This article provides a complete guide on managing audit packages for secretaries in companies operating from India. Read this to learn the subject topic thoroughly.
Secretarial auditing is a type of compliance audit. It is a component of an organization’s overall compliance management. It is a useful instrument for corporate compliance management, assisting in the detection of noncompliance and the implementation of corrective measures.
Manage Your Secretarial Audit Package:
A secretarial audit package supervises the company framework involving legal matters. The Indian Government determines the country’s Secretariat Audit needs by implying reward issuance to these audits.
The secretarial Audit Package is a compliance unit linked to a corporate organisation’s general enforcement management.
What is Secretarial Audit Reports?
A Secretarial Audit Report embodies an audit that ensures several regulations covering the company policies and accessory corporate and business laws are abide by. The purpose is to eliminate chances of biasness and add value to the company’s goodwill and improve the general departmental functions.
All organisations should practice issuing secretarial reports given that:
- An active Corporate Secretary must authorise the reports
- These reports must be on par with the Board meeting’s reports and should reflect the Corporate Governance’s value.
Company Eligibility for Secretarial Audit Package
To get a secretarial audit package, the company must be:
- A public limited company
- Listed company
If your company falls within the first category, then its paid-up share capital has to be more than ₹50 crores. Also, the turnover must exceed ₹250 crores.
A Secretarial Audit is recommended if any of the above credentials are met. Practising CS candidates are hired to execute these audits.
Secretarial Audit Needs as per the Companies Act (2013)
The secretarial audit mechanism ensures that all legal and procedural standards are met when companies engage their employees in commercial ventures.
Also, the process, in a substantial fashion, gives confidence to all the Directors and other major managerial personnel to carry on with their respective tasks.
Next, the process is proven to solidify the enterprise’s image and raise the members’ goodwill, encouraging potential stakeholders to buy company shares. A secretarial Audit is a vital risk management tool for an established venture as it assists the investor in assimilating the compliance factor of any company. They formulate a baseline idea or estimation of the company’s current market position by analysing its past audit records.
We also consider secretarial audits as a key governance mechanism. Companies hire related services to ensure that their activities do not violate several statutory regulations exercised upon the relevant sector. Companies Act have clearly defined the standardised processes for Board operations; each firm must follow it as long as they operate in the Indian market.
Before there was the 1956’s Companies Act which did not sufficiently manage the compliance of all legal regulations applicable to an enterprise, after the amendment in 2013, the secretarial audit was mandated to cover up this emptiness in a jurisdiction; since then, this provision persists in the world of legal compliance supervision.
Ways to manage Secretary Audit Package
In India, the method of secretarial audit is executed by abiding by a few basic steps. Firstly, the company hires a Corporate Secretary professional following Rule no. 8 of 2014’s Companies law. To execute this a Board Meeting is conducted where a resolution is passed concerning the appointment of an eligible secretary auditor.
The next step involves signing an engagement letter when the auditor has already been hired. This must be completed to ensure that responsibilities are executed following audit functions. Now we move on to a critical stage where relevant reports are being prepared for future reference. This step has been mandated under the new Companies Act (2013).
The secretarial auditor is responsible for head-to-toe analysis while submitting such a report. Based on analysis, some remarks are concluded by the auditor himself. The report explains these remarks as an independent entity maintains it. Again this party involved in the maintenance of the report is crucial as the final report should be unbiased. An opinionated format is followed while drafting this report.
In the final stage, reports must be submitted following the regulations set by the 2013’s Companies Act. While completing this procedure, a keen analysis is necessary from the end of a secretarial auditor.
When the auditor is accused of producing a defective report, owing to restrictions presented by his employer or the Board Members of the concerned company, then the secretary audit is entrusted to convey such revelations in highlighted sections of the report. In return for this, the Board Committee members need to provide justification that supports their cause reasonably. So, these are the fixed ways to manage the audit package for Secretary in India.
What Companies Need to do Secretarial Audit?
Only a few listed companies have the privilege to execute the secretarial audit. Generally, as we have mentioned before, the limited companies or PLCs and the listed enterprises whose shares are put up on the stock exchange need to comply with this process.
According to Section 2(71) of the Indian Companies Act (2013), a company can be tagged as a public limited corporation only when its securities and shares get listed on leading stock exchanges of India.
Documents required for Secretarial Audit
Company-specific documents are required to be presented without fail, this includes:
- Chartered documents, in addition to specific commercial information of records
- Board documents, including minutes of the meeting and other resolutions that the associates decide
- Audited reports and financial particulars of the company
- Key documents explaining details of the company’s listing in a stock exchange
- Insights on the yearly performance reports, bonds, returns, and deeds
- All the filings made with the Reserve Bank of India (this is mandatory if there is a foreign investment)
- Details of CSR amount
- Details of the labour regulations
- The Directors must acknowledge the statement and adherence to the company’s code of conduct.
- Sitting fees and packages allotted to each of the Directors
- Bank account details that are essential for distributing dividends among the shareholders
- Particulars of External Commercial Borrowings or ECB returns apply when your company has borrowed money from an overseas firm.
- SAST Disclosures
The Companies Act has put forward a set of provisions that need to be maintained through the Secretarial Audit package in India. To be able to execute a secretarial audit, one needs to be a professional company secretary. He is entrusted with the duty either once a year or the responsibilities need to be executed twice a year, quarterly, or even in some cases periodically.
Vakilsearch is the right destination if you intend to learn more about the Company Secretary-ship. Therefore, to gather more such information, please read our other related blogs.
- What is the Process of Secretarial Audit for a Public Company?
- What is the Scope of Forensic Audit in India?
- How the Audit Cost is Calculated?