Secretarial Auditor: Appointment, Roles and Responsibility

Secretarial Audit of the Company is required to be conducted as per Section 203 of Companies Act,2013 (“Act”). Secretarial Auditor as appointed by the Company is responsible to carry the audit and prepare a report on the same. The Board has power to appoint a Company Secretary in Practice as a Secretarial Auditor of the Company under Section 179 of the Act.

Board of Directors of the Company in its board meeting should propose the appointment of a Company Secretary in Practice as a Secretarial Auditor after ascertaining his/her credential and expertise.

Although the Act is silent as to when Company should appoint a Secretarial Auditor, it is rationale to appoint the secretarial auditor in the beginning of the Financial Year, thus the Auditor can conduct audit on quarter basis or time to time to avoid the rush of scrutinising documents at the end of the financial year.

What is the Process of Appointment of Secretarial Auditor?

Prior to calling the Board Meeting, Directors of the Company may reach to consensus for appointment of any specific Company Secretary in Practice as Secretarial Auditor of the Company. After narrowing down the proposed secretarial auditor, Company shall follow below given process:

  1. Any director or person authorised by the Board will dispatch a notice to call for Board Meeting.

    Notice shall be given as per section 173 of Companies Act, 2013 read with secretarial standard 1 on Board Meetings;
  2. Conduct Board Meeting for appointment of proposed secretarial auditor for the Company.

    Place the consent of the Company Secretary in Practice, which states his/her consent and eligibility to act as secretarial auditor, if appointed by the Board.

    In case of Listed Company, Audit Committee will make recommendation to the Board of Directors of the Company for appointment of the Auditor.
  3. Consider the appointment and term of remuneration of  Secretarial Auditor at the meeting and pass Board resolution for appointment;
  4. Send letter of appointment to the secretarial auditor regarding his/her appointment along with the terms of appointment.
  5. Receive acknowledgement from the secretarial Auditor for his appointment.
  6. File E form MGT-14 with the Registrar of the Companies for appointment of secretarial auditor within 30 days of appointment in Board Meeting.
  7. Conduct Audit as per the manner of audit as decided mutually among the Company and the Secretarial Auditor.

Furnishing and Submission of Secretarial Audit Report

After conducting the audit, company secretary in practice, will submit its report to the Company. There after Company is required to attach the Audit Report with the Board Report of the Company as per the provision of section 204(1) of the Act.

Companies are also required to explain in their Board Report, any qualification or observation or other remarks made by the company secretary in practice in his report.

Powers and Duties of Secretarial Auditor

In order to conduct independent audit for the Company, Secretarial Auditor has been empowered under the Act certain rights which he/she can avail while conducting the Audit.

Section 204(2) states that Company is under obligation to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.

Further, Section 143 of Companies Act, 2013 states the power and duties of a statutory auditor, however section 143(14) states that provision of this sections will also apply mutatis mutandis to the company secretary in practice conducting secretarial audit.

Below given are some rights of the secretarial auditor:

  • Right to access statutory records of the Company required conducting the audit.
  • Call for information or explanations and documents as and when required.
  • To ask for assistance with respect to any matter necessary for the purpose of audit.
  • Right to call for information of subsidiary company if necessary for the purpose of audit.
  • Right to receive notice of Annual General Meeting and attend the same. etc.

Secretarial Auditor has to conduct the audit with moral practice so that the report should present the true and fair status of the compliances and internal control of the Company.

Below given are some duties of the secretarial auditor:

  • To conduct independent audit in fair and transparent manner.
  • To scrutinise compliance of all the laws, acts, rules, regulation, guidelines as covered under the scope of Audit.
  • Scrutinise properly the books, papers, minute books, forms and returns filed and other records maintained by the company.
  • Report specific non compliances / observations / audit qualification, reservation or adverse remarks. etc.

Format of Secretarial Audit Report

The Act has provided the specific format in which Secretarial Auditor is required to submit its report. As per section rule 9 of (Appointment and Remuneration of Managerial Personnel) Rules, 2014the format of the Secretarial Audit Report shall be in Form No. MR.3.

What Records/Documents should be reviewed by the Secretarial Statutory Auditor?

Although the scope of the secretarial audit is so widened that any ready to made check list of documents will not solve the purpose of the Auditor since the law applicable to one company may differ from other Company.

Below given is an illustrative list, not exhaustive, for documents which the Auditor must consider while conducting the Audit.

  1. Minute Books of Board Meeting, General Meeting and Committee Meeting;
  2. Notice, agenda, notes to agenda for all Meetings conducted by the Company;
  3. Attendance Sheet of Directors attending Board and Committee Meeting;
  4. Leave of Absence request by director if any;
  5. Records regarding resolution passed by circulation at board meeting
  6. Records if postal ballot done at general meeting;
  7. Attendance Sheet of Members for any General Meeting;
  8. Documents with respect to fund transfer to Investor Education Protection Fund.
  9. If Company is listed, all documents submitted to stock exchange;
  10. Newspaper publications if made by the Company;
  11. Any correspondence made to stock exchange pertaining to any compliance;
  12. Statutory Registers of the Company;
  13. Copy of declarations/ disclosures received by the Company from directors under provision of Companies Act, 2013 or any other regulation.
  14. E- forms filed by the Company and their attachments.
  15. Documents pertaining to the Annual General meeting of the Company;
  16. Notices, Letter if any received by the Company. etc.

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