Secretarial Audit Service
Starting from ₹15,000 + GST
Table Of Content
Secretarial Audit
In today’s corporate environment, fulfilling legal and regulatory requirements is essential to ensure transparency and good governance. A secretarial audit is a crucial tool to verify whether a company complies with statutory and regulatory frameworks, particularly corporate laws. Conducted by a qualified practicing company secretary, the audit ensures that all legal provisions are in place and helps prevent non-compliance.
Secretarial audits are governed by the provisions of the Companies Act 2013, under Section 204, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. These audits play a pivotal role in maintaining good corporate governance and mitigating risks of penalties or legal action.
Benefits of Secretarial Audit
Eligibility for Secretarial Audit
Process of Secretarial Audit
Step 1
The Board of Directors appoints an independent practicing company secretary authorized to perform the audit.
Step 2
The auditor begins by analyzing the company’s organizational structure and business model.
Step 3
The auditor reviews the company’s compliance with applicable laws, rules, and regulations.
Step 4
An in-depth review of corporate, environmental, securities, labor laws, and other relevant regulatory frameworks.
Step 5
The auditor evaluates how the company conducts board meetings, maintains statutory registers, and files mandatory returns.
Step 6
The auditor checks filings submitted to the Registrar of Companies (ROC) and regulatory bodies like SEBI.
Step 7
The auditor compiles findings and observations into a comprehensive Secretarial Audit Report (MR-3).
Step 8
The final audit report is presented to the Board of Directors for review.
Step 9
The board may implement corrective measures based on the auditor’s observations to ensure continued compliance.
Documents Required for Secretarial Audit
FAQs
Why is the Secretarial Audit important?
A Secretarial Audit is crucial because it ensures that a company is compliant with legal and regulatory frameworks, thereby promoting good governance and minimizing the risk of non-compliance. This audit helps companies maintain transparency, avoid penalties, and foster investor trust.
Who can conduct a Secretarial Audit?
Only qualified practicing company secretaries, who are registered with the Institute of Company Secretaries of India (ICSI), are eligible to conduct a Secretarial Audit. Internal audit teams or employees cannot conduct this audit to maintain objectivity and independence.
Is Secretarial Audit compulsory for all companies?
No, a Secretarial Audit is mandatory only for certain companies, such as those listed on a recognized stock exchange, public companies with a share capital of ₹50 crore or more, and companies with a turnover of ₹250 crore or more. Private companies and smaller firms are typically exempt unless specified otherwise.
What are the consequences of non-compliance identified during the Secretarial Audit?
If non-compliance is detected during the audit, the company may face penalties, fines, and in severe cases, legal action. Corrective actions must be taken to address the issues identified, and the board is responsible for ensuring compliance going forward.
How often must a Secretarial Audit be conducted?
A Secretarial Audit must be conducted annually. It is an ongoing requirement to ensure that the company remains compliant with regulatory frameworks and corporate governance standards each financial year.
What laws does the Secretarial Audit cover?
The audit covers a broad range of corporate laws including the Companies Act, SEBI regulations, FEMA (Foreign Exchange Management Act), labor laws, environmental laws, and any industry-specific regulations that apply to the company’s operations.
What is Form MR-3?
Form MR-3 is the format used for the Secretarial Audit Report, where the auditor documents their findings, observations, and recommendations. This report is submitted to the Board of Directors and serves as an official record of the audit process and outcomes.
What is the responsibility of the Board of Directors during the Secretarial Audit?
The Board of Directors is responsible for providing necessary documents to the auditor and reviewing the audit report. They must also ensure that corrective measures are taken if any compliance issues or risks are identified during the audit process.
Can a company's internal audit team conduct a Secretarial Audit?
No, the audit must be conducted by an independent practicing company secretary. Internal teams cannot perform this audit to maintain the impartiality and independence required for an accurate and fair evaluation.
What happens if a company fails to conduct a Secretarial Audit?
Failure to conduct a Secretarial Audit can lead to severe consequences including penalties, fines, and in extreme cases, imprisonment for the company’s directors. Legal action can also be taken for persistent non-compliance, making it essential to adhere to audit requirements.