Scope of Secretarial Audit: Key Checks and Important Documents

Secretarial audits are an important part of corporate governance because they make sure that a company is following the rules and laws that apply to it. The reports are like a detective’s lens; they find problems with compliance or governance that might not have been seen otherwise. Significant documents and critical reviews are an important part of the process because they help people judge the health and honesty of a business. The goal of this blog post is to look at the key documents and steps that are needed for a secretarial audit. We’ll discuss about Scope of Secretarial Audit, key check and important documents.

Table of Content

Meaning of Secretarial Audit

A part of the company’s overall compliance management system is a secretarial audit. One useful method for managing corporate compliance is the secretarial audit. It also helps in identifying noncompliance and implementing the necessary actions.

The process of determining if a company complies with various laws, rules, regulations, processes, records, accounting, bookkeeping, etc. is known as secretarial audit applicability. The company’s secretarial audit might be taken over by an independent professional. Scope of Secretarial Audit. Enforcing adherence to legal and procedural requirements is the process inquestion. Its main purpose is to keep an eye on whether specified laws are being followed.

Objective of Secretarial Audit

The objective of secretarial Audit ( scope of Secretarial Audit) is:

• Compliance Verification: The audit verifies the company’s compliance with laws, rules, and corporate governance. Corporation filings, shareholder meetings, board meetings, and other legislative requirements must be observed.
• Non-Compliance Identification: The audit seeks to identify non-compliance with laws and corporate governance norms. This involves finding irregularities in organization records, documentation, and procedures.
• Risk Mitigation: Detecting non-compliance and risk areas helps mitigate risk. The secretarial audit helps the company quickly correct these problems. A pre-emptive approach may lessen legal, financial, and reputational concerns.
• Corporate Governance Enhancement: Auditing improves corporate governance in the organization. The firm’s transparency, fairness, and accountability build stakeholder trust.
• Stakeholder confidence: A good secretarial audit can encourage shareholders, investors, creditors, and regulators to trust the company’s management and operations. The organization’s commitment to legal and ethical values is shown here.
• Legal Compliance: Maintaining legal compliance requires ensuring compliance with legal norms. The secretarial audit aims to reduce legal, financial, and reputational risks from violating regulations.

Limits of Secretarial Audit

The Companies Act 2013 in India mandates specific companies to conduct a Secretarial Audit. The prescribed threshold for Secretarial Audit is as follows:

• Publicly traded companies that possess a paid-up share capital amounting to ₹50 crores or above.
• Private enterprises that possess a paid-up share capital amounting to ₹50 crores or above.
• Companies that have a yearly revenue of ₹250 crores or greater.

Hence, if a company comes into any of the categories, it is obligated to conduct a Secretarial Audit.

Documents required for Secretarial Audit

The necessary documents for performing a Secretarial Audit include below mentioned certified copies that need to be obtained and validated:

• The Articles of Association & Memorandum of Association.
• Documents submitted to the Registrar of Companies accompanied by receipts. 
• Certificate of issuance of shares and other forms of securities.
• The Company’s collection of deposits. 
• During the fiscal year, any charges that are established, altered, or fulfilled. 
• Documents for loans, advances, and investments, as stated in Sections 185 and 186 need to be obtained for audit.
• The documents stating appointment and resignation of an auditor, if applicable.
• Procedures for the Appointment, Resignation, and Removal of Directors and Key Managerial Personnel, if applicable. 
• All legislative registers, including the Share Transfer Register, are required to be maintained.
• Documentation of the proceedings of the Board, General Meetings, Audit Committees, and other Committees, commonly referred to as the minutes, is of utmost importance in the realm of corporate governance.
• Document containing records of attendance at Board meetings, General Meetings, Audit Committees, and other Committees. 
• A duplicate of the financial statement, accompanied with the Notice of General Meetings.
• Notifications about the disclosure of interests held by directors.
• Duplicates of contractual agreements executed between the business and any affiliated entities.
• The compilation of the shareholder list and comprehensive documentation about share transfers that have occurred within the fiscal year. 
• A certificate issued by the Road Transport Authority (RTA) indicating the total count of shareholders as of the conclusion of the fiscal year.
• A certificate that has been signed by the Company Secretary or Chief Financial Officer (CFO) of the organization. 
• During the financial year under audit, any modifications to the company’s name or face value, as well as any alterations in its capital structure resulting from corporate actions undertaken by the firm, need to be duly accounted for
• Any corporate actions undertaken by the Company. 
• The Company need to submit Corporate Action Forms. 
• The distribution of equity shareholding and its composition at the end of the fiscal year need to be obtained for audit.
• The company shall acknowledge and process any directives issued by the High Court/Tribunal or any other regulatory authority. 
• The establishment and modification of committees, specifically their formation and any subsequent alterations to their composition. 
• The distribution of dividends, specifically in the context of proposed or interim dividends needs to be documented.
• Corporate Social Responsibility (CSR) expenditures if incurred need to be documented.

Checklist of Secretarial Audit

Following is the secretarial audit checklist:

• An evaluation of the documentation pertaining to the registration of a firm.
• Reviewing the accuracy and completeness of the company’s statutory registers.
• An evaluation of the minutes from board and shareholder meetings.
• An analysis of the appointments and resignations of directors.
• A comprehensive review of share capital and its associated transactions.
• Review of the adherence to the provisions outlined in the Companies Act.
• Examining the Adherence to additional pertinent laws and regulations
• Review the process of submitting statutory returns and any relevant papers.
• The analysis of transactions involving interconnected entities
• An evaluation of the policies and code of conduct implemented by the firm.
• Evaluation of the organization’s risk management protocols
• The verification of confirming adherence to the internal controls and rules of the corporation.
• Evaluation of the organization’s sustainability initiatives
• An evaluation of the financial statements and accompanying disclosures of the company. 

The checklist for secretarial audit of listed company help auditor to conduct audit without missing any important aspect.

More about Secretarial Audit checklist & documentation

The secretarial auditor is responsible for verifying several aspects and provides secretarial audit report, including but not limited to, the maintenance of statutory registers and records, as well as ensuring compliance with relevant regulations as mentioned below:

• List of documents need to be verified in case of alteration of Memorandum of Association:
  • Notification of general meeting with appropriate justification.
  • General Meeting minutes
  • Annual Return
  • Financial Statements
  • Deposit Return
  • If any change in object occurs, then advertisement for the same.
  • Memorandum of association & Article of Association
  • Documents along with attachment of INC23, INC24, INC25, INC26, INC28.
• List of documents need to be verified in case of alteration of Article of Association:
  • General meeting minutes
  • Article & Memorandum of association
  • INC27 & MGT 14
• Indicative document list that needs to be verified:
  • Companies’ website
  • DIN
  • Incorporation document
  • Issue of shares & securities
• Documents need to be checked with respect to deposits:
  • Board meeting minutes
  • Inviting deposit circulars
  • Deposit insurance contract
  • Instrument creating charge
  • Trustee written consent for depositor
  • For calling meeting of depositors written requisition required
  • Deposit trust deed
•  Secretarial standard compliance

Takeaway

Secretarial audits make sure that people are following the law and doing the right thing in the complicated world of company governance. The careful looking over of important papers and the thorough checks that are done during these audits make sure that businesses are open and responsible. Finding mistakes and fixing them quickly is important for businesses because it keeps them out of trouble with the law and builds trust among partners. These important scope of Secretarial Audit, documents and checks are more than just paperwork; they are the foundations of responsible and legal business practices in the modern world. Hopefully these scope of Secretarial Audit, key check and documents help you.