws as may be applicable specifically to the company which shall include all the laws which are applicable to specific industry for example for Banks- all laws applicable to Banking Industry;
for insurance company-all laws applicable to insurance industry; likewise for a company in petroleum sector- all laws applicable to petroleum industry; similarly for companies in pharmaceutical sector, cement industry etc
Examines and reports regarding the adequacy and efficiency of the systems and processes with other laws
Monitor and ensure compliance with general laws like labour laws, competition law, environmental laws
Examines and reports on the specific observations or qualification, reservation or adverse remarks in respect of the Board Structures/system and processes relating to the Audit period
Secretarial Auditor may rely on reports given by statutory auditors or other designated professionals to check compliance with other laws like Income Tax, Customs, GST
APPOINTMENT OF SECRETARIAL AUDITOR
Obtain the consent of secretarial Auditor
File certified a true copy of a resolution passed in Board Meeting with the Registrar of Companies as an attachment in MGT – 14 (only in the case of the of Public Company)
Appoint the Secretarial Audit in Board Meeting
Fix the remuneration in Board Meeting
OBJECTIVES OF SECRETARIAL AUDIT
The objectives of Secretarial Audit are mentioned below as follows :-
To verify & report on compliances of applicable laws and Secretarial Standards
To point out non-compliances and inadequate compliances
To protect the interest of various stakeholders i.e. the customers, employees, society etc
To avoid any unwarranted legal actions/penalties by law enforcing agencies and other persons as well