The importance of internal audit and secretarial standards in India

India’s internal auditing standards have been issued and are regulated by the Board of Internal Audit and Management Accounting (originally named the Committee on Internal Audit) was set up by the Institute of Chartered Accountants of India (ICAI) in the year 2004. Secretarial standards have been formulated and are monitored by the Secretarial Standards Board (SSB) which was established by the Institute of Company Secretaries of India (ICSI).

The internal auditing standards aim to clarify roles and responsibilities of a firm’s internal auditor, management, and other stakeholders regarding internal controls. This prevents ambiguity, improves the quality of audit work, documentation and procedures, validates the independence and objectivity of the expert, verifies their qualifications and credentials, and defines their scope, approach, and work plan. To date, the following internal auditing standards have been issued:

1. 100 Series – Standards on key concepts
   
   
2.  200 Series – Standards on internal audit management
   
   
3.  300—400 Series – Standards on conduct of audit assignments
   
   
4.  500 Series – Standards on specialised areas
   
   
5.  600 Series – Standards on quality control
   
   
6.  700 Series – Other/miscellaneous matters

On the other hand, the SSB secretarial standards provide adequate, timely, and quality information leading to higher standards of corporate governance. Standardisation of the processes and adoption of practices through these standards has effected important improvement in the decision-making process.

Apart from the mandatory standards for board meetings (SS-1) and general meetings (SS-2), the SSB secretarial standards cover a wide range of areas related to corporate operations including dividend policy, maintenance of registers and records, keeping minutes, the transmission of shares and debentures, passing of resolutions by circulation, affixing of a common seal, and forfeiture of shares of the company. 

Internal auditing standards in conjunction with secretarial standards aim to codify best practices and also provide a benchmark for the performance of these services. In the event of non-compliance with any of the internal auditing standards or secretarial standards, there may be several consequences including legal liability, professional misconduct charges, reputational damage, and a review of ethical issues. Overall, following the internal auditing standards and secretarial standards is crucial to maintain the quality and integrity of the profession and avoid any negative consequences.

Alok Kumar is a Partner in internal audit at RNM India. He is experienced in internal audit, statutory audit and stock audit in various sectors such as manufacturing, real estate, trading, banking, insurance, and more. He is a BCom (H), a law graduate, a qualified CA, and has completed a certification course on business responsibility and sustainability reporting from ICAI.

Ajit Kumar is the Head of the Transaction & Regulatory Advisory Services department at RNM India. He is an LLB, FCS with over 14 years of experience and expertise in handling legal, secretarial and corporate affairs matters for trading, manufacturing, and service sector industries in India. He is a subject matter expert in corporate restructuring, FEMA & RBI advisory, corporate compliance, and due diligence.