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A Secretarial Audit secures non-financial aspects of the business impact on the Company’s performance and verifies compliance with applicable laws, regulations and guidelines.
The company secretary independently checks records, books, and documents and verifies whether it complies with the Company’s legal and procedural requirements and processes.
Therefore, it is an independent body intending to add value and improve the operational qualities of the Company. It helps to accomplish organisation prospects by bringing effective risk management and securing a governance process.
Thus, it provides necessary tools to the management, stakeholders and regulators.
According to the Companies Act, 2013, read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and applies to the following companies:
The Audit Report must be prepared and reviewed by an appointed Company Secretary. It shall be prepared in Form MR and annexed with the Board’s Report of the Company.
Form MR-3 regulates five laws through which audits are conducted and prepared reports.
The procedure for Secretarial Audit is mentioned below:-
After passing a resolution as per rule 8 of companies Rules 2014, an auditor is appointed.
An Auditor is supposed to communicate formally with the Auditor and provide a letter of engagement.
After the formal communication with Auditor about the appointment, the Auditor needs to give the assent of his appointment after signing his Letter of Engagement.
The next step to be followed after acceptance of the letter of engagement is to discuss the Company’s management programme with the Auditor to learn about the company policies.
After the discussion with the Auditor, conduct a meeting to give a better structure to the audit plan and make plans accordingly.
Generally, after discussing the audit plans, the next step is to follow to implement the audit plans and inform other staff about the same.
Further, the next step is to do the testing interview and analyse the staff capabilities to implement the audit plan.
An Auditor must prepare the working report, including all the Company’s audit reports.
The next step is to prepare the audit summary and discuss the same with the concerned persons.
The final step is the submission of the report to the secretarial Auditor.
If a Company or the Company Secretary contravenes any provision of the Companies Act, 2013 or who is in default, they shall be liable to a penalty of two lakhs rupees under section 204 of the Companies Act, 2013
The secretarial Audit is an independent procedure that must be complied rules. However, it facilitates good practices amongst the members. To achieve Company’s prospects by developing a strategy and standardised approach to improve risk management, provide suitable governance mechanisms and helps to detect non-compliance and to take corrective measures.
However, public companies might adopt audit practices to maintain compliance systems and clear the risks associated with non-compliance mishaps. The corporate sector considers this audit system the most effective way to manage corporate rules and regulations, thereby taking preventive measures to protect the company’s record.
Read our Article: Secretarial Audit in India – Process & Benefits
Minakshi Bindhani has completed LL.M. with a specialization in Criminal Law from Madhusudan Law University, Cuttack, Odisha. She is more inclined toward legal research and writing and have prior experience in Civil and Criminal litigation and content writing.
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