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Overview of Secretarial Audit
The Secretarial Audit aims to cross-check and prepare a report on the compliances of the laws appropriate and the secretarial, identify non-compliances and insufficient compliances, safeguard the interest of various stakeholders, and avoid unjustifiable legal actions/penalties by the law implementing agencies and other persons.
The benefits of a Secretarial Audit include ensuring compliance with law and process requirements, giving trust to leaders and high-level management, encouraging kindness to stakeholders and regulators, and serving as a powerful managing and compliance management feature.
The Secretarial Audit Report is made by a Company Secretary in Practice and given in Form No. MR-3, which is connected with the Board Report of the Company. The company is needed to provide full help and tools to the reviewer during the secretarial audit.
In conclusion, Secretarial Audit plays a vital part in keeping a company's compliance with various laws and regulations, ensuring openness, and promoting good corporate governance. It is an important tool for spotting non-compliance and taking quick repair steps, finally protecting the interests of various parties and avoiding useless court actions or fees.
Benefits of Secretarial Audit
1. Enhanced Compliance
Secretarial Audit plays a key part in helping companies keep legal compliance by finishing a full review of their secretarial records and practices. This process ensures that companies stick to relevant laws and rules, lowering the risk of fines and legal problems. By finding any non-compliance or flaws, companies can take fixed steps quickly, ensuring they run within the legal framework and escape possible legal consequences. Enhanced compliance not only guards the company's interests but also supports trust among partners, including investors, buyers, and governmental officials.
2. Improved Governance
A full Secretarial Audit leads to better control methods within a company. By examining the company's office processes, the audit can spot governance-related issues and offer corrective steps. This improves communication, responsibility, and decision-making processes, finally improving the company's image and reliability. Strong governance practices not only build trust in partners but also add to sustainable growth and long-term success for the business.
3. Risk Management
Through the discovery and settlement of secretarial compliance issues, Secretarial Audit helps in effective risk management. By successfully handling regulatory gaps, businesses can reduce various risks, including legal, running, financial, and image threats. This careful method ensures that the company works in a safe and legal way, protecting against possible threats and questions. By adding risk management practices into their processes, companies can improve strength, ensure stability, and pave the way for continued success in the long run.
Secretarial Audit offers numerous benefits to businesses, including improved compliance, better control, and risk management. By making a full review of the company's secretarial records and practices, the Secretarial Auditor can spot any non-compliances or poor compliances, allowing the company to take appropriate steps and maintain legal compliance. Moreover, a Secretarial Audit can lead to better ruling practices, improve the company's image and trustworthiness, and help companies reduce risks and ensure long-term success.
Requirements of Secretarial Auditor
1. Appointment of Secretarial Auditor
The Board of Directors is responsible for appointing a Secretarial Auditor who must be a member of the Institute of Company Secretaries of India (ICSI). This ensures the auditor's independence and expertise in assessing secretarial records and compliance.
2. Audit Scope
The audit scope includes examining secretarial records like regulatory filings, meeting minutes, and annual reports. The objective is to assess compliance with legal and regulatory obligations, ensuring that the company maintains updated and accurate documentation.
3. Audit Report
Post audit, a comprehensive Secretarial Audit Report must be submitted to the Board of Directors. This report outlines compliance status, identifies non-compliances or weaknesses, and provides insights into the company’s governance.
Eligibility Criteria for Secretarial Audit
- Company Type: Mandatory for public companies and specific classes of companies as per the Companies Act, 2013.
- Net Worth: Companies with a net worth of INR 500 crore or more must undergo Secretarial Audit.
- Turnover: Companies with a turnover of INR 1000 crore or more are also required to undertake Secretarial Audit.
Documents Required for Secretarial Audit
- Board Resolution: Approval of Secretarial Auditor appointment, filed with ROC as required.
- Auditor's Information: ICSI registration and qualifications of the appointed Secretarial Auditor.
- Audit Report: Final audit report containing observations, recommendations, and compliance summary.
Additional Documents and Checks
- Memorandum and Articles of Association: Outline the company’s purpose and internal regulations.
- ROC Filings: Statutory forms filed with the Registrar of Companies including share allotment, directorship changes, etc.
- Statutory Registers: Includes registers of members, directors, share transfers, etc.
- Meeting Minutes: Detailed minutes of Board, General, Audit Committee and other key meetings.
- Financial Statements: Includes balance sheet, P&L statement, and cash flow statements.
- Contracts and Agreements: Documents related to partnerships, loans, and related party transactions.
- Regulatory Orders and Notices: Orders or communications from regulatory bodies like High Court or Tribunal.
Checklist for Secretarial Audit
- Appointment of Auditor: Ensure the auditor is ICSI-certified and appointed via Board Resolution.
- Define Audit Scope: Include all relevant secretarial documents and practices.
- Review Audit Report: Address any issues, take corrective actions, and retain the report as required.
- Maintain Documentation: Collect and preserve all key records and statutory documents.
- Ensure Compliance: Adhere to all legal and procedural requirements.
- Risk Management: Identify and mitigate compliance risks.
- Governance Practices: Implement strong corporate governance frameworks.
- Stakeholder Confidence: Build trust through compliance and transparency.
- Sustainable Growth: Support long-term success through proper governance and risk control.
Process of Secretarial Audit
Secretarial Audit is a vital process to ensure a company’s adherence to legal compliance and corporate governance. Governed by the Companies Act, 2013, it is mandatory for certain classes of companies and must be carried out by a qualified Company Secretary in Practice. Below is a detailed breakdown of the audit procedure:
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Appointment of Secretarial Auditor
The Board of Directors appoints a Secretarial Auditor through a board resolution. The auditor must be a member of the Institute of Company Secretaries of India (ICSI). The resolution includes their professional qualifications and ICSI registration details.
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Conduct of the Audit
The auditor performs a comprehensive review of secretarial records, statutory registers, board meeting minutes, annual filings, and other related documentation. The audit scope is clearly defined to ensure that all statutory and regulatory obligations are fulfilled.
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Preparation of Secretarial Audit Report
Following the audit, a detailed report is presented to the Board of Directors. The report outlines the compliance status, observations, recommendations, and any instances of non-compliance discovered during the audit.
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Board’s Review and Action
The Board evaluates the audit report and initiates necessary corrective actions. This includes rectifying non-compliances, implementing better internal controls, and reinforcing governance standards.
Secretarial Audit Compliance Requirements
Companies undergoing secretarial audits must comply with the following:
- Annual Submission: The audit report must be filed with the Ministry of Corporate Affairs (MCA) as part of the company’s annual compliance.
- Independence: The Secretarial Auditor must be independent and objective, free from any conflict of interest with the auditee company.
- System Evaluation: The auditor must verify that effective systems are in place to monitor compliance with applicable laws, including labour and corporate laws.
- Audit Techniques: Common audit techniques include sample checking, test verification, and risk assessment procedures.
Renewal of Secretarial Audit
Secretarial Audits must be conducted annually. A new appointment or reappointment of the auditor should be made every financial year. The process involves reviewing current practices, addressing prior audit findings, and maintaining consistent compliance to avoid penalties and ensure sustainable corporate governance.
Why Choose Kanakkupillai?
Kanakkupillai is a trusted provider of secretarial audit and compliance services across India. Here’s why businesses rely on us:
- Experienced Professionals: Our team of certified Company Secretaries ensures thorough and accurate audits.
- Wide Range of Services: From Company Registration and GST Filing to Trademark and Compliance Management, we offer end-to-end legal solutions.
- Client-Centric Approach: We tailor our services to meet your unique business needs, ensuring maximum satisfaction and compliance.
- Reliability and Support: Continuous support for post-audit implementation and follow-up actions ensures long-term governance improvement.
Partner with Kanakkupillai to ensure your business remains compliant, well-governed, and poised for growth through expert-led secretarial audits.
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