SECRETARIAL AUDIT

SECRETARIAL AUDIT

Secretarial Audit is an independent process assuring to add value and improve an organization’s operations. It helps to bring a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

An audit is to be on the principle of “Prevention is better than cure”. It strengthens the image and goodwill of a company in the minds of regulators and stakeholders. It acts as an effective compliance risk management tool or a governance tool.

The benefits are available to the following stakeholders of the company:

• Promoters
• Executive directors
• Officers of the company
• Regulators
• Government authorities
• Investors
• Banks
• Creditors and consumers and others

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 make sure that the legal and procedural requirements are complied with
• Also followed the due process
• It is essentially a mechanism to monitor compliance with the requirements of stated laws

SECRETARIAL AUDIT REPORT

Every company to which the secretarial report applies:

• It shall be prepared by a Company Secretary in Practice
• It shall be prepared in Form MR 3
• Annexed with Board’s Report, considering the increasing importance of Corporate Governance

APPLICABILITY:

As per section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following companies are required to obtain ‘Secretarial Audit Report’ from independent practicing company secretary:

• Every listed company
• Every public company having a paid-up share capital of Fifty crore rupees or more
• Every public company having a turnover of Two Hundred Fifty crore rupees or more
• Every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.

For the purposes of this sub-rule, it is hereby clarified that the paid-up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of the latest audited financial statement shall be taken into account.

Secretarial Audit is also mandatory for a private company which is a subsidiary of a public company, and which falls under the prescribed class of companies.