MEANING: Secretarial audit is the compliance audit. It is the mechanism to monitor the compliance with company law and other applicable laws and rules and regulations made thereunder. It is part of total compliance management in the corporation.

NEED: To save the corporations from heavy penalties and punishment for non-compliance with laws, rules, and regulations, a secretarial audit is an effective tool. It also ensures timely corrective measures when any non-compliance is detected.

APPLICABILITY: As per section 204(1) of Companies Act, 2013 and Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 certain prescribed companies are mandatorily required to get a secretarial audit report from a practicing company secretary in Form 3. These companies are:

• Every listed company;
• A public company having paid-up share capital equal to or more than 50crore rupees;
• A public company whose turnover is equal to or more than 250crore rupees ;
• A company whose outstanding loans or borrowings from banks or public financial institution is 100crore rupees or more.

Also, regulation 24 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a  listed company that has a material unlisted subsidiary is to mandatorily get the secretarial audit done.

As laid down in the case of Hotels Queens Road v. Hillcrest Reality, a private company that is the subsidiary of the public company and satisfying conditions (i), (ii), (iii) stated above has to mandatorily get the secretarial audit done.

APPOINTMENT AND QUALIFICATION OF SECRETARIAL  AUDITOR:

A secretarial audit is to be performed by a secretarial auditor who shall be a member of the Institute of Companies Secretaries of India (ICSI) having the certificate of practice.

He shall be appointed by passing board resolution at a duly convened board meeting – as per the provisions of Rule 8 of Companies (Meetings of the Board and its Powers) Rules, 2014.

SCOPE OF SECRETARIAL AUDIT:

A secretarial auditor has to check the following compliances by the company:

(i)Compliance with Companies Act, 2013 and rules made thereunder;

(ii) Compliance with Securities Contract (Regulation) Act, 956 and rules made thereunder;

(iii) Compliance with Foreign Exchange Management Act, 1999 and rules and regulations made thereunder;

(iv)Compliance with Secretarial Standards issued by ICSI;

(v)Compliance with specified regulations of Securities and Exchange Board of India.

 LIMITS ON SECRETARIAL AUDIT:

For financial years starting from 2016-2017 onwards the limits for the issue of the secretarial audit report is as :

(i)10 secretarial audits per practicing company secretary or partner in one financial year;

(ii)in case the unit has peer-reviewed then additional 5 secretarial audits per practicing company secretary or partner.

SECRETARIAL AUDIT- THE PROCESS:

• Appointment of a secretarial auditor by the company;
• Communication to an earlier incumbent in case a new secretarial auditor is appointed;
• A letter of appointment along with the copy of the board resolution is to be issued to the secretarial auditor;
• Secretarial auditor to take a general overview of the operations of the company and interact with the personnel employed in the company;
• Secretarial auditor to conduct a preliminary meeting with the senior management of the company;
• Finalization of the audit plan and briefing the staff. The audit should outline the fieldwork and usage of the auditing tools;
• Testing, interviews, and analysis to be done by the secretarial auditor to determine that the controls are operating properly;
• Preparation of working papers which forms the basis of the audit opinion;
• Findings during an audit are finalized and to be presented for internal discussion with the management for their clarifications or replies;
• Finally, after considering the clarifications or replies, the secretarial auditor will prepare the secretarial audit report.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, 5thVoice.News shall not be responsible for any errors caused due to human error or otherwise.