Overview

Secretarial Audit is a process that evaluates the compliance level of a company with respect to various statutory and legal requirements. It is conducted by an independent professional who verifies and assesses the accuracy and completeness of the company's records and documents to ensure that they are maintained in accordance with the relevant laws and regulations. 
The purpose of Secretarial Audit is to identify any violations, irregularities, or errors in the company's records and report them to the management for necessary action. It helps the company to maintain transparency, accountability, and good corporate governance practices.
An audit is more than just a review of financial records and accounts. 

In fact, it involves a comprehensive evaluation and confirmation of a company's operations and functions, data, records, and efficiency. The Secretarial Audit specifically focuses on ensuring annual compliance with all relevant rules and regulations.

In addition to overseeing regulatory bodies and interested parties, the Secretarial audit also evaluates employees to ensure that the company's management is in compliance and has a strong internal control system and structured approach to risk management and governance. All of these areas are closely scrutinized during the audit process.

India's implementation of Secretarial Audit
An essential tool to ensure legal compliance in a company is the Secretarial Audit. This process involves close monitoring, examination, and verification of the company's operations to ensure adherence to the applicable rules and regulations. Through this process, any errors or mistakes are regularly inspected, and an efficient compliance mechanism is established within the organization.

Under the Companies Act 2013, all companies are required to adhere to numerous regulations and guidelines when it comes to their reports and records. Therefore, routine audits provide accurate information regarding the entity's adherence to applicable laws and the extent to which it has complied with legal provisions.

Scope of Secretarial Audit in India
The Secretarial Audit is governed by Section 204(1) of Companies Act 2013, which outlines its scope, applicability, and procedure. Thus, certain categories of companies are required to undergo an Audit.
•    Any entities that are not listed
•    Unlisted public companies with a paid-up share capital of over Rs. 50 Crore or a turnover of over Rs. 250 Crore
•    Private companies that are subsidiaries of unlisted public companies with paid-up capital and/or turnover exceeding Rs. 50 Crore and Rs. 250 Crore respectively.

What are the benefits of Conducting Secretarial Audit in India?
Listed below are benefits that come with conducting a secretarial audit:
•    Ensures proper functioning of a company relies on the collaboration of its directors, creditors, stakeholders, employees, and management.
•    By maintaining compliance, a company can benefit from the positive reputation it garners. 
•    Monitoring and regulating compliance and non-compliance further ensures that the company operates effectively. 
•    When all procedures are legally executed through secretarial audit, management can devote their attention to other vital operations. 
•    Investors are reassured and gain confidence in the company's level of compliance, ensuring that their investments are protected.

Steps involved in secretarial audit
Undertaking Secretarial Audit requires strict adherence to a specific set of steps. Despite its difficulty, a proficient auditor must follow these steps to conduct an effective audit:
•    The purpose of the management meeting is to go over the tasks and compensation regarding their audit services. Once the objectives have been established, the scope and activities will be designated. 
•    When the plan for the auditing work is complete, the company will issue an engagement letter outlining the terms and conditions of their role. 
•    The PCS will then prepare the appropriate procedure for conducting the audit, including prioritizing the legal areas to be covered, scheduling site visits, and estimating the necessary time required to complete the work.
•    The audit will be carried out and documented through all stages of the process. Following the conclusion of the audit, the final report will be presented by PCS in the designated MR-3 format, complete with signature and Company Secretary in Practice stamp.

Conducting secretarial audits in various areas
•    SEBI mandates that listed companies undergo secretarial audits conducted by authorized PCA/PCS. The audit process requires PCS to reconcile the information from CDSL/NSDL with the shares held by the companies. This requirement is strictly applicable to all listed corporations.
•    In accordance with the Ministry of Heavy Industry and Public Enterprise, it is obligatory for Central Public Sectors to abide by corporate governance standards. 
•    The Reserve Bank of India requires banks to conduct thorough due diligence and obtain a certification from professionals indicating compliance levels. 
•    Private and unlisted public companies must undergo an annual audit by practicing professionals and submit the report to the relevant ROC as mandated.

Section 204's violation comes with a penalty
Breaking any provisions stated in this section can result in penalties or fines ranging from a minimum of Rs.1 Lakh up to Rs. 5 Lakhs for the company, its director, officer or practising company secretary.

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