Role of Company Secretary as an internal auditor
Internal Auditor is a sheer work of professionals in which individual professionals can be hired or any professional entity engaged in the work of auditing and handling compliance matters appointed by companies.
An Internal Auditor is expected to check in detail about the compliance done and their reporting by companies – pulling out relevant facts, ensuring reporting of management, participating in fraud investigations, presenting free and fair views on the overall company’s performance.
In this post, you will get to know about the role, appointment, key duties, and responsibilities of a Company Secretary representing as an Internal Auditor of a Company.
#1 Who can appoint an Internal Auditor?
As placed in Section 138(1) Read With Rule 13 of Companies ( Accounts) Rules, 2014 and the amendment Act, the following company types can appoint an Internal Auditor :
- Listed Companies (Irrespective of any criteria).
- Private Companies
- With a turnover of Rs 200 crore or above;
- With debt acknowledging Rs 100 crore or above.
- Unlisted Companies
- With paid capital of Rs 50 crore or above
- With a turnover of Rs 200 crore or above ;
- With an outstanding debt of Rs 100 crore or above ;
- With outstanding deposits of Rs 25 crore or above.
Provided that the company shall comply with all requirements of Section 138 and Rule 13 Companies ( Accounts) Rules, 2014.
#2 Who can be the Internal auditor & the appointment?
Further provided in Rule 13 Companies ( Accounts) Rules, 2014:
- That the auditor may or may not be the employee of the company.
- The term ‘Chartered Accountant’ or ‘Cost Accountant’ shall mean a ‘Chartered Accountant’ or a ‘Cost Accountant’, as the case may be, whether engaged in the practice or not.
- That the Internal Auditor will not be appointed by the Board by passing a resolution by circulation.(Section 179 and Rule 8(4) of the Companies (Meetings of Boards and Its Powers) Rules,2014
- That the Statutory Auditor shall not be appointed as an Internal Auditor (Section 144(A))#
#3 Role of Company Secretary as an Internal Auditor
There are no substantial powers or responsibilities of a Company Secretary as an Internal Auditor allocated in the act, however, he is expected to :
- Ensure proper following of accounting standards and conventions by the company.
- Ensure audit of the company’s financial statements and books of accounts.
- Ensure management of compliance timely and properly and true representation of management funding and financial risk in business.
- Ensure safely keeping of records of meetings held in the company.
- Provide required advisory on finance usage and corporate litigation.
- Ensure proper management of capital, debt and tax planning.
- Prepare cost structures and representing efficiency indicators of the business.
- Design audit methodologies and reporting criteria.
Note: The above list is not an exhaustive list for explaining the role of CS as an Internal Auditor.
#4 Powers and Duties of Company Secretary as an Internal Auditor
Depending on the terms and policies of the companies, duties – responsibilities of CS representing as an Internal Auditor of the company might vary. While some of the key duties of a CS as an Internal Auditor are as follows:
- To access at any time books of accounts and ask for relevant source documents during Audit.
- To introspect any official of the company at any time on various transactions or any decision of the company whether financial or non-financial.
- To verify the actual debt of the company
- To present the actual view of the company’s financial strength and affairs of the company.
- And, as per the terms and conditions agreed.
#5 Why a Company Secretary?
A Company Secretary is recognized as a Key Managerial Personnel in compliance fulfillment of the company along with CEO, Director or Manager according to Section 2(51)(ii) of the Companies Act,2013. A Companies Secretary on obtaining recognition from an Independent body ‘Institute of Company Secretaries of India (ICSI)’ gets qualified for the criteria of representing as an Internal Auditor. A Company Secretary / Company Secretary Firm further bestows the following merits if appointed as an internal auditor to a company.
Section 205 Read With Rule 10 of Companies(Appointment and Remuneration of Managerial Personnel) Rules, 2014:
- Ensure timely fulfillment of some essential company compliance which either not be taken by a Chartered Accountant or any other professional other than a Company Secretaries.
- Company Secretaries plays a vital role in representing the company towards other government authorities, shareholders and its Board of Directors.
- Company Secretaries holding expertise of filling ROC compliance, organizing and handling Board meetings, placing new and improved policies for the company.
- Company Secretaries reduces the compliance burden of companies and provides additional services like working as a finance agent, tax advisory, Intellectual property protection seeker, liaisoning with government agencies, market advisor and arbitration/conciliation assistant, law advisor, etc.
- e) Other functions as prescribed in Rule 10.
The practicing area work of Company Secretary has been widened and thus, empowers them to exercise the powers diligently as they contribute to the sustainability of corporate governance.
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