A secretarial Audit is an impartial and objective guarantee aimed at adding value and enhancing the operations of an entity. It contributes to achieving the goals of the company by offering a clear, disciplined approach to assess and increase the performance of risk management, control, and governance processes.
For private companies and small public companies, Secretarial Audit has not been obligatory. These organizations should follow secretarial audit procedures to ensure compliance and prevent non-compliance-related risk.
Auditing is a policy of reinforces the reputation and goodwill of a business in the minds of controls and stakeholders. It serves as an effective compliance risk management mechanism or a governance tool.
Secretarial Audit is the independent verification procedure, the compliance level inspection for a corporation of the relevant company laws. If correctly configured, the audit process ensures that different relevant regulations are complied with promptly and avoids any accidental failure to comply. An Executive Secretarial Action Plan shall be established to ensure that compliances on the basis of events and time are taken into account and enforced.
The secretarial audit package advantages are available to-
- Executive directors
- Officers of the company
- Government authorities
- Financial institutions
- Creditors and consumers alike
The Secretariat Audit Reports is an audit to verify that different rules, including the Company Law and other company and business laws, are complied with. This is an unbiased and objective promise aimed at adding value and enhancing the company’s operations.
Every organization needs to make a secretarial report applies –
- It must be made by a Company Secretary in Practice.
- It must be made by a Company Secretary in Practice.
- Annexed with Board’s Report, recognizing the rising value of Corporate Governance.
Eligibility to get Secretarial Audit Package
- All Listed Company.
- All public company holding–
- Paid-up share capital is greater than Rs. 50 crore
- Turnover Greater than Rs. 250 crore
If anyone of the criteria matches then also secretarial audit is necessary. A practicing Company Secretary (CS) has been identified to carry a secretarial audit.
The Secretary Audit and the Secretariat Audit Report can only be issued by a member of the Institute of Company Secretaries of India, holding a Certificate of Practice (company practical secretary).
Under Rule 8 (Meetings of the Board and its powers) of the Rules of Procedure 2014, Secretarial Auditor shall be appointed by resolution of the Board, and the selection resolution of the board of directors shall be filed within 30 days in the form of an E-form MGT-14, at a scheduled meeting of the board of directors.
The letter of agreement should be obtained from the organization by the Secretarial Auditor. The letter of engagement should be officially approved by the secretarial auditor. It is also advisable, as a sound business practice, that the members of the Board report on the improvement in the secretarial auditor during the year.
Below are the benefits associated with Secretarial Audit:
- It is designed to assure owners that the actions of management and other company matters are in accordance with legal requirements and that the owner’s stake is in a safe place.
- It ensures corporate governance that those responsible for complying with legal requirements perform their duties efficiently, effectively, and efficiently, so that the person in charge of general corporate supervision is not ‘exposed to punishment or other liability if you do not comply with the rules.
- Convincing them of being completely complied with the mandatory regulations.
- Also, believe to them that the company complies with the rules so they are free from any action given to law enforcement for non-compliance issues.
- The secretarial investigation, which is an effective measure of compliance with a number of laws, will have a positive effect on significantly reducing the burden on law enforcement authorities.
- The secretarial audit provides assistance to agencies such as SEBI, Stock Exchanges, Financial Institutions, Banks, etc. to measure compliance and non-compliance with relevant companies.
- Secretarial auditing can attest to the effective strategy of a potential company acquirer and the interest of co-op partners.
- Reassuring with hand-on-hand as a legal company and secure investment guarantee. CA or CS will help expose and track such activities and allow law enforcement agencies, by making books for the guilty, to take prompt corrective measures. The secretarial audit gives the shareholder comfort in terms of compliance and the protection of their investments.
Firstly take advice and Consulation
At this step, the auditor collects relevant information about the Company in order to obtain an overview of its performance.
Identifying scope and objectives
In a formal meeting with the management and the auditor, the nature and priorities of the review are addressed, information on critical procedures is collected, the controls are evaluated and the audit steps plan.
Obtaining an official letter of engagement
A letter of formal engagement from Management will be provided to the Auditor-General. This book outlines the dimensions and objectives of the audit. PCS will then submit the first checklist to the Company that will assist the auditor to learn more about the auditing company.
Meetings with affected groups/individuals
The opening meeting should involve senior management and any administrative staff who may be involved in auditing.
This program outlines the field performance required to achieve the audit objectives. The Auditor-General will use a variety of tools and techniques to collect and analyze information about the Company’s operations. The control review helps the auditor to determine high-risk areas and design assessments to be carried out in the fieldwork field.
Preparation of Working Papers
Worksheets are an important tool for audit work. They are advocates of the theory of auditing. The link management and financial records to the auditor’s opinion. They are broad and multi-functional.
Monitoring / Consultation with Management
Detailed comments explaining the findings and recommended solutions will be summarized and preliminary discussions with management will be presented with their details.
Summary of audit results and subsequent discussions
Upon completion of the work, the auditor will summarize the audit findings, conclusions, and recommendations needed for the nature of the audit report.
Secretarial Audit Report
The Auditor-General will prepare a final report based on the paperwork and working papers to present the audit findings and discuss recommendations for improvement if any. The final report will be awarded or without qualifications.
Follow up to be taken
Finally, Even after the Audit process, the Auditor-General may request the Company to record the steps taken by the Company to resolve the findings of the audit report.
For Secretarial Audit, the following documents are needed:
- Charter Reports and Statutory Registers
- Minutes & Notices of the Board and the General Assembly
- Audited financial statements and End year Secretarial Audit Report
- Where the company is named, ROC Filings & Stock Exchange, Börse, Newspaper ads.
- Reports, bonds, and annual returns annual results
- Filings with RBI and with other legislative departments (If foreign investment is available)
- Registers maintained following Labour Laws
- Code of Conduct Admission and Statement by the Directors
- Information of salaries to supervisors and expenses for sitting and reimbursement.
- CSR amount Particulars
- Disclosures of SAST
- Bank account information for dividend
- Details of ECB Returns, in the situation of foreign borrowings in the business.
A secretarial audit consists of a compliance audit which monitors the implementation of various acts, including the Companies Act, as well as other applicable corporate and financial law. Secretarial audit is the process of verifying compliance by an organization under corporate law and other relevant laws, regulations, rules and policies. It is enforced under Section 204 of the Companies Act, 2013. Under this, regulators monitor companies for compliance with regulations and policies.
In today’s diverse business scenario, every company must follow hundreds of rules, regulations and laws. Any non-compliance could be a dice for the company. It is important for companies to periodically test their work to identify deficiencies in any organization and to maintain a strong compliance mechanism.
Periodic inspection of records gives accurate information to the authority for the compliance policy of the organization. For inexperienced persons, only a member of the Institute of Company Secretaries of India who has a practice certificate can conduct such a secretarial audit and then submit an official secretarial audit report to the company.
A detailed secretarial audit will help:
- To check the compliance report.
- Protecting the interests of employees, customers, the community, etc.
- To prevent unnecessary legal action by law enforcement agencies.
- To indicate sufficient consent and consent.
- To ensure that the procedural and legal requirements are appropriate and that it is crucial to the image and harmony of any organization.
- The Board of Directors of the Company is properly established with the precise balance of Executive Directors, Non-Executive Directors, and Independent Directors.
- In compliance with provisions of the Act, changes have been made to the Board of Directors composition that occurred during the time under review.
- All board directors are given ample notice for the preparation of Board meetings, agenda, and comprehensive agenda notes were submitted at least seven days in advance, and there is a mechanism to search out and acquire additional details and information on agenda items before the meeting and to make meaningful use of the meeting.
- The majority decision is made while the opinions of the dissenting members are reported in the Minutes.
- In order to ensure compliance with relevant legislation, rules and regulations, and guidelines, the organization has appropriate structures and processes that are proportionate to the scale and activities of the company.
In addition, the auditor of the secretariat shall provide information and report on certain events and acts during the reporting period which has an important impact on the Company’s affairs in accordance with the above-specified laws/rules and regulations.
The Secretary-Auditor shall, however, depend on the reports issued by the Statutory Auditors or other appointed professional in the case of financial law such as tax law and the Customs Act, etc.
- First Comprehensive period for submission to COVID-19 Listed Companies of the Annual Secretariat Compliance Report:
As of 19 March 2020, in Circular No.: SEBI/HO/CFD/CMD1/CIR/P/2020/38;
Since COVID-19 is being propagated, the SEBI had therefore agreed to grant relaxation of one Month, i.e. until June 30, 2020 in order to generate an Annual Secretarial Compliance Report that was needed to submit within 60 days from the end of a financial year, i.e. May 30, 2020.
- Further extension for submission, due to the continuing effect of the COVID-19 Pandemic, of the Annual Secretarial Report on Compliance by listed companies:
In line with the SEBI/HO/CFD/CMD1/CIR/P/2020/109 Circular No. of June 25, 2020, SEBI had extended the timetable for submitting its 2019-20 annual secretarial report for the listed entities by 1 month by a broad circular date of 19 March 2020. (from May 2020 to June 2020).
Moreover, following review by SEBI, SEBI had received representation from ICSI concerning an additional extension of the date for submitting the study, which SEBI agreed to extend further by another month, i.e. by 31 July 2020.
The punishment for false statements is discussed by section 448 of the Companies Law of 2013. The section stipulates that if, in or for the purposes of any of the provisions of that Act or the rules made in respect of any report, certificate, financial declaration, prospectus, statement, or other document requested, any person makes a statement.
(A) knowing that something is wrong with any particular material
(B) Anyone who abandons any physical reality, knows
he /she must be responsible under section 447.
Section 447 deals with a fine for cheating, which means that any person who commits fraud shall not be less than six months imprisonment for a term extending to ten years. And there is also a responsibility. The fine is not less than the amount committed for fraud, but three times the amount for fraud. If, however, the fraud under consideration is in the public interest, the prison sentence should not be less than three years.
In the case of Section 448, in practice the Company Secretary takes a penalty provision, if he makes a statement in the Secretarial Audit Report, knowing that any material is specific, whether it is a lie or any physical fact. Leaves, knowing that it is matter.
Furthermore, in practice the Company Secretary shall be liable for both commercial or other misconduct specified in the First or Second Schedule, or for both Schedules to the Company Secretary Act, 1980 and, if found guilty, liable for the following duties:
(i) Where the professional or other misconduct mentioned in the first schedule has been committed:
(b) the elimination, within three months, of the name from the members’ registry
(c) That can be applied to one rupee of a lakh.
(ii) When found guilty in the second schedule of professional misconduct or other misconduct:
(b) The removal of the name from the register of members shall be considered permanent or as long as the disciplinary committee deems fit;
(c) The fine may increase to five lakh rupees.
We have trained experts at Legalraasta to assist you with the entire secretarial audit process. Our experts will support and advise you during the audit process and associated services, as well as ensure that your work is carried out efficiently and effectively. Contact legalraasta’s experienced and skilled professionals for any questions related to the Secretariat Audit and related services.
Legalraasta has an expert team and qualified consultants to support and conduct the whole audit. Legalraasta allows its client to perform the Secretariat Audit through the provision of similar services.
- Proper legal and account review & answers all concerns about Secretarial Audit.
- Preparation and review of reports and claims in compliance with correct records.
- Ensuring that the organization meets the relevant business and job practice secretarial practices and review.
- Ensures the audit services are known as a medium- to long-term profitable investment.