The audit of a company’s non-financial operations is known as a secretarial audit. Secretarial audits examine non-financial business factors that affect the company’s performance as well as the observance of relevant laws, rules, and regulations.
Basically, a secretarial audit is an independent examination of the books, papers, and records by a company secretary to determine whether the company is in compliance with the law and to ensure that the procedures it follows are in compliance with the law.
- Make sure that various laws and regulations are followed
- Helps find non-compliance and makes it easier to take corrective action to reduce risks in the future.
- Assures the Company’s stakeholders that the regulations are being followed.
- to make sure the businesses have a strong compliance management programme, reducing their risk of being penalised.
Secretrail Audit Applicability:
Secretarial Audit is applicable to the following firms, under Companies Act of 2013, as well as Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:
- Each listed business
- Any public business with a paid-up share capital of at least Rs. 50 crore.
- Any publicly traded firm with a revenue of at least Rs. 250 crore.
- Any business has a balance of at least Rs. 100 crore in loans or borrowings outstanding from banks or public financial institutions.
- These businesses must append a Secretarial Audit Report in form MR-3 to their Board’s Report.
Nota: The most recent date of the most recent audited financial statement shall be used to determine the paid up share capital, turnover, or outstanding loans or borrowings, as applicable.
Appointment of a Secretarial Auditor:
Only an ICSI member with a certificate of practise is qualified to perform a secretarial audit and provide the report.
A board resolution must be used to appoint a secretarial auditor, as per rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014. Within 30 days after the resolution’s passage, an e-Form MGT-14 filing of the resolution must be made with the Registrar.
The appointment of a secretarial auditor at the start of the fiscal year is advised. The Board may receive quarterly reports from the Secretarial Auditor addressing the compliance with different laws and regulations.
Scope of Secretarial Audit
The Secretarial auditor is required to review and document the observance of the following five particular statutes on Form MR-3:
The Securities Contracts (Regulation) Act of 1956 (the “SCRA”) and the regulations made thereunder; The Companies Act of 2013 (the “Act”) and the rules issued thereunder;
The Depositories Act of 1996 and the bylaws and regulations made under it;
Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings are governed by the Foreign Exchange Management Act of 1999 and the rules and regulations that are enacted thereunder;
Other Areas that need to be checked
The following must be examined for conformity with the relevant provisions and reported on by the secretarial auditor:
- The Institute of Company Secretaries of India has published secretarial standards.
- The Listing Agreements that the Company has, if applicable, entered into with….. Stock Exchange(s).