Overview of Secretarial Audit
The Secretarial Audit is a process where a Secretarial Auditor checks whether the organisation complies with applicable laws and regulations. There are certain features of secretarial Audit which are given below:
Applicability of Secretarial Audit
Secretarial Audit is a mandate for the below-mentioned companies. Also, these companies are required to prepare the Secretarial Audit Report.
Important Provisions pertaining to Secretarial Audit
The necessary provisions pertaining to Secretarial Audit are given below
Benefits of a Secretarial Audit
The Benefits of a Secretarial Audit are as follows:-
Beneficiaries of Secretarial Audit
The beneficiaries of Secretarial Audit are-
Laws specifically mentioned in the Secretarial Audit Reports
In terms of the Secretarial Audit report, the Secretarial Auditor needs to examine and report the compliance with the following Laws-
Pre- Requisites for a Secretarial Audit
The prerequisites are given below:
Eligibility Criteria for the Appointment of a Secretarial Auditor
The Members of the ICSI (Institute of Company Secretaries of India), holding the certificate of practice which are validated to perform a secretarial audit, can only conduct a Secretarial Audit and prepare the Secretarial Audit Report of the Company.
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Documents are required for Secretarial Audit.
Below-mentioned documents are required for Secretarial Audit-
Procedure of the Secretarial Audit
The procedure for Secretarial Audit is given below:-
- Appointment of Secretarial Auditor
The appointment of a Secretarial Auditor is made by passing a resolution in the Board Meeting.
- Communication to earlier Incumbent
After passing the resolution, the next step is formally informing the secretarial auditor about his appointment. This can be done by proposing an engagement letter to the Secretarial Auditor.
- Acceptance of Appointment by the Secretarial Auditor
After the formal communication of employment, the secretarial auditor needs to accept the appointment by signing the Letter of Engagement.
Initial Discussions about the company with the Secretarial Auditor The next step is to discuss the company with the secretarial auditor so that he know the structure of the company
- Preliminary Meeting with the Auditor
After this, there is a meeting with the auditor to decide to make an audit plan.
- Finalization of the Audit plan and briefing the staff
After the meeting with the auditor and discussing the audit plan, the next step is to finalize the audit plan and inform others about the same to other staff.
- Testing, Interview and Analysis
After this step, the next step is to do the testing interview and analysis.
- Preparation of Working Report
The next step is preparing the working report by the secretarial auditor. A working report consists of all the Secretarial audit reports of the company.
- Audit Summary for Discussions
The next step is to prepare the audit summary and discuss the same with the concerned persons.
- Submission of Secretarial Audit Report
The final step is the submission of the report by the secretarial auditor
Process Reporting Qualification in the Secretarial Audit Report
During the preparation Secretarial Audit report, the auditor can point out where there is non compliance of the required laws in Bold type or Italics. in case the auditor is unable to express an opinion on any matter he can specify the same, stating the reasons thereof.
The auditor should provide all the limitations in the report and the reason why he cannot give an opinion on the same Further, the Board of Directors (BoDs) of the company shall mention all the remarks of the auditor in the resolution.
Penalty for Fraud and False Statement
The Companies Act 2013 provides the penal provisions related to committing fraud and giving a false statement. The penal provisions are given below –
- Section 447
This section states that if any person is found to commit fraud shall be liable for a minimum imprisonment of 6 months which may extend to 10 years, along with a fine which can be thrice the amount of the fraud committed.
In relation to the affairs of the company, fraud can be defined as the commission of any illegal act or omission of any legal act, abuse of position, concealment of fact with the intention to deceive, gain undue advantage or hamper the interests of the shareholder or creditors of the company or any other individual irrespective of the fact that there is a wrongful loss or wrongful gain.
- Section 448&
This section deals with the penalty for false statements. The section provides that if in any report, certificate, return, financial statement, prospectus, statement or other document required by, or for any of the provisions of this Act or the rules made there under, anyone makes any
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Frequently Asked Questions
Only members of the Institute of Company Secretaries of India having COP (Certificate of Practice) can conduct an Audit and submit the Report in Form MR-3.
Mandatory Provision-Secretarial Audit is mandatory for the below-mentioned companies. Also, the companies are required to prepare the Secretarial Audit Report.
Voluntary Provision-Companies which are not covered under section 204 may obtain a Secretarial Audit Report voluntarily as it provides an independent undertaking of the compliances in the company.
The Secretarial Audit should be carried out-
In case of any adverse finding, it is reported on an interim basis to the Board immediately. The Report must be annexed with the Board and submitted before the preparation of the Board’s Report.
A secretarial Audit Report is required to be provided in the format laid down in Form MR-3.
Yes, Fiscal laws like tax laws, Customs Act, etc needs to be examined while conducting a secretarial audit.
Presently, The authority (ICSI) has not placed any limitation on the number of Secretarial audits conducted by a Practicing Company Secretary in a financial year.
There is no requisite for peer review of Secretarial Auditors.
Sign the Secretarial Audit Report:
Also, while signing the Report, the practising Company Secretary should ensure that he holds the valid certificate of practice number.
The Secretarial Auditor is required to be appointed through a resolution passed at a duly convened Board meeting. However, it is recommended for Secretarial Auditor to get the letter of engagement from the company.
Skills required for conducting the Secretarial Audit process: