Revamped Approach to Departmental Examination
In the ever-changing landscape of corporate governance, the significance of secretarial audits has grown exponentially. These audits, once a mere compliance check, have now transformed into a vital tool for enhancing corporate governance and risk management.
The primary function of a secretarial audit is to provide independent assurance on a company's compliance with legal and regulatory requirements, particularly those related to corporate laws such as the Companies Act, and adherence to established corporate governance practices. This meticulous review involves a systematic and independent verification of the company’s records, documents, and compliance systems to ensure that the company is following applicable laws and internal governance policies.
Over the years, the scope of secretarial audits has broadened, reflecting a shift towards a more proactive, integrated approach to compliance and governance assurance. Beyond verifying adherence to company law provisions, secretarial audits now play a crucial role in:
- Detecting non-compliance with a range of applicable laws beyond company law (e.g., securities regulations, labor laws).
- Providing assurance to management, shareholders, and regulators about the effectiveness of governance mechanisms.
- Enabling early identification of risks related to legal and regulatory compliance.
- Delivering recommendations for improving internal policies, procedures, and governance standards.
This evolution is a testament to the growing importance of secretarial audits in ensuring transparency and accountability. In jurisdictions like India, secretarial audits are now mandated by law for certain categories of companies, underlining their significance in the corporate world. The secretarial auditor, typically a practising company secretary, prepares a detailed report on compliance and governance which is addressed to shareholders, fostering trust and due diligence.
Looking ahead, the vision for secretarial audits is to reimagine them as a strategic tool that goes beyond compliance checks. The Strategic Governance Report (SGR) is proposed to evolve from its current state, integrating the SAR (Strategic Governance Report) and ASCR (Annual Secretarial Compliance Report) into a single multidimensional tool. The SGR is expected to provide a concise yet insightful snapshot of governance health, enabling stakeholders to gauge the depth of control maturity, cultural alignment, and governance resilience.
The profession of company secretaries is also expected to undergo a transformation. The PCS (Professional Company Secretary) is being reimagined as a governance strategist capable of delivering a reimagined SAR. This requires the development of new capabilities in governance analytics, behavioural risk assessment, and stakeholder engagement. The PCS must engage proactively with boards and committees, spotting emerging governance risks, advising on institutional responses, and testing the adaptability of systems.
In conclusion, secretarial audits provide an independent, systematic review and assurance on a company's compliance with legal and governance frameworks. Their importance has grown as companies face more complex and diverse regulatory requirements and stakeholder expectations for transparency and accountability. As we move forward, the role of secretarial audits is set to evolve, with a focus on strategic governance and risk management.
[1] Regulation 24A, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [2] Companies Act, 2013, India
- The role of secretarial audits has expanded from a mere compliance check to a vital tool for corporate governance and risk management, ensuring adherence to legal and regulatory requirements such as the Companies Act and even detecting non-compliance with laws like securities regulations and labor laws.
- Secretarial audits now offer independent assurance to management, shareholders, and regulators about the effectiveness of governance mechanisms, and enable early identification of legal and regulatory risks.
- In some jurisdictions like India, secretarial audits are mandated by law for certain categories of companies, highlighting their significance in the corporate world.
- The Secretarial auditor, often a practising company secretary, prepares a detailed report on compliance and governance, fostering trust and due diligence among shareholders.
- As the profession of company secretaries evolves, the PCS (Professional Company Secretary) is being reimagined as a governance strategist equipped with skills in governance analytics, behavioural risk assessment, and stakeholder engagement.
- The future of secretarial audits lies in their transformation as a strategic tool, focusing on strategic governance and risk management in an increasingly complex and diverse business, finance, and technology landscape.
