Applicability Of Secretarial Audit: Know more About It

Applicability of Secretarial Audit helps the company to make compliance with its rules and regulations as prescribed under the Act.

A secretarial audit is an audit of companies in respect of their management and compliance. It is a process that checks and ensures that a company is in 100% compliance with the law. It is taken for transparent, corporate governance. It is done by a competent professional. It is also known as a compliance audit.

A secretarial Audit is carried out for the detection of non-compliance and implementation of corrective measures. It is a mechanism that is linked with an audit of non-financial matters of the company which affects the company’s performance.

Rules and Regulation of Applicability of Secretarial Audit

The Secretarial audit applicability companies act, 2013 read with prescribed rules provides that:-

• Every listed company
• Every public company which is having a paid-up capital of fifty crore rupees or more;
• Every public company which is having a turnover of two-hundred fifty crore rupees or more;
• Every company has loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.

It shall attach with its Board report, A secretarial Audit Report given by Practising Company Secretary in Form MR-3.

Secretarial Audit Report Applicability for Private Company

As per the section of Companies Act, 2013 the Public Company is the one

• Which is not a private company
• Which has minimum paid-up capital of Rs. Five lakh rupees or exceeding the paid-up capital prescribed.

According to the given provision the Applicability of Secretarial Audit is applicable to private companies which are subsidiary of a public company and which are in the given criteria by the law.

According to the recent amendment to Company law, It is mandatory for a private company to have Secretarial Audit Report if :-

• Outstanding loans or borrowings from the public financial institutions or  banks of Rs. One hundred crores or more shall annex the Secretarial audit report with its board report with effect from the financial year 2020-2021 onwards

Appointment of Secretarial Auditor Companies Act, 2013

Any member having a certificate of practice from the “Institute of Company Secretaries of India” (ICSI) can conduct a Secretarial audit and furnish a Secretarial audit report to the company.

Process of appointment of Secretarial Auditor for the purpose of Secretarial Audit:

1. Ensure that the person is qualifying the eligibility criteria as given in the law.

2. Conduct a Board meeting with notice of not lesser than 7 days to the directors of the company.

3. Pass the board resolution for the appointment of a secretarial auditor of the company and fix the remuneration that will be paid to the auditors for the issue of the report.

4. Filing of a Certified copy of the Board resolution for the appointment of an auditor with the ROC in E-Form MGT-14 within 30 days under the prescribed section of Applicability of Secretarial Audit of the Companies Act, 2013 with the given rules of the Act. At the time of receiving of ‘Letter of Engagement’ from the company, the secretarial auditor gives his acceptance to conduct the audit with a report of his working status to the board.

Powers of Secretarial Auditor

The companies act, of 2013 has given the powers same as a statutory auditor. As per provisions of the Act, the secretarial auditor can collect the required information and explanations from the officers/employees of the company as he considers necessary for completing his task and effective performance of his duties as an auditor. The powers of a Secretarial auditor are:

1. The Applicability of Secretarial Audit gives the Right to access the books of accounts of the company

2. Right to access the records of the subsidiary company

3. Right to receive the notice of general meeting.

4. Right to receive information and explanation regarding the crucial matters for the performance/execution of his duties.

Tenure of Secretarial Auditor

It is suggested that the Applicability of Secretarial Auditor should be appointed at the beginning of the financial year. The secretarial auditor is responsible for checking the compliances on a continuous basis.

As a lawful practice, the Secretarial auditor should submit a report to the board of the company at the end of each quarter for the Applicability of Secretarial Audit compliances of the company.

Important Points / Format of Secretarial Audit Report: –

• The board of directors has a balance of Executive directors, non-executive directors, and independent directors.
• Changes in the composition of the board of the company have taken place during the year.
• Notice has been sent to all the directors of the board for the Board meeting at least seven days before the meeting
• The opposition votes are recorded in the minutes of the meeting
• There are proper systems in place to monitor compliances of the company

Fraud Reporting

Secretarial auditors have the authority to report the fraud that occurred in the company in the tenure of their appointment with the reason or cause to believe that the fraud has been committed by the employees of the company.

Penalty for fraud

As per section of the Companies Act, 2013 the Applicability of Secretarial Audit shall appoint a Company secretary and if a company or any person/officer or the Company Secretary in practice contravenes the provision of the Secretarial Audit whoever in default shall be punishable with a fine of One lakh to Five lakhs.

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