The Auditor shall assess the efficacy and adequacy of the systems and processes of the Auditee. Comment. Also cite any four best practices being observed by the companies for Board processes.

System and process broadly refer to the framework of legal and procedural compliances of the Auditee including but not limited to internal regulations, control, guidance and governance. A system is the core element, that company management has and/or implements in its business. It's something that helps the business run. The processes are all the things that company management do in order to make any given system work most efficiently. In other words, systems are designed to connect all of an organization's intricate parts and interrelated steps to work together for the achievement of the business strategy. System and process in the context of Secretarial Audit includes internal policies, decisions or procedures, etc. laid down by the Auditee for ensuring the compliance of the various laws, rules, standards and guidelines as may be applicable to the company. The Auditor should verify those policies, decisions, procedures, etc. of the Auditee to verify the adherence thereof and ascertain that the systems and processes are adequate and commensurate to its size and operations to ensure compliance with applicable laws, rules, regulations, standards, guidelines and defined internal processes. The Auditor shall assess the efficacy and adequacy of the system and processes of the Auditee commensurate with its size and operation for verifying compliance of applicable laws, rules, regulations, standards, guidelines, and defined internal processes, if any by: Reviewing records maintained by the Auditee. Understanding compliance responsibility centers, control points, matrix, the flow of information, escalation of non-compliances to different levels, reporting of any non-compliance. Assessing compliance mechanism and understanding its extent, coverage and severity mapping. The Auditor shall also assess compliance manual/ standard operating procedures, if any, available with the Auditee. Analysing instances of show cause notices received, prosecution initiated, fine or penalties levied, imprisonment ordered, qualification, adverse remark or observations in the statutory, internal or industry specific audit, orders passed by regulatory bodies or judicial/quasi-judicial authorities. Best practices being observed by the companies for Board processes (2022) are: 1. Bharti Airtel Limited The company submits audited quarterly results to the Stock Exchange. Separate meeting of Independent Directors on a quarterly basis. The evaluation of the Board of Directors is done by an external agency Linkage of remuneration of MD & CEO and Senior Management with ESG/sustainability targets. 2. Hindustan Unilever Limited The Board of directors has adopted 'Corporate Governance Code' a statement of practices and procedures to be followed by the company and its officers and employees. 3. Mahindra Logistics Limited The company has voluntarily adopted the practice of scheduling its AGM within 5 month of end of financial year as a god governance measure. The company, voluntarily as a good governance practice, observes a 'silent/quiet period' for 15 days prior to the announcement of quarterly and annual financial results. The company has structured system-based PAN India compliance mechanism, with process management and end-to-end visibility for its compliance process. 4. AU Small Finance Bank Limited The Executive Directors are duty bound with Malus and Claw back clause, which activates in the event of subdues or negative financial performance of the Bank