About Secretarial Audit
The
audit is not exactly only the inspection of financial records and accounts.
Actually, audit means proper inspection and verification of the company overall
operations and functions, data, records, efficiency and so on. Secretarial
Audit is all about the inspection of annual compliance with all related rules
and regulations that must be followed. Apart from the regulators and
stakeholders, the Secretarial audit even checks the employees that management
of the company is compliant and holds the internal control of the company,
disciplined approach, risk management, and governance process all check.
Secretarial
Audit in India
Secretarial
Audit is legal compliance that helps to monitor, examine and verify that the
company operations and adheres to the rules and regulations applicable upon it.
It also plays a vital role to inspect the error and mistakes regularly and to
establish a racy compliance mechanism in the company.
As
per the Companies Act 2013, each and every Company has several rules and
ordinances to comply with their reports and records. Thus regular Audit depicts
exact details about applicable law on the entity and the extent up to that it
has complied as per the provisions of law.
The Advantages of Secretarial Audit in India
Following
are the advantages of the secretarial audit:
- Secures
the confidence of directors, creditors, stakeholders, employee, and
management in the functioning of the company
- The
compliant entity avails the advantage of the goodwill
- Ensures
the effective mechanism of the company in place and monitors and regulates
the compliance and non-compliance of a company
- The
secretarial audit ensures that all the procedures are done legally which
helps the management to concentrate on other important operations of the
company.
- Investors
get a good opinion about the level of compliance the entity does to be
checked that their funds and investments are in safer hands.
Applicability
of Secretarial Audit in India
Section
204(1) of Companies Act 2013, actually regulates scope, applicability,
procedure, etc. that are related to Secretarial Audit. Thus Audit is mandatory
for the following categories of companies:
- All
Unlisted Entities
- Unlisted
Public Company having paid-up share capital exceeding more than Rs. 50
Crore
- Unlisted
Public Company that holds turnover exceeding more than Rs. 250 Crore
- Private
Company that is a subordinate of an unlisted public company with:
• paid-up exceeding more than RS.50 Crore
• turnover exceeding more than RS.250 Crore
The Process of Secretarial Audit
The
process of Secretarial Audit is too that hard and fast steps to be followed,
however, below are the steps that should be followed by an auditor while
carrying on auditing:
- Meeting
with management to discuss the scope of its work and the payment of their
professional fees to be delivered for conducting the audit
- After
setting all the primary objects, identification of scope and activities
are started which shall be listed
- After
the finalizing the PCS, the company shall grant an engagement letter which
holds all the terms and condition of his appointment
- PCS
shall plan accordingly about the procedure for auditing work such as areas
of laws which has to be covered first, date of visits for auditing, approx
time schedule needed to finish the auditing work, and so on.
- Conducting
the audit and filing all the observations and finding done throughout the
process of audit
- After
completing the auditing work, PCS will present the final Audit report in
the prescribed format MR-3 duly signed and with Company Secretary in
Practice stamp on it.
Application
of Secretarial Audit conducting different spheres
- For
Listed companies: Secretarial audit is made mandatory for listed companies
by SEBI. These companies should get audited by authorized PCA/PCS. During
the process, PCS should conciliate the CDSL/NSDL information with shares
held
- For
Central Public Sector: As per the Ministry of heavy enterprise and public
enterprise, it is mandatory for corporate governance of CPS projects.
- For
Banks: According to RBI, due diligence for banks and they should secure a
certificate from practising professionals mentioning the level of
compliance do
- For
private company/ Unlisted public: These sectors company must get audited
once in a year. And are mandatory to submit the audited report to
concerned ROC which is done by practising professional
The
penalty enforced for the infringement of Section 204
The
company, its director, officer, or practising company secretary if conflicts
any provision of this section will be liable with a penalty or fine of a
minimum of Rs.1 Lakh and it can be extended to Rs. 5 Lakhs.
Frequently Asked Questions
What is Audit?
The
audit is not exactly only the inspection of financial records and accounts.
Actually, audit means proper inspection and verification of the company overall
operations and functions, data, records, efficiency and so on.
What is a Secretarial Audit?
Secretarial
Audit is legal compliance that helps to monitor, examine and verify that the
company operations and adheres to the rules and regulations applicable upon it.
What are the benefits of Secretarial Audit
in India?
- Secures
the confidence of directors, creditors, stakeholders, employee, and
management in the functioning of the company
- The
compliant entity avails the advantage of the goodwill
- Ensures
the effective mechanism of the company in place and monitors and regulates
the compliance and non-compliance of a company
- The
secretarial audit ensures that all the procedures are done legally which
helps the management to concentrate on other important operations of the
company.
- Investors
get a good opinion about the level of compliance the entity does to be
checked that their funds and investments are in safer hands.
What is the penalty enforced for the
infringement of Section 204?
The
company, its director, officer, or practicing company secretary if conflicts
any provision of this section will be liable with a penalty or fine of a
minimum of Rs.1 Lakh and it can be extended to Rs. 5 Lakhs.
