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CMA Intermediate · Corporate Accounting and Auditing

Secretarial Audit for CMA Intermediate Paper 10

Secretarial audit is an audit of a company's secretarial and related records by a company secretary in practice. Under Section 204, every listed company and prescribed classes of companies must annex the report to the Board's report. To solve questions, check applicability, appointment, report contents, Board's reply to remarks, and penalty.

What this chapter covers

This chapter in Paper 10 covers one compliance audit: the audit of secretarial and related records by a company secretary in practice. Section 204 of the Companies Act, 2013 is the base. It says who must get this audit done, who does it, where the report goes, and what happens on default.

The chapter is short and mostly theory. You need to know the meaning, applicability, the auditor, the report in Form MR-3, the compliance areas, the process and the penalties. Details such as thresholds for prescribed companies, the eligibility rules and the exact list of laws covered come from the Rules and ICMAI study material. Learn them from there. This guide gives only the Act's rules with section numbers.

It connects to the rest of the paper. Statutory audit (Section 143) is about financial statements. Secretarial audit is about compliance with laws. Reading the two side by side helps you answer comparison questions. It also links to the Board's report under Section 134 and to Section 143(12) on fraud reporting, which applies to the secretarial auditor through Section 143(14).

The chapter is compact and fact-based, so it is a good source of MCQs and short theory answers without long calculations. Questions often test one precise rule, such as who gives the report, to whom it is annexed, what the Board must do with qualifications, or the penalty amount. If you learn those rules exactly, you can score safely here and save time for numerical chapters.

Secretarial Audit: topics in the order to study them

  1. 1Secretarial Audit: Meaning and ApplicabilityStart here. You must know what the audit is and which companies need it before anything else makes sense.
  2. 2Appointment and Qualification of Secretarial AuditorNext, learn who can do the audit. Section 204 requires a company secretary in practice, so this follows applicability.
  3. 3Secretarial Audit Report (Form MR-3)Once you know who audits, learn what they deliver: the report, its annexure to the Board's report, and the Board's duty to explain remarks.
  4. 4Secretarial Standards and Compliance AreasThis explains what the auditor checks. It is easier after you understand the report that records the findings.
  5. 5Secretarial Audit Process and PenaltiesFinish with the audit steps, the company's duty to assist, and penalties. It ties all earlier topics together.

How to prepare Secretarial Audit

This chapter rewards exact recall of rules. Prepare it in short, repeated sessions that suit phone study.

  1. Read Section 204 slowly, sub-section by sub-section. Write one plain-words line for each of the four sub-sections.
  2. Make a one-page note on applicability: listed companies and the other prescribed classes. Fill in the prescribed thresholds from the ICMAI study material.
  3. Prepare a table-free list of the auditor's eligibility and appointment points from the study material. Keep it separate from the Act's rules.
  4. List the areas the audit covers and the Secretarial Standards, then link each area to the law that governs it.
  5. Write a 6-8 line answer to: Explain the secretarial audit process and the Board's duty on the report. Practise it from memory.
  6. Solve past MCQs and note each wrong option. Most traps are about who, to whom, and how much.
  7. Revise Section 143(14) and (12) so you can answer how fraud reporting applies to a secretarial auditor.

Common mistakes in Secretarial Audit

  • Saying the statutory auditor or a chartered accountant does the secretarial audit.

    Fix: Remember that Section 204 names a company secretary in practice. Statutory audit and secretarial audit are separate.

  • Writing that secretarial audit applies to all companies.

    Fix: State both limbs: every listed company, and other classes as prescribed. Add thresholds only from the Rules.

  • Forgetting where the report goes.

    Fix: Write that the report is annexed to the Board's report made under Section 134(3), and that the Board must explain any qualification in full.

  • Giving the wrong penalty or leaving out who is liable.

    Fix: Section 204(4): the company, every officer in default and the auditor in default face a penalty of ₹2,00,000. The ₹5,00,000 and ₹1,00,000 figures belong to Section 143(15).

  • Quoting section numbers or rules from the older law or from memory of the Rules.

    Fix: Quote section numbers only for the Act. For thresholds and eligibility, use the ICMAI study material and write them without a section number if unsure.

Last-day revision: Secretarial Audit

  • Section 204 covers secretarial audit for bigger companies.
  • Applies to every listed company and other prescribed classes of companies.
  • The audit is done by a company secretary in practice.
  • The secretarial audit report is annexed to the Board's report under Section 134(3).
  • The report is given in the prescribed form, which is Form MR-3.
  • The company must give all assistance and facilities to the auditor for auditing the secretarial and related records.
  • The Board must explain in full any qualification, observation or other remark in the report.
  • Penalty under Section 204(4) is ₹2,00,000 on the company, every officer in default and the auditor in default.
  • Section 143 applies mutatis mutandis to a company secretary in practice conducting secretarial audit.
  • If the secretarial auditor does not comply with the fraud-reporting duty in Section 143(12), the penalty is ₹5,00,000 for a listed company and ₹1,00,000 for any other company.
  • Good-faith reporting of fraud under Section 143(12) is not a breach of any duty.

Secretarial Audit practice questions

Secretarial Audit in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Secretarial Audit: frequently asked questions

What is secretarial audit under Section 204?

It is an audit of the secretarial and related records of a company by a company secretary in practice. Every listed company and prescribed classes of companies must annex the report to the Board's report. The company must give the auditor all assistance and facilities.

What must the Board do about remarks in the secretarial audit report?

The Board of Directors must explain in full any qualification, observation or other remark made by the company secretary in practice. This explanation goes in the Board's report made under Section 134(3).

What is the penalty for contravening Section 204?

If the company, any officer of the company or the company secretary in practice contravenes Section 204, the company, every officer in default and the auditor in default are liable to a penalty of ₹2,00,000.

Does the fraud-reporting rule apply to a secretarial auditor?

Yes. Section 143(14) applies the section mutatis mutandis to a company secretary in practice conducting secretarial audit. So the fraud-reporting duty in Section 143(12) applies, with the penalty in Section 143(15) for non-compliance.