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Secretarial Audit in India

Secretarial audit is a process of systematic examination and verification of a company’s compliance with various legal and regulatory requirements prescribed under the Companies Act, 2013, and other relevant laws and regulations in India. The objective of Secretarial Audit in India is to ensure adherence to statutory provisions, promote transparency, uphold corporate governance standards, and mitigate risks associated with non-compliance. Know More

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Legal Framework and Regulatory Provisions

Secretarial Audit in India is mandated under Section 204 of the Companies Act, 2013, which requires certain categories of companies to conduct a secretarial audit annually by a qualified company secretary. The rules and regulations pertaining to secretarial audit are outlined in the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Applicability of Secretarial Audit: The requirement for secretarial audit applies to the following categories of companies:

Listed companies.

Public companies with a paid-up share capital of Rs. 50 crore or more.

Public companies with a turnover of Rs. 250 crore or more.

Scope of Secretarial Audit: The scope of secretarial audit encompasses a comprehensive review of various aspects, including:

Compliance with applicable laws, rules, regulations, and guidelines.

Maintenance of statutory records, registers, and documents.

Convening and conduct of board meetings and general meetings.

Filing of statutory returns, disclosures, and documents with regulatory authorities.

Adherence to corporate governance norms and best practices.

Conducting a Secretarial Audit

Appointment of Company Secretary: The board of directors of the company is responsible for appointing a qualified company secretary to conduct the secretarial audit. The appointed company secretary must possess the requisite qualifications, expertise, and experience to perform the audit effectively.

Examination and Verification: The company secretary conducts a systematic examination and verification of the company’s compliance with statutory and regulatory requirements. This involves reviewing relevant documents, records, agreements, resolutions, and filings to assess compliance status and identify any insta nces of non-compliance or irregularities.

Preparation of Secretarial Audit Report (SAR): Based on the findings of the audit, the company secretary prepares a secretarial audit report (SAR) containing detailed observations, analysis, and recommendations. The SAR provides an assessment of the company’s compliance status, highlights any instances of non-compliance, and suggests remedial measures to address identified issues.

Submission of SAR to the Board of Directors: The company secretary submits the SAR to the board of directors of the company within the stipulated timeframe. The board reviews the findings and recommendations presented in the SAR and takes appropriate actions to address any identified non-compliances or deficiencies

Benefits of Secretarial Audit in India

Enhanced Compliance: Secretarial Audit in India helps companies maintain compliance with statutory and regulatory requirements, reducing the risk of penalties, legal disputes, and regulatory sanctions.

Risk Mitigation: By identifying non-compliances, irregularities, and lapses in governance practices, secretarial audit facilitates proactive risk management and enables companies to take corrective actions to mitigate risks.

Improved Corporate Governance: Secretarial audit promotes transparency, accountability, and good corporate governance practices, enhancing investor confidence and stakeholder trust in the company.

Legal Compliance

Secretarial audit helps companies adhere to the legal and procedural requirements prescribed under the Companies Act, 2013, and other relevant laws, ensuring adherence to corporate laws and regulations.=

Board Oversight

Secretarial audit provides the board of directors with insights into the company’s compliance status, enabling informed decision-making and effective oversight of corporate affairs.

Scope of Secretarial Audit in India

  • Compliance with Statutory Provisions: Examination of compliance with the provisions of the Companies Act, 2013, and other relevant laws, rules, and regulations applicable to the company.

    Verification of adherence to statutory requirements related to the incorporation, management, and administration of the company.

    Assessment of compliance with provisions concerning board meetings, general meetings, maintenance of statutory registers and records, and filing of statutory returns and disclosures.

    Corporate Governance Practices: Evaluation of the company’s corporate governance framework, including the composition and functioning of the board of directors, board committees, and key managerial personnel.

    Review of compliance with corporate governance guidelines, codes, and standards prescribed by regulatory authorities, stock exchanges, and industry bodies.

    Assessment of policies and practices related to transparency, accountability, risk management, and ethical conduct.

    Secretarial Records and Documentation: Scrutiny of the maintenance, accuracy, and completeness of statutory registers, records, and documents required to be kept by the company under applicable laws.

    Verification of the minutes of board meetings, general meetings, and committee meetings to ensure compliance with statutory requirements and accuracy of record-keeping practices.

    Assessment of the adequacy and accessibility of secretarial records and documentation maintained by the company.

    Related Party Transactions and Disclosures: Examination of transactions with related parties, including directors, key managerial personnel, and their relatives, to ensure compliance with disclosure requirements and approval procedures prescribed under the Companies Act, 2013.

    Verification of compliance with provisions concerning disclosure of related party transactions in financial statements and board reports.

    Insider Trading and Code of Conduct: Assessment of compliance with provisions related to prevention of insider trading, including maintenance of insider trading policies, codes of conduct, and trading window restrictions.

    Review of adherence to codes of conduct and ethical standards governing the conduct of directors, officers, employees, and other stakeholders.

     Regulatory Filings and Disclosures: Examination of the filing of statutory returns, documents, and disclosures with regulatory authorities, such as the Registrar of Companies (ROC), Securities and Exchange Board of India (SEBI), and stock exchanges.

    Verification of the accuracy, completeness, and timeliness of filings and disclosures made by the company in compliance with regulatory requirements.

     Specialized Areas of Compliance: Assessment of compliance with specific regulatory requirements applicable to the industry or sector in which the company operates, such as environmental regulations, foreign exchange regulations, and sector-specific laws.

    Review of compliance with provisions concerning intellectual property rights, competition law, data protection, and other specialized areas of regulation.

    Internal Controls and Risk Management: Evaluation of the company’s internal control systems, risk management practices, and compliance monitoring mechanisms.

    Identification of weaknesses, gaps, and areas of improvement in internal controls and risk management processes.

Secretarial Audit
Secretarial Audit
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Process Of Secretarial Audit

Engagement Letter: The company engages a qualified company secretary or a firm to conduct the secretarial audit. An engagement letter is issued outlining the scope of the audit, timelines, responsibilities, and confidentiality requirements.

Preliminary Assessment: The company secretary or audit firm conducts a preliminary assessment to understand the company’s business operations, legal structure, regulatory environment, and specific areas of concern.

Audit Planning: Based on the preliminary assessment, the auditor develops an audit plan outlining the objectives, scope, methodology, and timelines for the secretarial audit.

  1. Documentation Review:

Gathering Information: The auditor requests access to relevant documents, records, registers, agreements, resolutions, minutes of meetings, and other relevant information maintained by the company.

Review of Documents: The auditor systematically reviews and examines the documents to assess compliance with statutory provisions, corporate governance norms, and internal policies.

  1. On-site Examination:

Meetings and Interviews: The auditor conducts meetings and interviews with key personnel, including directors, officers, company secretaries, and other stakeholders to gather additional information and insights.


Verification of Records: The auditor conducts physical verification of statutory registers, records, and documents to ensure accuracy, completeness, and compliance with legal requirements.

  1. Compliance Assessment:

Evaluation of Compliance: The auditor assesses the company’s compliance with the provisions of the Companies Act, 2013, and other applicable laws, rules, and regulations.

Review of Governance Practices: The auditor evaluates the company’s corporate governance practices, including board composition, functioning of committees, disclosure standards, and adherence to codes of conduct.

  1. Preparation of Audit Findings:

Identification of Non-compliances: The auditor identifies instances of non-compliance, irregularities, deficiencies, or lapses observed during the audit process.

Documentation of Findings: The auditor documents the audit findings, observations, and conclusions in a comprehensive Secretarial Audit Report (SAR) in accordance with the prescribed format and guidelines.

  1. Presentation and Discussion:

Presentation of SAR: The auditor presents the SAR to the board of directors or the audit committee, highlighting key findings, observations, and recommendations.

Discussion and Clarifications: The board or audit committee engages in discussions with the auditor to seek clarifications, address concerns, and understand the implications of the audit findings.

  1. Implementation of Recommendations:

Action Plan: The board formulates an action plan based on the recommendations provided in the SAR to address identified non-compliances, strengthen governance practices, and mitigate risks.

Timely Remedial Actions: The company implements timely remedial actions, policy changes, process improvements, and corrective measures to enhance compliance and governance standards.

  1. Follow-up and Monitoring:

Follow-up Audits: The company may conduct follow-up audits periodically to monitor the implementation of corrective actions and assess the effectiveness of compliance measures.

Continuous Improvement: The company adopts a culture of continuous improvement by incorporating lessons learned from the audit process, feedback from stakeholders, and changes in regulatory requirements. 

Objectives Of Secretarial Audit 

ompliance Verification:

Adherence to Legal Provisions: Ensure compliance with the provisions of the Companies Act, 2013, and other applicable laws, rules, and regulations governing the company’s operations.

Filing of Statutory Returns: Verify the timely filing of statutory returns, documents, and disclosures with regulatory authorities, such as the Registrar of Companies (ROC) and Securities and Exchange Board of India (SEBI).

Maintenance of Registers: Ensure the accurate and up-to-date maintenance of statutory registers, records, documents, and minutes of meetings required under the Companies Act, 2013.

  1. Corporate Governance Assessment:

Board Composition and Functioning: Evaluate the composition, structure, and functioning of the board of directors, board committees, and key managerial personnel to ensure effective governance oversight.

Transparency and Disclosure Standards: Assess the company’s adherence to transparency and disclosure standards, including timely dissemination of financial information, related party transactions, and other material disclosures.

Ethical Conduct and Code of Conduct: Review compliance with codes of conduct, ethical standards, and policies governing the conduct of directors, officers, employees, and other stakeholders.

  1. Risk Identification and Mitigation:

Identification of Non-compliances: Identify instances of non-compliance, irregularities, deficiencies, or lapses in compliance practices, internal controls, and governance procedures.

Risk Assessment and Mitigation: Assess risks associated with non-compliance, legal disputes, regulatory sanctions, reputational damage, and financial loss, and recommend measures to mitigate identified risks.

  1. Stakeholder Protection and Assurance:

Protection of Stakeholder Interests: Safeguard the interests of shareholders, creditors, employees, customers, and other stakeholders by ensuring transparency, accountability, and integrity in corporate affairs

Assurance to Investors and Regulators: Provide assurance to investors, regulatory authorities, and other stakeholders regarding the company’s compliance with legal and regulatory requirements and adherence to corporate governance standards.

  1. Continuous Improvement and Best Practices:

Identification of Improvement Opportunities: Identify areas of improvement in compliance practices, governance procedures, risk management systems, and internal controls to enhance operational efficiency and effectiveness.

Adoption of Best Practices: Recommend the adoption of best practices, standards, and guidelines to align the company’s governance framework with industry benchmarks and regulatory expectations.

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