Focusing Secretarial audit
In recent years, a new statutory audit has gained prominence in the corporate landscape i.e. Secretarial Audit (SA), reflecting the growing emphasis on compliance, governance, and stakeholder accountability. Often regarded as the non-financial counterpart to the financial audit, the Secretarial Audit provides independent assurance on a company’s legal compliance and corporate governance systems. While the financial audit assesses the integrity of financial reporting, for instance, whether related party transactions (RPTs) are correctly recognised, measured, and disclosed, the Secretarial Audit evaluates whether those transactions comply with the company’s RPT policy and have received the necessary approvals from the audit committee, board, or shareholders. Together, these two audits form a complementary framework that strengthens corporate accountability and enhances.
The Companies Act, 2013, a watershed in corporate governance, mandated Secretarial audit by a PCS for every listed company and every public company above the prescribed thresholds of paid-up share capital/turnover. The scope expanded beyond the Companies Act to encompass SEBI Regulations, the Depositories Act, 1996, the Foreign Exchange Management Act, 1999, and other industry-specific laws. This shift elevated the Secretarial Audit from a procedural review to a governance assessment with the potential to influence boardroom decisions, shape board processes, strengthen internal controls, and embed a culture of compliance.
The turning point came in 2019 with the insertion of Regulation 24A into the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR). This provision required listed entities to submit two reports annually to the stock exchanges, both certified by a PCS: the Secretarial Audit Report (SAR) and the Annual Secretarial Compliance Report (ASCR). By bringing both the reports into the market disclosure regime, SEBI transformed SA from a statutory formality to a governance oversight tool. This could be possible because the PCS has access to board agendas, minutes, and records that reflect actual decision-making and governance practices.
