Allow Company Secretary for Internal Audit: ICSI seeks amendment in Section 138 of Company Act

The Institute of Company Secretaries of India(ICSI) has submitted representation before MCA Secretary to seek amendment in Section 138 of Company Act for Internal Audit.

ICSI has been open in sharing the concerns and needs of all of its stakeholders, including its members, with the regulatory authorities. Members of the Institute, on the other hand, have made advancing good corporate governance their primary goal and have served in a variety of roles as Governance Professionals both in employment and in practise.

Amongst the various activities undertaken by Company Secretaries, audit of non-financial activities takes a prime position. This includes Internal Audit as well.

Internal Audit requires an in-depth understanding of the business culture, systems, and processes, as well as an understanding and improvement of internal controls for effective risk management, an understanding of the organization’s governance structure, and the ability to provide value additions for governance process improvement.

Subsection (1) of Section 138 of the Companies Act of 2013, relating to Internal Audit, states that such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as the Board may decide to conduct internal audit of the company’s functions and activities.

The Company Secretaryship programme’s curriculum is well designed, covering corporate and other allied laws, as well as aspects of governance, ethics, corporate restructuring, strategic management, effective compliance management, Corporate Accounting, Corporate Finance and Financial Management, risk management, and so on, all of which are essential elements of internal audit.

Furthermore, the Company Secretary has been designated as a Key Managerial Personnel under the Companies Act of 2013 and interacts with a wide range of stakeholders within the firm. Appointing a professional with diverse skills as an internal auditor will benefit a variety of stakeholders, including the Board and its Committees, Senior Management, Vendors, Suppliers, and Shareholders.

In view of the above, it is submitted that Company Secretaries, amongst other professionals, should also be specifically mentioned under Section 138 and that the words “or a Company Secretary” be inserted after the words “either be a chartered accountant or a cost accountant” and the section should be read as under:

“(1) Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or a company secretary or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.”

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