ICSI has recently issued four Auditing Standards for the members in practice in order to enable them to carry out the audit engagements more effectively. The four Auditing Standards are:
The first three Standards will be applicable to all kinds of audit engagements and the fourth one will specifically be applicable for the Secretarial Audit under section 204 of the Companies Act, 2013. The Standards shall be mandatorily effective for the audit engagements accepted on or after 1st April, 2020.
Since varied audit practices are being carried over by different auditors, monitoring of audit process has become cumbersome and troublesome. These Standards are expected to harmonize the audit practices among the auditors all over the country. The Standards seek to promote best auditing practices, uniformity and consistency in the audits conducted by the members in practice. It is expected to strengthen the corporate governance practices while conducting the audit.
The objective of these Standards is to streamline and enable members to effectively undertake secretarial audit and ensure compliance with the provisions of applicable laws, rules, regulations and standards applicable for the time being in force.
These Standards are applicable on recommendatory basis on Audit engagements accepted by the Auditor on or after 1st July, 2019 and mandatory for Audit engagements accepted by the Auditor on or after 1st April, 2020.
However, the Auditing standards issued by ICSI are not supported by any legal provisions as of now unlike the Secretarial Standard-1 and Secretarial Standard-2 which have a legal proviso, i.e., sub-section 10 of section 118 of the Companies Act 2013 which provides that every company shall observe Secretarial Standards with respect to General and Board Meetings specified by the Institute of Company Secretaries of India. The Auditing Standards are being brought in by ICSI with an intent to make them mandatory and with expectation that these standards will enhance the quality of compliance.
CSAS-1 lays down the Auditor’s role and responsibilities with respect to an Audit Engagement and the process of entering into an understanding/agreement with the Appointing Authority for the purpose of audit.
CSAS-2 lays down the responsibilities and duties of the Auditor with respect to Audit Process in conducting audit and maintaining proper audit records.
CSAS-3 covers the basis and manner for forming Auditor’s opinion on subject matter of the audit
CSAS-4 covers the basis and manner for carrying out the Secretarial Audit.
A Practising Company Secretary is authorised to undertake various audits prescribed under the Companies Act, 2013, SEBI regulations and other applicable laws, some of which are as under:
|♦||Secretarial Audit as per provisions of section 204 of the Companies Act 2013;|
|♦||Annual Secretarial Compliance Report as per SEBI Listing Regulations;|
|♦||Share Reconciliation Certificate as per Regulation 76 of the SEBI (Depositories and Participants) Regulations, 2018;|
|♦||Half-yearly certificate certifying that all share certificates were issued by Share transfer Agent/Registrar and transfer Agent within 30 days of the date of lodgment for transfer as provided under regulation 40(9) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations;|
|♦||Certificate regarding compliance of conditions of corporate governance as per SEBI Listing Regulations;|
|♦||Half-yearly certification regarding maintenance of 100% asset cover for non-convertible debt securities as per regulation 56(d) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, etc.|
These Standards shall be applicable to all these audits along with any other audit required to be done by PCS. For the purposes of these Standards, ‘Auditor’ shall mean a Company Secretary who is deemed to be in practice under sub-section (2) of Section 2 of the Company Secretaries Act, 1980 including a firm or Limited Liability Partnership (LLP) registered with ICSI undertaking the Audit.
In conclusion, these Standards provide a broad structure to the audit process and direction in conducting the audit. Therefore by having a direction to proceed will make the audit more systematic and further strengthen the audit process. Unity of procedures herein, ensures clarity to the auditee as well as the auditor which enables them to ensure systematic compliance. Thus finally, application of these Standards is believed to be beneficial for all involved stakeholders, including the Auditors as well as the companies and regulators in the long run.
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