ACCOUNTING & TAX
SECRETARIAL AUDIT
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OVERVIEW
SECRETARIAL AUDIT
During the Secretarial Audit, a secretarial auditor determines whether the organisation complies with all relevant rules and regulations. The following are some characteristics of a secretarial audit:
- Recognizing a non-compliance occurrence makes it easier to take appropriate action.
- The business adheres to excellent corporate practices.
- This Audit aims to benefit the company and enhance its operations.
- By bringing a systematic, fruitful way to consider the control, governance, and possible efficacy of risk management, it aids in achieving the company's goals.
- It assures management, regulators, and stakeholders about statutory compliance, sound governance, and appropriate and effective procedures and systems.
Beneficiaries of Secretarial Audit
- Promoters
- Management
- Non–Executive Directors
- Government Authorities
- Investors
- Other Stakeholders
APPLICABILITY
APPLICABILITY OF A SECRETARIAL AUDIT
The companies listed below have a mandate for secretarial audits. These businesses must also create the Secretarial Audit Report.
- All Listed Companies
- Each public company with at least INR 50 crores in fully paid-up share capital.
- A public firm with an annual revenue of at least INR 250 crore.
- Every company borrows at least INR 100 crore.
IMPORTANT CLAUSES
IMPORTANT CLAUSES ASSOCIATED WITH SECRETARIAL AUDIT
The components that must be included in the Audit and the requirements for secretarial audits are listed below.
- Certificate of Compliance.
- Verification of records and documents
- Under the Companies Act of 2013, a critical section of the secretarial audit report.
- According to SEBI Rules & Regulations, a critical portion of the Secretarial Audit report.
- Under other laws, this section of the secretarial audit report is significant.
- The Secretarial Audit's time frame.
- Ineligibility for the Secretarial Auditors' appointment.
- The business is required to offer all support.
- Goals of a Secretarial Audit
BENEFITS
BENEFITS OF SECRETARIAL AUDIT
The following are some advantages of a secretarial audit.
- It can be used as part of due diligence by someone who wants to buy the business, has an interest in it, or is looking for a joint venture partner.
- It assures the owners that the company's management and affairs are being handled in accordance with the law and that their investment is not at risk.
- Self-regulation and professional discipline are aided.
- Allows for prompt compliance.
- It gives the investors a positive impression of the company's legal history.
LAWS HIGHLIGHTED
LAWS HIGHLIGHTED IN THE SECRETARIAL AUDIT REPORTS
The secretarial auditor must assess and document adherence to the following laws for the secretarial audit report:
- The Companies Act of 2013 (the Act) and it's implementing Rules.
- The Companies Act and client interactions are covered by the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993.
- The Securities and Exchange Board of India Act, 1992 (the "SEBI Act") contains the following regulations and guidelines.
- Securities Contracts (Regulation) Act of 1956 (the "SCRA") and it's implementing rules.
- The Depositories Act of 1996 and its implementing regulations and by laws.
- Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings are governed by the Foreign Exchange Management Act of 1999 and the rules and regulations enacted thereunder.
- The 2008 SEBI Regulations (Issue and Listing of Debt Securities).
- The 2011 SEBI Regulations (Substantial Acquisition of Shares and Takeovers).
- The SEBI (Prohibition of Insider Trading) Regulations, 2015; Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992.
- The 2009 Regulations of the Securities and Exchange Board of India (Issuance of Capital and Disclosure Requirements).
- The SEBI (Share Based Employee Benefits) Regulations, 2014; the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
- The 2009 Regulations of the Securities and Exchange Board of India (Delisting of Equity Shares).
- Regulations for the buyback of securities by the Securities and Exchange Board of India, 1998.
- Regulations for SEBI (Listing Obligations and Disclosure Requirements), 2015.
REQUIRED DOCUMENTS
REQUIRED DOCUMENTS FOR A SECRETARIAL AUDIT
- Charter Documents and Statutory Registers
- Board and General Meeting Minutes & Notices
- Last year's Secretarial Audit Report and Audited financial statements
- Lease Deed, Bonds, Annual Performance Reports, and other returns
- If there is a foreign investment, then the filings with RBI and other statutory departments are needed
- Registers that are maintained as per Labour Laws
- Statement and Admission for code of conduct received from the directors
- Sitting fees and remuneration details paid to directors
- Particulars of CSR amount
- SAST Disclosures
- Details of Bank account regarding dividend
- If there are any foreign borrowings in the company, the details of ECB Returns are required.
PROCEDURE
PROCEDURE OF THE SECRETARIAL AUDIT
- The Board Meeting must approve a resolution to appoint a Secretarial Auditor.
- The nomination of the secretarial auditor is officially announced after the resolution has been approved. This can be accomplished by suggesting an engagement letter to the Secretarial Auditor.
- The secretarial auditor must sign the Letter of Engagement to accept the position following the formal communication of employment.
- The secretarial auditor should then be consulted about the company to familiarize them with its organizational structure.
- Following that, a meeting with the auditor is held to decide whether to create an audit plan.
- The next stage is to finalize the audit plan and communicate it to other staff members following the meeting with the auditor and discussion of the audit plan.
- The preparation of the working report by the secretarial auditor is the next step. All of the company's secretarial audit reports make up a functioning report.
- The audit summary must then be prepared and discussed with the relevant parties.
- The secretarial auditor must submit their report as the last stage.
PENALTIES
PENALTIES FOR FRAUD AND FALSE STATEMENT
The Companies Act of 2013 contains criminal penalties for making a false statement or committing fraud. The criminal provisions are as follows:
Article 447
According to this clause, anyone found guilty of fraud faces a minimum sentence of six months in jail and a maximum of ten years in prison, as well as a fine that may be triple the amount of the fraud that was perpetrated.
Fraud, as it relates to corporate affairs, is defined as the commission of any illegal act or omission of any legal act, abuse of position, concealment of fact, or any combination thereof, with the intent to deceive, obtain an unfair advantage, or impede the interests of the company’s shareholders, creditors, or any other individual, regardless of whether there has been a wrongful loss or gain.
Article 448
The punishment for making false statements is covered in this section. According to the section, if someone makes any false statements in any report, certificate, return, financial statement, prospectus, statement, or other document required by, or for any purpose of, this Act or the rules issued thereunder, False statement concerning any significant details, with the knowledge that it is false; omission of any significant detail, with the knowledge that it is essential.
ASSIST WITH SECRETARIAL AUDIT
HOW CAN TAXKEY ASSIST YOU WITH A SECRETARIAL AUDIT?
A team of knowledgeable and skilled business consultants from Taxkey will support and carry out the full Secretarial Audit. By offering services like proper analysis of laws and accounts and answering any questions concerning secretarial Audit, Taxkey assists its client in carrying out the secretarial Audit. We ensure that the business adheres to the relevant secretarial standards and conduct a review of business and working practice.
The Secretarial Audit process will be made easier for you by the qualified individuals we have on staff at Taxkey. Your job will be successfully and promptly completed with the guidance and assistance of our experts throughout the entire audit procedure and other connected services. Feel free to get in touch with our knowledgeable and skilled personnel at Taxkey if you have any questions about secretarial auditing and related services.
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