Secretarial Audit - An Overview
Most Indian companies are required to comply with such auditing requirements. There are specific provisions that must be followed by the company when conducting audits. The Companies Act of 2013 is the main law that governs secretarial audits in India. Companies are required to obtain a secretarial audit report from the secretarial auditor under section 204(1). The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 must be read in conjunction with this provision.
Procedure for Carrying out Secretarial Audit
The following procedure has to be utilized for carrying out the secretarial audit in India:
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Documents Required for Carrying out Secretarial Audit in India
In India, the following documents are required for secretarial auditing:
Documents pertaining to the company, such as charter documents and other pertinent information
The company's financial statements and audited financial reports
Annual Performance Reports, Lease Deed, Bonds, and Returns information
All labour laws must be registered and kept up to date as required by law
Information on directors' remuneration and sitting fees
SAST Disclosures (Substantial Acquisition of Shares)
Details of ECB (External Commercial Borrowings) Returns if the company has taken on foreign debt.
Board documents, such as board meeting minutes and resolutions that are discussed at the meeting
All information pertaining to the company's listing. This would include important documents pertaining to the company's listing
Filings with the RBI and other statutory departments (if there is a foreign investment).
The directors' admission and statement for the code of conduct
Details of the CSR amount
Bank account details for dividends
Features of Secretarial Audit
- This type of audit verifies that the company is adhering to the requirements set forth in the Companies Act of 2013.
- It promotes independence throughout the organization because it is carried out by a group of individuals.
- One of a company’s primary goals is to manage risks. This can be easily accomplished with the help of a secretarial auditing system.
- It encourages employees to follow good business practices.
- The company can manage and handle various types of risks by following proper procedures related to this type of audit
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Benefits of Carrying out Secretarial Audit
Secretarial Audit Applicability
As per section 204(1) read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the following companies require to carry out secretarial audit:
Hence if the above criterion is met, then carrying out secretarial audit is mandatory.
Conditions for Carrying out Secretarial Audit
The following conditions have to be satisfied for carrying out this form of audit:
Who can carry out the above compliance related to Secretarial Audit?
In India, an individual who has completed the Institute of Company Secretaries in India (ICSI) Company Secretary course is usually qualified to perform this type of audit. However, in order to perform this type of audit, the individual must have the necessary training.
Provisions related to Secretarial Audit
- Company-specific compliance requirements
- Any type of flexibility in the company’s compliance certificate.
- In-depth examination of the company’s documents and records.
- A schedule for conducting a secretarial audit.
- The appointment of auditors to conduct this type of audit.
FAQs On Secretarial Audit
Secretarial audit is one of the compliances which are required to be carried out by the company in accordance with the provisions of the Companies Act, 2013.
The following companies require carrying out secretarial audit:
- Listed Companies
- Company Having a Paid-Up Capital of 50 Crore Rupees
- Turnover of a Public Company is more than 250 Crore Rupees
Borrowings of the Public Company is more than 100 Crore Rupees
An individual, who has a company secretary certificate from the institute of company secretaries of India, can carry out this form of audit for the company.
Yes, carrying out this form of audit requires the resolution of the board. Under Rule 8 of the Companies (Meetings of the Board and its powers) Rules 2014, the company is required to conduct a board meeting and pass the resolution related to appointment of a secretary auditor.
Carrying out proper security audits have to be in compliance with the requirements of the companies act, 2013. However, these audits have to be carried out in the following period:
- Periodically,
- Quarterly,
- Half-year and,
Yes, Secretarial audit must be carried out in the format which is stated under Form MR-3.
When secretarial audit is prepared, the same must be submitted as per the requirements of the board meetings.
The following laws would be applicable for audits:
- The Companies Act, 2013 and respective rules
- The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and respective rules
- The Depositories Act, 1996 and the Regulations and Byelaws and respective rules
- Foreign Exchange Management Act, 1999 and rules related to Overseas Direct Investment, Foreign Direct Investment and Other Allied Laws in India
- Apart from this, the regulations under the Securities Exchange Board of India would be applicable to carry out secretarial audit in India.
Usually, the above report would be signed by the duly certified company secretary. This would be the case if the company has an individual company secretary. In case the companies’ compliance is managed by a firm of company secretaries then the same would be signed by the partners of the firm.
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