SECRETARIAL AUDIT – AN OVERVIEW

SECRETARIAL AUDIT – AN OVERVIEW FOR CS, CMA. CA
Secretarial Audit – Concept
• objective, scope of secretarial audit
• Benefits and Beneficiaries
• Secretarial Audit process
• Professional Responsibilities and Penalties
• Secretarial Audit Report - Format
Secretarial Audit is a process to check compliance with the provisions of various laws and rules/regulations/procedures, maintenance of books, records etc
CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009/MCA
Secretarial Audit is the process of verification of compliance with rules, procedures, maintenance of books, records etc.
• Complied with the provisions of various laws but also extends professional help to the company in carrying out effective compliances and establishment of proper systems with appropriate checks and balances.
• Its prove to be an effective and multipurpose mode to assure the regulator, generate and repose confidence amongst the shareholders
• Secretarial Audit is of immense benefit even to larger companies which otherwise have a whole-time Company Secretary in its employment.
The Companies Act, 1956 and the Rules made there under;
(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Rules made there under;
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;
(iv) Foreign Exchange Management Act, 1999 and the rules & regulations made there under;
(v) The following Regulations and Guidelines prescribed under SEBIAct, 1992 (‘SEBI Act’) which inter alia includes;
(a) SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(b) SEBI(Prohibition of Insider Trading) Regulations, 1992;
(c) SEBI(Issue of Capital and Disclosure Requirements) Regulations, 2009;
(d) SEBI(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
(e) SEBI(Issue and Listing of Debt Securities) Regulations, 2008;

1. DDR Ch-1
SECRETARIAL AUDIT –AN
OVERVIEW

2. Secretarial Audit –Concept
• objective, scope of secretarial audit
• Benefits and Beneficiaries
• Secretarial Audit process
• Professional Responsibilities and Penalties
• Secretarial Audit Report -Format
CH-1 SECRETARIAL AUDIT –AN OVERVIEW

3. INTRODUCTION
Secretarial Audit is a processto check compliance with the provisions
of various laws and rules/regulations/procedures, maintenance of
books, records etc
CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009/MCA
Secretarial Audit is the process of verification of compliance with
rules, procedures, maintenance of books, records etc.
• Complied with the provisions of various laws but also extends
professional help to the company in carrying out effective compliances
and establishment of proper systems with appropriate checks and
balances.
• Its prove to be an effectiveand multipurpose mode to assure the
regulator, generate and repose confidence amongst the shareholders
• Secretarial Audit is of immense benefit even to larger companies
which otherwise have a whole-time Company Secretary in its
employment.
• Secretarial Audit is an area of practice for company secretaries

4. The Objectives of
Secretarial Audit
To check & Report on Compliances
• To Point out Non-Compliances and
Inadequate Compliances
• To Protectthe interest of the Customers,
employees, society etc.
• To avoid any unwarranted legal actions by
law

5. Scope of Secretarial Audit
(i) The Companies Act, 1956 and the Rules made there under;
(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Rules made
there under;
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there
under;
(iv) Foreign Exchange Management Act, 1999 and the rules & regulations made
there under;
(v) The following Regulations and Guidelines prescribed under SEBIAct, 1992
(‘SEBI Act’) which inter alia includes;
(a) SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(b) SEBI(Prohibition of Insider Trading) Regulations, 1992;
(c) SEBI(Issue of Capital and Disclosure Requirements) Regulations, 2009;
(d) SEBI(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999;
(e) SEBI(Issue and Listing of Debt Securities) Regulations, 2008;
(f) SEBI(Delisting of Equity Shares) Regulations, 2009; and
(g) SEBI(Buyback of Securities) Regulations, 1998;

6. (vi) The Listing Agreement(s) entered into by the Company with Stock
Exchange (s).
(vii) Secretarial Standards issued by ICSI
(viii) Corporate Governance Voluntary Guidelines, 2009 issued by the
Ministry of Corporate Affairs, Government of India;
(ix) CSR Guidelines, 2009 issued by the MCA
(x) Guidelines on Corporate Governance for Central Public Sector
Enterprises, 2010;
(xi) Corporate Governance Guidelines for Insurance Companies, issued
by IRDA in case of companies regulated by IRDA; and
(xii) Other corporate laws as may be applicable specifically to the
auditee company.

7. NEED FOR SECRETARIAL AUDIT
Secretarial Audit is the process of independent verification, examination of level of
compliance of applicable Corporate Laws to a company.
Effective mechanism to ensure that the legal and procedural requirements are duly
complied with.
• Provides a level of confidence to the directors, officers in default,
Key Managerial Personnel etc.
• Directors can concentrate on important business matters as
Secretarial Audit ensures legal and procedural requirements.
• Strengthen the image and goodwill of a company in the minds of
regulators and stakeholders
• Secretarial Audit is an effectivecompliance risk management tool.
• It helps the investor in analyzing the compliance level of companies,
thereby increases the reputation.
• Secretarial Audit is an toolof effectivegovernance

8. Secretarial Audit & Company Secretary in
Practice (PCS) PROCESS
A Company Secretary in Practice has been assigned the role of
Secretarial Auditor in section 2(2)(c)(v) of the Company Secretaries Act,
1980.
Secretarial Audit –The process
Initial discussions
Identifying scope and objectives
Obtaining of formal engagement letter
Meeting with teams/persons involved
Planning of Audit programme
Informal interactions and understanding of business
Preparation of Working Papers
Observations/Discussions
Summary of Audit findings and subsequent discussions
Audit Report
Follow up

9. Benefits and Beneficiaries
of Secretarial Audit
The Benefits
(a) It can be an effective due diligence exercise for M&A and JV.
(b) It assures the owners that management and affairs of the company are
being conducted in accordance with requirements of laws, and REDUCE
exposed risk.
(c) It ensures the Management of a company that those who are charged with
the duty and responsibility ofcompliance with the requirements of law are
performing their duties competently, effectively and efficiently.
(d) It ensures the Management that the company has complied with the laws
and REDUCE OR ELIMINATE PENALTY
(e) It help in compliance of laws, it will have a salutary effect of substantially
lessening the burden of the law-enforcement authorities.
(f) Instilling professional disciplineand self-regulations.
(g) Reduces the work load of the regulators due to better and timely
compliances

10. The beneficiaries
(a) Promoters
Secretarial Audit will assure the Promoters of a company that those in-charge of its
management are conducting its affairs in accordance with requirements of laws.
(b) Management
This also helps the management to establish benchmarks for the compliance
mechanism, review and improve the compliances on a continuing basis.
(c) Non-executive directors
Secretarial Audit will provide comfort to the Non-executive Directors that appropriate
mechanisms and processes are in place to ensure compliance with laws
(d) Government authorities/regulators
Being a pro-active measure, Secretarial Audit facilitates reducing the burden of the law-
enforcement authorities and promotes governance and the level of compliance.
(e) Investors
Secretarial Audit will inform the investors whether the company is conducting its affairs
within the applicable legal framework.
(f) Other Stakeholders
Financial Institutions, Banks, Creditors and Consumers are enabled to measure the law
abiding nature of Company management.

11. SECRETARIAL AUDIT Contents:
Secretarial Audit report should be addressed to the members and form part of the Annual Report.
It should, among other things, contain Secretarial Auditor’s comments and observations on:
1. Compliance or non-compliance during the defined audit period, in relation to the
statutes, rules, regulations, etc. applicable to the company;
2. Significant litigation(s) within the scope of audit;
3. Board Processes followed by the Company which inter alia would cover:
a. Board structurewhich consists of –
(i) Composition of the Board , (ii) Suitability of directors , (iii) Succession planning
b. Board Systems and Processes consisting of-
(i) Convening the meeting. (ii) Content of agenda
(iii) Conducting the meetings (frequency and length)
(iv) Adequacy of mineutes (v) Board Comittes
4. The existence of adequate internal control systems, procedures and safeguards for
ensuring compliance with laws applicable to the company, commensurate with the size
of the company and the nature of its business.
5. Such other matters that may be required to be audited/reviewed from a compliance
and governance perspective.
6. Any material event(s) happening after the financial year but before the date of the
report having substantial impact on any of the above reported items.

12. I M POSSIBLE
1
I M POSSIBLE
BibekPrajapati
(FCMA, CS, MBA, M COM, ).
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