ICSI has already issued a reference guide on secretarial audit, which contains a detailed check-list for compliance.
Companies only conduct financial audit, which is audit of their financial aspects, but secretarial audit will cover non-financial aspects such as board level decisions, control mechanism, governance system etc., said NK Jain, CEO and secretary, ICSI.
A secretarial audit includes audit of areas such as corporate laws, compliance system commensurate to the size of the company, board process and various guidelines such as corporate governance and corporate social responsibility.
The Corporate Governance Voluntary Guidelines, 2009, of the ministry of corporate affairs require public limited companies and larger private limited companies to get a secretarial audit conducted by a company secretary. The Board should also give its comments on such audit in its report to the shareholders.
If a company fails to provide the secretarial audit report, then it will have to give the reasons for the same to the government.
Companies like RIL, ONGC, HDFC, CMC have already introduced secretarial audit and are attaching the secretarial audit report to their Boards Report, said Jain.
The reference contains a detailed check-list for compliance including compliance with Companys Act 1956, Depositories Act , 1996 , the Securities Contracts (Regulation) Act, 1956, Sebi regulations and guidelines, Voluntary Corporate Governance Guidelines and Corporate Social Responsibility guidelines of ministry of corporate affairs.
Jain said, ICSI has been impressing upon the ministry of corporate affairs and Sebi to introduce this audit and since it has found place in the voluntary guidelines, it is also expected that the same would be introduced in the new Companies Act.
The benefits of secretarial audit are that it educates the corporates and assist them in meeting legal requirements.
The multiplicity of laws, rules, and regulations has necessitated the introduction of secretarial audit in organization to ensure compliance with laws applicable to a company. It reduces the burden of law enforcement authorities and the board members as it provides them with a comfort that the company is compliant with laws, said Jain.