Secretarial Audit
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Secretarial Audit
Auditing entails thoroughly inspecting and verifying the company's overall operations and functions, data, records, efficiency, and so on. Secretarial auditing is the examination of annual conformity with all relevant rules and regulations. Aside from regulators and stakeholders, the Secretarial audit ensures that management's personnel are in compliance.Enhances the trust of the company's directors, creditors, shareholders, employees, and management in its ability to run effectively
Secretarial auditing is compliant with the law
The obedient party benefits from the goodwill.
Keeps track of and controls any compliance violations.
Secretarial audit makes sure that everything is done legally.
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Secretarial Audit's Applicability in India
Every Unlisted Entity
Subordinate private corporation of an unlisted public company with:
Application of Secretarial Audit in various fields
Secretarial audit, how does it work, and how much of a fine is imposed for violating Section 204
Secretarial Audit
For maintaining compliance is secretarial auditing, which supports monitoring, verifying, and validating that a business conforms with all relevant laws and regulations.
For Listed companies
Authorized PCA/PCS should audit these businesses. PCS should reconcile the CDSL/NSDL information with the shares held during the process.
For Central Public Sector
According to the Ministry of Heavy Industry and Public Enterprise, corporate governance is required for CPS projects.
For Banks
As per to RBI, banks should exercise due diligence and obtain a certificate from active professionals stating their degree of compliance.
For Private Company
Every year, these companies must undergo an audit. and are required to present the audited report to the relevant ROC, which is done by a specialist in the field.
Penalty
If any of these clauses are broken company director, officer, or secretary could face a minimum punishment or penalty of Rs. 1 lakh and a maximum fine of Rs. 5 lakhs.
Secretarial Audit Process
Although there aren't any strict guidelines for the secretarial audit procedure, an auditor should nonetheless follow the processes listed below to complete the audit:
Step-1
Conference with management to go through the project's parameters and the delivery of their professional fees for carrying out the audit.
Step-2
Identification of the scope and the actions that will be specified begin once all the primary objects have been set.
Step-3
Following the completion of the PCS, the business shall issue an engagement letter containing all of his appointment's terms and conditions.
Step-4
The PCS shall plan appropriately for the auditing process, including the initial areas of law to be examined, the dates of auditing visits, the approximate time frame required to complete the auditing job, and so forth.
Step-5
Conducting the audit and recording all observations and findings made during the auditing procedure.
Step-6
After the auditing work is finished, PCS will submit the final Audit report in the required format MR-3, duly signed, and stamped with the company secretary in practice.
Penalty imposed for violation of Section 204
The company, its director, officer, or practicing company secretary if conflicts any provision of this section will be liable with a penalty or fine of a minimum of Rs.1 Lakh and it can be extended to Rs. 5 Lakhs.
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Frequently Asked Questions
The scrutiny of financial documents and accounts is not the exclusive purpose of an audit. The term "audit" actually refers to a thorough examination and verification of a company's overall operations, functions, data, records, efficiency, and other factors.
Secretarial auditing is a form of legal compliance that supports monitoring, examining, and confirming that a corporation operates in accordance with the laws and regulations that apply to it.
The company, its director, officer, or practicing company secretary if conflicts any provision of this section will be liable with a penalty or fine of a minimum of Rs.1 Lakh and it can be extended to Rs. 5 Lakhs.
The paid-up share capital should be more than ₹50 crores, and the turnover should be more than ₹250 crores. If any of these criteria match, then a secretarial audit becomes compulsory, and a practising Company Secretary is fit to conduct the process of 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.
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.
A member of the Institute holding a valid certificate of practice shall be entitled to sign Secretarial Audit Report(s) pursuant to Section 204 of the Companies Act, 2013.
Every Public Company with Paid-up capital of 50 crores or more, Every Public Company with a turnover of 250 crores or more, Any private company that is a subsidiary of a public company that falls into the above categories shall conduct a Secretarial Audit.
Knowledge
Team
Documentation and Backup
Reliance upon management representation
Complying with the timelines
Impartial Behaviour
Maintaining the Audit records
