Introduction
Secretarial audit, also referred to as a key compliance function, established in its place are used by the promoters and the management of an entity for checking up compliances with the provisions as amended or replaced from time to time. The audit is done by practiced Company Secretaries so as to bring in transparency, accountability and better investors confidence in the organization.
The purpose of this guide is to offer an accessible, easy to reference summary of secretarial audits, what it means, importance and its process. It is intended as a guide to be followed by companies considering how to conduct an audit properly.
What is a Secretarial Audit?
Secretarial audit means an independent verification process that ensures submitter compliance with the applicable legal and procedural requirements. The audit will pick on gaps, risks and non-compliance areas and give recommendations on how to reduce potential legal liabilities.
Our audit covers these areas:
Company laws like Companies Act, 2013 (in India).
Compliance to proper corporate governance standards.
Compliance with legal frameworks relevant to company operations
Why is a Secretarial Audit Essential?
As secretarial audits provide the quality and integrity aspects of a company, it is important for an organization to build its reputation. Here are the core benefits:
Maintain Compliance : 2000 Characters It's very important to audit every now and then just in case you're missing some rules or even regulations this can also prevent you from a potential lawsuit!
Ensuring Good Governance: Through revealing defects in governance, the audit helps organizations carry out transparent operations and ensures accountability.
Supports Stakeholder Confidence: Investors, employees, and shareholders will be more likely to trust your business if it follows a predictable process or framework.
Risk Detection: detect non-complying by the time so that organization does not enter into any type of potential legal liability.
It Reinforces Corporate Integrity: By building goods out of business with the regulatory landscape, companies are able to foster a culture engine around ethical conduct.
Applicability of Secretarial Audit
Secretarial audits are mandatory for certain categories of companies as per the Companies Act, 2013. Typically, these include:
Listed Companies.
Public Companies with a paid-up share capital exceeding ?50 crores, or annual turnover exceeding ?250 crores.
Every Company with Outstanding Loans or borrowings of at least ?100 crores from Banks or Public Financial Institutions.
Note that this is subject to specific regulations and may vary based on jurisdiction.
Scope of the Secretarial Audit
A thorough secretarial audit encompasses the following key areas:
Corporate Laws:
Companies Act, 2013 compliance.
Statutory registers, filings, and secretarial records review.
Evaluation of Board meetings, annual general meetings, and other statutory meetings.
Securities Laws:
Industry-Specific Laws:
Additional Laws:
Steps for Conducting a Secretarial Audit
To achieve near universal compliance, it is necessary to follow a systematic approach when carrying out a secretarial audit. Below is a step-by-step guide to conducting the audit:
Step 1: Appointment of a Company Secretary
The secretarial audit should be done by a qualified Company Secretary(CS) with a certificate of practice. It is recommended that the appointment should be done through and by the Board of Directors by a resolution.
Step 2: Preliminary Planning
Setting up scope and objectives of the audit.
Make a list of enacted laws, rules, and regulations to guide the project.
Check for previous audits if any that was done in the secretarial department to establish previous problems.
Step 3: Assessment of Papers and Records
Check legal incorporation documents to include the Memorandum and Articles of Association.
Review board meeting’s minutes and records of AGMs/ EGMs and statutory registers.
Assess regulatory compliance to filing obligations (for instance MCA filings, SEBI requirements or other applicable laws and rules etc).
Step 4: Interaction with Management
Campaign the heads of certain departments, including the compliance department and legal team to clarify procedures.
Some of the compliance risks that the organization is likely to experience are;
Step 5: Assessment and Gap Analysis
In this case, the competent compliance levels should be determined in relation to the relevant or applicable regulatory standards.
Review product formulation records and identify areas of weakness which give rise to compliance risks.
Step 6: In the event issue the Secretarial Audit Report
Format your audit report in any of the following audit report forms: MR-3 form under the Companies Act, 2013.
Summarize good and bad and come up with recommendations.
Take the report of the committee to the Board of Directors for their appreciation and to take necessary action.
Conclusion
A secretarial audit is not only mandatory—it is the means to bring better returns to your organizational compliance rating, your governance frameworks, and your overall performance. In this case, company risks are identified and appropriate measures are taken to modify the company environment to correspond to the long-term goals of the business.
First-time secretarial audit clients should approach our qualified team of Company Secretaries at [Your Company Name] for assistance. We are proud to boast of our expertise in advising, engaging, and navigating all the compliance needs of your organization throughout.