The Secretarial Audit (SA) is a part of Legal compliance reporting system. Government of India will be able to conceive and recognize the requirement for Secretarial Audit India only by giving the due statutory recognition to such an Audit. It will onus on the company to conduct a secretarial audit on its own.
Secretarial audit makes Board of Directors assured about compliance of different provisions affecting corporate entities and thus justify their bonafide objective of not being a party, directly or indirectly, to any technical error, commission or omission, violation or contravention, breaches and non- compliance. This will also enable the directors to adopt measures to mitigate the consequences of any offenses they might have committed unknowingly. With multiplicity of laws dealing with corporate functions and the alarming increment in the implications thereof, secretarial auditor will act as a catalyst and would be able to support the Board of Directors and the Government of India.
The section 383 A(1) specifies that, every company which is not required to employ a whole time secretary and has a paid up share capital of Rs 10 lakhs or more shall file with the ROC a certificate from a secretary in whole time practice. The Compliance Certificate was made mandatory under the Companies (Amendment) Act, 2000, w.e.f. 13-12-2000, which inserted a provision in section 383A(1) of the Companies Act making it mandatory for every company not required to employ a whole-time secretary under sub-section (1) and having a paid-up share capital of Rs. 10 lakhs or more shall file with the Registrar a certificate from a secretary in whole-time practice in such form and within such time and subject to such conditions as may be prescribed, as to whether the company has complied with all provisions of this Act and a copy of such certificate shall be attached with Board’s report referred to in section 217. But before issuing such certificate a company secretary has to audit the relevant documents of the company to conclude about the position of the company. The scope, content and criteria of the audit and of the compliance certificate are framed by the Central Government of India and the rules and regulations are made in this regard. The Central Government of India has framed Companies (Compliance Certificate) Rules, 2001 regarding this which specifies a 33-item formula for Compliance Certificate. The secretarial Audit is always in the better interest of every corporate management as; an independent professional will approve that the company has carried out the compliances under the Act. This will also serve the larger interest of the shareholders, creditors and employees. The secretarial audit also help the department of company affairs and the office of the registrar, as the documents filed by the small and medium companies covered by this provision will assure proper compliance. This will even be helpful in reducing work of the inspection department. The inherent objectives of secretarial Audit are:
- Protection of Top Management from undesirable hassles,
- Compliance of statutory regulations by the company.
- These services are for investor, shareholder, lender protection so as to mitigate the level of scam and grievances.
SECRETARIAL AUDIT ADVANTAGE: -
The following are the advantages of the secretarial audit.
- It ensures the owners that management and affairs of the company are being conducted in accordance with statutory requirements, and that the owners’ stake is not being exposed to excessive risk.
- Ensures the Management of a company that those who are charged with the duty and responsibility of compliance with the legislation requirements 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.
- Assures them that they have done everything required under law.
- Ensures them that the company has complied with the laws and, therefore, they are not likely to be exposed to action by law enforcement agencies for non-compliance by the company.
- The secretarial audit being pro-active measure for compliance with a plethora of laws, it will have a salutary effect of substantially reducing the burden of the law-enforcement authorities
- The secretarial audit provides assistance to 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