Secretarial audit is the term used to describe the independent review and assessment of a firm's compliance with legal and regulatory obligations relating to corporate governance, company law, and other applicable regulations. A competent Company Secretary (CS) conducts it to guarantee that the business complies with applicable laws, keeps accurate records, and adheres to good corporate governance principles.
A secretarial audit's goal is to determine whether the company has complied with all of its legal requirements, including holding board and general meetings by established procedures, keeping statutory registers and records, submitting necessary paperwork to regulatory bodies, adhering to disclosure rules, and maintaining statutory registers and records.
To determine the degree of compliance, the secretarial audit process analyzes and confirms the organization's records, documents, registers, agreements, meeting minutes, and other pertinent information. The auditor checks to see if the business complies with the Companies Act of 2013, norms set forth by the Ministry of Corporate Affairs (MCA), Securities and Exchange Board of India (SEBI) rules, and any other relevant legislation.
A report detailing the results of the secretarial audit contains observations on non-compliance, flaws, and suggestions for improvement. The report might also make suggestions for improving the corporate governance framework of the organization and addressing any non-compliance.
The secretarial audit is a proactive step to find and fix compliance flaws, improve corporate governance procedures, and guarantee accountability and openness in business operations. The management, board of directors, regulators, and stakeholders use it as a crucial tool to evaluate the company's compliance status and take the necessary steps to remedy any issues.

Secretarial auditing is the process of carefully going over and confirming that the company's records are accurate and compliant with all applicable laws and regulations. It is handled by a certified expert known as a company secretary. These are a few benefits of secretarial audit:

• Observance of legal and regulatory requirements: Secretarial audits make sure that the business abides by the numerous legal and regulatory standards that apply to it. It aids in locating any non-compliance concerns and enables the business to make necessary corrections to stay out of trouble or face legal repercussions.
• Risk management: A secretarial audit aids in locating potential hazards and inconsistencies in the business's processes. It evaluates the company's governance procedures and internal control systems, emphasizing any flaws or holes that could put the business at risk. The business can improve its framework for risk management by addressing these problems.
• Enhanced corporate governance: Secretarial audit encourages the use of strong corporate governance procedures within the company. It evaluates the efficiency of the board of directors, the operation of several committees, and adherence to moral principles. It assists in finding areas where governance practices can be better, resulting in more transparency, accountability, and justice.
• Increased stakeholder trust: By doing a secretarial audit, the company shows its dedication to compliance and good corporate governance. In turn, this boosts the confidence of all parties involved, including shareholders, lenders, investors, and regulatory bodies. They are reassured that the business is run responsibly and openly by this.
• Finding irregularities and fraud: A secretarial audit can aid in identifying any unethical behavior within the organization. An extensive examination of financial transactions, records, and internal control systems is required. Any suspect activity can be located and reported, enabling prompt action.
• Avoiding fines and legal repercussions: By conducting a secretarial audit, businesses can find and fix any non-compliance problems before regulatory authorities notice them. This assists in preventing fines, legal lawsuits, reputational harm, and other unfavorable effects that may result from non-compliance.
• Continuous improvement: Secretarial audits offer insightful analysis and suggestions for enhancing the organization's compliance, governance, and operational procedures. It aids in pinpointing areas that require improvement and putting best practices into action to increase overall effectiveness and efficiency.

The specific documents required for a secretarial audit may vary depending on the nature and size of the company, as well as the scope of the audit. However, here is a list of common documents required for secretarial audits in India:

• Memorandum of Association (MoA) and Articles of Association (AoA) of the company.
• Register of Members, Register of Directors, and Register of Charges.
• Minutes of meetings of the Board of Directors and its committees.
• Yearly reports and budget summaries of the organization.
• Statutory registers such as Register of Investments, Register of Contracts, etc.
• Arrangements, contracts, and other authoritative reports went into by the organization.
• Shareholding pattern and details of share transfers.
• Board resolutions and circular resolutions.
• Copies of notices, agenda, and minutes of general meetings.
• Register of Related Party Transactions.
• Secretarial records, including the company's statutory books, registers, and records.
• Regulatory filings are made with the Registrar of Companies (RoC) and other authorities.
• Correspondence with regulatory authorities, such as the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), etc.
• Compliance with environmental, labor, and other applicable laws and regulations.

The following steps are involved in the process of a secretarial audit :

• Understanding the Scope: The first step is to ascertain the secretarial audit's scope, which entails locating the rules and regulations that apply to the organization. This aids in identifying the audit's scope and the subjects that require investigation.
• Planning and preparation: The auditor plans the audit process after defining the scope. Specifically, this entails identifying the areas that will be examined, developing an audit plan, and figuring out the resources needed for the audit. The auditor also gathers and examines the pertinent firm records and documentation.
• Preliminary Assessment: To get a thorough understanding of the business's operations, its compliance status, and any possible areas of concern, the auditor conducts a preliminary assessment. This evaluation aids in determining the audit's main emphasis areas.
• Auditing Techniques: The auditor employs meticulous auditing techniques to assess the company's adherence to legal and regulatory standards. Reviewing pertinent documents, records, registrations, agreements, meeting minutes, and other items is part of this process. If necessary, the auditor may also undertake site visits and interview essential people.
• Identification of Non-compliance: During the audit, the auditor looks for any instances of failing to adhere to any laws, rules, or regulations that may be in force. These can consist of failing to keep statutory registers up to date, failing to file the necessary paperwork, breaking corporate governance rules, etc.
• Reporting: The auditor creates a thorough report outlining the audit's key findings after finishing the audit procedures. The report offers a summary of the objectives, methods, findings, and suggestions for improvement. There may be a management response section in the report where the business can comment on the conclusions and suggested changes.
• Follow-up and Compliance: After the audit report is turned in, it is up to the business to address any violations found and put the suggested corrective measures into practice. To make sure the organization has implemented the necessary corrective actions, the auditor may carry out follow-up processes.

In India, secretarial audits generally examine whether the 2013 Companies Act's rules have been followed. Several additional laws and rules do, however, apply to secretarial audits. In India, the following significant laws and regulations are covered under secretarial audit:

• Companies Act, 2013: The Companies Act, 2013 is the primary piece of legislation that controls the formation, administration, and management of businesses in India. Secretarial audits make sure that the numerous rules of this act are followed, including those concerning corporate governance, board meetings, general meetings, the upkeep of registers and records, the filing of documents, etc.
• Securities Contracts (Regulation) Act of 1956: Secretarial audits look at how well the rules of this act—which governs insider trading, stock exchanges, the listing and delisting of securities, etc.—are being followed.
• The Securities and Exchange Board of India (SEBI) Act of 1992: SEBI Act creates the regulatory framework for securities markets in India. Secretarial audits assess adherence to SEBI regulations, including those about public concerns, disclosures, corporate governance, insider trading, etc.
• The Depositories Act, 1996: This law controls the creation and operation of depositories in India. Secretarial audits confirm that the rules regarding the dematerialization of securities, share transfers, etc. are being followed.
• Foreign Exchange Management Act, 1999 (FEMA): In India, FEMA oversees the regulation of international investments and foreign exchange operations. Secretarial audits determine whether FEMA standards are being followed, including those relating to reporting requirements for foreign investments, money repatriation, and following regulations for external commercial financing, among other things.
• Insolvency and Bankruptcy Code, 2016: Secretarial audit looks at adherence to the code's provisions, which serve as a framework for handling insolvency and bankruptcy proceedings in India.
• Labour Laws: Depending on the size and type of the business, a secretarial audit may also look at whether or not different labor laws, such as the Employees Provident Fund Act, Employees State Insurance Act, Payment of Bonus Act, and Payment of Gratuity Act, have been complied with.

A firm's compliance with legal and regulatory obligations about corporate governance, company law, and other applicable statutes is examined and evaluated independently as part of a company secretarial audit. It entails determining whether the business has complied with established standards and procedures as well as its legal duties.

A company secretarial audit's main goal is to make sure the business is operating by all applicable legal requirements, including the Companies Act of 2013, MCA rules and regulations, and other applicable laws and regulations. It focuses on examining the company's compliance with rules regarding, among other things, disclosure requirements, the upkeep of statutory registers and records, holding board and general meetings, and corporate governance practices.

The following characteristics of a company secretarial audit often exist:

• Independent Examination: A competent company secretary (CS) who is not an employee of the company conducts the company secretarial audit on behalf of the firm. Due to its independence, the company's compliance with legal and regulatory standards can be evaluated objectively.
• Assessment of conformity: The main objective of a Company Secretarial Audit is to determine if the company conforms to all applicable laws, rules, and standards. It looks at how well the business complies with laws about corporate governance, business law, and other pertinent statutes.
• Comprehensive Review: As part of the audit, all of the company's records, papers, registers, contracts, meeting minutes, and other pertinent information will be thoroughly reviewed. It covers a broad range of topics, including board and general meetings, keeping statutory registers, submitting paperwork to regulatory agencies, adhering to disclosure rules, corporate governance practices, etc.
• Determination of Scope: The requirements of the Companies Act, 2013, and other relevant regulations, as well as the size and nature of the company's operations, are used to establish the scope of the Company Secretarial Audit. Based on risk evaluation and compliance priorities, the auditor evaluates the particular areas that need to be audited and determines the major focus areas.
• Reporting and Recommendations: The Company Secretary draughts a thorough report following the audit's conclusion. Based on the audit findings, the report includes findings, observations, and recommendations. It might draw attention to instances of non-compliance, flaws in corporate governance procedures, and problem areas. The recommendations are meant to improve the company's compliance system and address non-compliance.
• Enhancing Corporate Governance: The Company Secretarial Audit is essential to enhancing the company's internal corporate governance procedures. The audit helps identify and address weaknesses by evaluating compliance with legal and regulatory standards, encouraging openness, accountability, and responsible management.
• Stakeholder Confidence: The audit report gives management, the board of directors, regulators, and shareholders important information. It ensures that the business runs by established standards and procedures, giving stakeholders trust in the company's adherence to legal and regulatory requirements.

Secretarial audit services encompass a range of activities aimed at assessing and ensuring compliance with legal and regulatory requirements related to corporate governance and company law. Some of the key services that fall under secretarial audit include:

• Compliance Review: Conduct a comprehensive review of the company's compliance with applicable laws, rules, and regulations. This involves examining the company's adherence to statutory provisions, corporate governance norms, and regulatory requirements.
• Statutory Registers and Records Maintenance: Verifying the maintenance of statutory registers, records, and books of accounts as required by the Companies Act, 2013. This includes assessing the completeness, accuracy, and up-to-dateness of records such as the Register of Members, Register of Directors, Register of Charges, etc.
• Corporate Governance Assessment: Evaluating the company's adherence to good corporate governance practices. This includes assessing the composition and functioning of the board of directors, compliance with governance codes, related party transactions, board and committee meetings, and disclosure practices.
• Regulatory Filings and Disclosures: Reviewing the company's compliance with filing requirements and disclosure obligations. This involves ensuring timely and accurate filings with the Registrar of Companies (RoC) and other regulatory authorities, including annual returns, financial statements, board resolutions, and other required documents.
• Board and General Meetings: Assessing compliance with the provisions related to the conduct of board and general meetings. This includes reviewing the notice, agenda, minutes, and resolutions of meetings to ensure adherence to legal requirements and procedural formalities.
• Due Diligence: Conducting secretarial due diligence for mergers, acquisitions, and other corporate transactions. This involves assessing the compliance status of the target company and identifying potential legal and regulatory risks.
• Advisory Services: Providing expert advice and guidance on corporate governance, legal compliance, and regulatory matters. This may include assisting with the interpretation of laws and regulations, suggesting best practices, and helping companies develop effective compliance frameworks.
• Training and Education: Conducting training programs and workshops to enhance awareness and understanding of legal and regulatory requirements among directors, executives, and employees. This helps companies build a compliance-conscious culture within the organization.

Depending on the particular needs of the business and the parameters negotiated with the auditing firm, key provisions that are commonly included in a secretarial audit engagement agreement can change. Here are a few frequent clauses that are frequently used, though:

• Scope of Work: This section specifies the precise parameters of the secretarial audit, including the topics to be addressed, the records and documents to be reviewed, and the compliance standards to be evaluated. This ensures that both parties are aware of the expectations and clarifies the scope of the audit.
• Confidentiality: This provision guarantees the privacy of any sensitive information about the company that may be made public throughout the audit process. It states that the auditing company and its personnel are required to uphold absolute secrecy and not share any sensitive information with unauthorized parties.
• Independence and Objectivity: The auditing firm's independence and objectivity in carrying out the secretarial audit are emphasized in this section. It promises to conduct the audit objectively, free from conflicts of interest, and without being improperly influenced by the company or its stakeholders.
• Compliance Reporting: This provision outlines the secretarial audit's reporting responsibilities. It specifies the format, due date, and submission requirements for the audit report, as well as any intermediate or final words. It could also specify the expected level of detail and the report suggestions.
• Access to Information: This provision guarantees that the auditing firm will have complete access to all corporate records, papers, and staff needed to carry out the secretarial audit successfully. It might specify the company's obligation to grant timely, unrestricted access to the pertinent data and help needed for the audit process.
• Liability and Indemnification: The company and the auditing firm's liability for the secretarial audit is covered by this provision. To shield both parties from potential legal claims resulting from the audit engagement, it may outline the scope of obligation, restrictions of liability, and any indemnity clauses.
• Termination: The circumstances under which either party may end the secretarial audit assignment are described in this clause. It might have clauses for ending a contract owing to non-performance, a breach of the agreement, or other predetermined conditions. It also covers the after-effects of termination, such as paying fees and giving back private information.

A beneficiary of a secretarial audit can vary depending on the context and purpose of the audit. A secretarial audit is an independent examination of a company's compliance with various laws, regulations, and guidelines related to corporate governance, company law, and other applicable laws. It focuses on ensuring that the company is compliant with legal and regulatory requirements and follows the prescribed procedures.

Here are some potential beneficiaries of a secretarial audit:

• Company management: The management of the company can benefit from a secretarial audit by gaining insights into the company's compliance status, identifying any areas of non-compliance, and taking corrective actions to address deficiencies. It helps them ensure that the company is being managed by the applicable laws and regulations.
• Board of Directors: The board of directors is responsible for overseeing the affairs of the company and ensuring compliance with legal and regulatory requirements. A secretarial audit provides the board with an independent assessment of the company's compliance practices, allowing them to fulfill their fiduciary duties effectively.
• Shareholders: Shareholders have a vested interest in the company's operations and want assurance that the company is being managed by the law. A secretarial audit report provides transparency and reassurance to shareholders regarding the company's compliance and adherence to corporate governance norms.
• Regulatory authorities: Regulatory authorities, such as the Securities and Exchange Board of India (SEBI) or the Ministry of Corporate Affairs (MCA), may require certain companies to conduct secretarial audits as part of their regulatory compliance. The audit report serves as evidence of compliance and can be submitted to the relevant regulatory authority.
• Lenders and investors: Banks, financial institutions, and investors may request a secretarial audit as part of their due diligence process before extending loans or making investments. The audit report helps them assess the company's compliance status and manage potential risks associated with non-compliance.
• Government agencies: Government agencies, such as tax authorities or enforcement agencies, may benefit from a secretarial audit to ensure that companies are adhering to legal and regulatory requirements. The audit findings can assist in investigations or legal proceedings if required.

The eligibility criteria for the appointment of a secretarial auditor in India are outlined in Section 204 of the Companies Act, 2013. According to the Act, the following individuals or entities are eligible to be appointed as a secretarial auditor:

• Practicing Company Secretary (PCS): A Practicing Company Secretary who holds a valid certificate of practice issued by the Institute of Company Secretaries of India (ICSI) is eligible for appointment as a secretarial auditor. The PCS should have a minimum of three years of continuous practice.
• The firm of Company Secretaries: A firm of Company Secretaries, where at least one of the partners is a PCS, can be appointed as a secretarial auditor. The firm must have a minimum of three years of continuous practice.
• Company Secretary in Whole-time Practice (CSWTP): A Company Secretary in Whole-time Practice who holds a valid certificate of practice issued by the ICSI and fulfills the eligibility criteria prescribed by the ICSI can also be appointed as a secretarial auditor.

It's important to note that the secretarial auditor appointed for a company cannot be an employee of the company. The auditor should be an independent professional or firm, separate from the management of the company, to ensure impartiality and objectivity in the audit process.

BiatConsultant offers several benefits when it comes to helping with secretarial audits. Some of the key advantages include:

• Expertise in Secretarial Audit: BiatConsultant specializes in secretarial audit services, which means they have a deep understanding of the legal and regulatory requirements related to corporate governance and compliance. Their expertise ensures that your organization's secretarial audit is conducted effectively and in line with the applicable laws and regulations.
• Compliance with Laws and Regulations: Secretarial audit is crucial for ensuring compliance with various laws, regulations, and guidelines related to corporate governance. BiatConsultant can help you navigate through these complexities and ensure that your organization adheres to all relevant legal requirements. This minimizes the risk of non-compliance and potential penalties or legal issues.
• Comprehensive Audit Approach: BiatConsultant follows a comprehensive approach to secretarial audit, covering various aspects such as compliance with company law, corporate governance practices, statutory registers, board meetings, shareholder meetings, and other related areas. Their detailed examination helps identify any gaps or non-compliance issues and provides recommendations for rectification.
• Risk Mitigation: By conducting a secretarial audit, BiatConsultant helps identify and mitigate potential risks associated with non-compliance or inadequate corporate governance practices. This proactive approach minimizes the likelihood of legal disputes, penalties, reputational damage, or operational disruptions that could arise due to non-compliance.
• Enhanced Corporate Governance: BiatConsultant's secretarial audit services contribute to enhancing your organization's corporate governance practices. They provide insights and recommendations to improve processes, strengthen internal controls, and align practices with the best industry standards. This fosters transparency, accountability, and overall efficiency within the organization.
• Professional Experience: BiatConsultant's team comprises experienced professionals with expertise in corporate law, secretarial practices, and compliance. Their knowledge and experience enable them to handle complex audit requirements and provide practical solutions tailored to your organization's specific needs.
• Confidentiality and Independence: BiatConsultant maintains strict confidentiality while conducting secretarial audits and ensures independence in their assessment. This impartiality ensures the integrity of the audit process and provides unbiased insights and recommendations for improvement.
• Time and Cost Savings: By outsourcing secretarial audits to BiatConsultant, you can save valuable time and resources. Their specialized knowledge and efficient processes allow for a streamlined audit experience, reducing the burden on your internal teams. This enables your organization to focus on core business activities while ensuring compliance and good corporate governance.