Secretarial Audit is a compliance audit and it is a part of total compliance management in an organization. The Secretarial Audit is an effective tool for corporate compliance management. It helps to detect non-compliance and to take corrective measures.
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 ensure that the company has complied with the legal and procedural requirements and also followed the due process.
Section 204 of the Companies Act, 2013 mandates every listed company to annex a Secretarial Audit Report, given by a company secretary in practice with its Board’s report.
As per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed class of companies is as under:
The format of the Secretarial Audit Report shall be in Form No. MR.3.To point out non-compliances and inadequate compliances;
Secretarial Audit is also applicable to a private company which is a subsidiary of a public company, and which falls under the prescribed class of companies as indicated above.
The Objectives of Secretarial Audit
The objectives of Secretarial Audit may be summarized as under:-
Scope of Secretarial Audit
The scope of Secretarial Audit comprises verification of the compliances under the following enactments, rules, regulations, notifications and guidelines:
The Companies Act, 2013 (the Act)
2. Other major Acts and Regulations
-The Securities Contracts (Regulation) Act, 1956
-The Depositories Act, 1996
-The Foreign Exchange Management Act, 1999
-The regulations and guidelines made under the Securities and Exchange Board of India Act, 1992
3. Other Applicable Laws
Other laws as may be applicable specifically to the company’ shall mean 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 sectoral laws applicable to petroleum industry; similarly for companies in pharmaceutical sector, cement industry etc.
SS-1 requires every company to specify list of laws applicable specifically to the company at its Board Meeting.
In preparing the Audit Report, the secretarial auditor shall consider the following matters
1. Instances of non-compliance during the defined audit period,
2. Significant litigation(s) initiated by the company or filed against the company with brief details of the cases;
(a) Board structure
(b) Deficiencies in the Board systems and processes –