A Secretarial Audit is an audit in which the Secretarial Auditor expresses an
opinion as to whether the organization has sufficient structures and procedures proportionate to
the size and activities of the company in order to track and validate compliance with the rules,
legislation, regulations and guidelines in effect.
Also, a Secretarial Audit is a method by an independent practicing company secretary to verify compliance by an independent practicing company secretary with the rules of different laws and regulations/regulations/procedures, management of books, documents, etc., to ensure that the company has complied with the legal and procedural requirements and has followed proper processes. In essence, it is a system for monitoring compliance with the requirements of the laws and processes mentioned. This allows the organization to deduct any non-compliance that happens. Section 204 of the Companies Act, 2013 and the Listing Regulations enable such companies to carry out a secretarial audit of their companies. Below are the main characteristics of the Secretarial Audit, which are as follows:
Below, the goals of the Secretarial Audit are described as follows:
The Securities and Exchange Board of India (SEBI) has addressed all listed companies to subject themselves to a secretarial audit initiated by a professional accountant or company secretary. The step is aimed at reconciling the total shares held in CSDL, NSDL, and in physical form with the companies’ admitted, released, and listed stock. SEBI also requested firms, after this audit, to send a quarterly audit report back to the stock exchanges where their original shares are listed. Any discrepancies found must be delivered immediately to the attention of the SEBI and the depositories.
Every Public Unlisted Company is required to conduct auditing by knowledgeable preferably, Company Secretaries India as long as Any notice is delivered from ROC or the other authority. Such an audit comments and presents the Auditor’s view on the proceedings of the corporate, also it states whether the corporate has complied with all the provisions of Companies Act, 1956, SEBI and other relevant acts and presents its adverse comments on an equivalent if any.
Every private company is required to conduct auditing by knowledgeable preferably, Company Secretary on yearly basis. Such an audit comments and presents the Auditor’s view on the proceedings of the corporate, also it states whether the corporate has complied with all the provisions of Companies Act, 1956, SEBI and other relevant acts and presents its adverse comments on an equivalent if any.
The Ministry of Heavy Industries and Public Enterprise has drawn up guidelines for Central Public Sector Companies on corporate governance. Via a consultation process where the stakeholders participated, these guidelines have evolved. These guidelines confine the view of the provisions to the legislation, rules and instructions in question. These corporate governance guidelines are designed with the aim of upholding the rules in their activity by the Central Public Sector Enterprises. The rights of shareholders and related stakeholders will be covered by the proper implementation of those guidelines.
The Federal Reserve Bank of India vid it’s circular no. DBOD NO. BP.
BC.46/08.12.001/2008-09 dated September 19, 2008, advised all to scheduled commercial
banks(excluding RRBs and LABs) to get a regular certificate by professional, preferably by a
corporation Secretary, regarding the compliance of varied statutory prescription that is as per
specimen given ion the notification.
In respect of matters set out in RBI Circular No., the practicing Company Secretary is required to certify compliance. NO. BP. Dated 19 September 2008, BC.46/08.12.001/2008-09. Paragraph 2(iii) of the RBI Circular provides that the Due Diligence Report is to be drawn up in the format set out in Annex III. The format was later updated and simplified by the RBI.
SEBI (Security and Exchange Board of India) vide it’s Circular Number 20091016-5 as of 16th October 2009 has directed to hold out complete Internal Audit on the half-yearly basis by chartered accountants, Company Secretaries India and price and management accountant who are in practice and who don’t have any conflict of interest. To make the audit effective certain additional areas like provisions concerning the Prevention of cash Laundering Act, Investor Grievances, Handling Mechanism, Power of Attorney received from investors, the status of compliance of last audit/inspection are to be included.
Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel)
Regulations, 2014, read in compliance with section 204 of the Companies Act, 2013:-
TReporting on the agreement of 5 laws as specified in form MR-3:
In this step, in order to obtain a general overview of operations, the auditor gathers specific information about the organization.
In a formal meeting with management, the Secretarial Auditor outlines the nature and goals of the review and collects information on critical procedures, reviews the existing controls, and schedules the audit measures.
The Management’s formal letter of engagement shall be given to the Auditor. The nature and priorities of the audit are communicated in this letter. PCS will then forward to the organization a preliminary checklist that will assist the auditor to learn more about the company under audit.
Top management and any administrative personnel that may be involved in the audit should be present at the opening meeting.
This schedule details the fieldwork required to achieve the goals of the audit. In order to collect and interpret information about the activities of the organization, the auditor will use a range of methods and techniques. The controls analysis lets the auditor define the areas of greatest risk and design checks to be carried out in the fieldwork section.
A critical instrument of the audit profession is working papers. They support the judgment of the audit. They link the documents and financials of the management to the opinion of the auditor. They are thorough and fill in several positions.
Detailed remarks detailing the results and proposed suggestions are compiled and introduced for initial discussions with management in order to include their insights.
Upon completion of fieldwork, the auditor shall summarize, in the form of an audit report, the audit results, conclusions, and recommendations required.
The auditor shall prepare a final report on the basis of fieldwork and working papers in order to present audit findings and, where appropriate, to review suggestions for improvement. The final report, with or without qualifications, is to be issued.
Finally, the Secretarial Auditor can order the Company to list the actions taken by the Company to address the findings of the audit report, even after the audit process.
25-Mar-2020: Secretarial Audit of more unlisted firms to come under
With effect from 1 April 2020, the secretarial audit will cover all unlisted companies/private enterprises with unpaid loans in excess of Rs 1 billion or more. Such businesses will, without fail, have to apply the results of the mandatory audit to the MCA.
20-Mar-2020: ICSI Sets New Criteria for Secretarial Audit
New guidelines for Secretarial Auditing Standards have been issued by the Institute of Company Secretaries India (ICSI) for the coming financial year. This is in accordance with the audit requirements referred to in the Companies Act, 2013, Section 204.
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