Secretarial Audit is most effective way to mechanism to ensure the compliance of the multifarious requirements by the corporate enterprises under a host of legislations. It is a part of Legal compliance reporting system. The scope, content, criteria of the audit and of the compliance certificate are framed by the central government and rules are framed in this regard. The secretarial audit is always in the better interest of every corporate management as, an independent professional will certify that the company has carried out the compliances of the Act. This will also serve the larger interest of the shareholders, creditors and employees. The benefit of such audits, its process and other related aspects have successfully been brought out In this article including a checklist of activities, various areas to verify etc.
Benefits of Secretarial Audit:
- The Secretarial Audit can be an effective due diligence exercise for the prospective acquirer of a company or controlling interest or a joint venture partner.
- It assures the owners that management and affairs of the company are being conducted in accordance with requirements of laws, and that the owners’ stake is not being exposed to undue risk.
- Ensures the Management of a company that those who are charged with the duty and responsibility of compliance with the requirements of law are performing their duties competently, effectively and efficiently, so that the people in-charge of the day-to-day management of the company are not likely to be exposed to penal or other liability (and consequential risk and embarrassment) on account of non-compliance with law.
- The secretarial audit can assist bodies like SEBI, Stock Exchanges, Financial Institutions, Banks, etc. to gauge or measure the levels of compliance and non-compliance by the companies with whom they are concerned.
- To provide comfort to investors that the company has been conducting its affairs in accordance with laws and, therefore, their investment is safe and being taken due care of. SA will help unearth and check these practices and also enable law-enforcing agencies take timely corrective action by bringing to book the guilty.
Secretarial Audit (Clause 204)
- Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report a Secretarial Audit Report, given by a Company Secretary in Practice, in such form as may be prescribed.
- It shall be the duty of the company to give all assistance and facilities to the Company Secretary in Practice, for auditing the secretarial and related records of the company.
- The Board of Directors, in their report shall explain in full any qualification or observation or other remarks made by theCompany Secretary in Practice in his report.
- If a company or any officer of the company or the Company Secretary in Practice, contravenes the provisions of this section, the company, every officer of the company or the Company Secretary in Practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
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