Corporate Accounting and Auditing · Secretarial Audit

Secretarial Audit: Meaning and Applicability under Section 204

Updated 10 October 2026 · Fact-checked

Secretarial audit is an independent check, by a company secretary in practice, of whether a company follows the laws, rules and secretarial standards that apply to it. Under Section 204, every listed company and other prescribed classes must get it done and annex the report to the Board's report.

Understand Secretarial Audit: Meaning and Applicability

A company must follow many laws: the Companies Act, SEBI rules, FEMA and others. Statutory auditors check the financial statements. Someone also has to check whether the company keeps its meetings, registers, filings and approvals in order. That check is the secretarial audit.

It is carried out by a company secretary in practice. He or she examines the secretarial and related records of the company and reports whether the company has complied with the applicable laws. The company must give all assistance and facilities for this work (Section 204(2)).

The objective is to give the Board, shareholders and regulators assurance on legal compliance and good governance. It tells the Board where compliance is weak so it can fix gaps early. The scope covers corporate laws, securities laws, secretarial standards, and other laws applicable to the business. Detailed items are in the prescribed report format.

Applicability starts with Section 204(1): every listed company and a company belonging to other class of companies as may be prescribed. The Act itself does not list the other classes. They are set by the rules made under the Act (Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is the rule you are asked about). Check the prescribed thresholds in your ICMAI study material rather than guessing them.

The report is annexed to the Board's report made under Section 134(3). The Board must explain in full any qualification, observation or other remark made by the secretarial auditor (Section 204(3)). Penalty for contravention of the section is two lakh rupees on the company, every officer in default, or the company secretary in practice in default (Section 204(4)).

Do not confuse it with statutory audit. Statutory audit gives an opinion on whether the financial statements give a true and fair view. Secretarial audit reports on compliance with laws and secretarial records. Also note that Section 205 gives separate functions to the company secretary, and says Sections 204 and 205 do not reduce the duties of the Board, chairperson, managing director or whole-time director.

Key rules to remember

Who must get it done (Section 204(1)): Every listed company + other prescribed classes of companies; The other classes come from the rules. Learn the thresholds from your ICMAI material.
Who conducts it: Company secretary in practice; Not the statutory auditor, and not the in-house company secretary.
Where the report goes: Annexed to the Board's report under Section 134(3); The Board must explain in full every qualification, observation or remark (Section 204(3)).
Company's duty: Give all assistance and facilities for auditing secretarial and related records; Section 204(2).
Penalty for contravention: ₹2,00,000 on the company, every officer in default, or the company secretary in practice in default; Section 204(4), as substituted by the 2020 amendment.

How to solve Secretarial Audit: Meaning and Applicability questions

Use this method for any question on meaning or applicability of secretarial audit.

1Define secretarial audit in one line: an audit by a company secretary in practice of compliance with applicable laws, rules and secretarial standards.
2State the legal basis: Section 204 of the Companies Act, 2013 and the rules made under it.
3For an applicability question, check first if the company is listed. If yes, it is covered.
4If it is unlisted, test it against the prescribed classes and thresholds in the rule. Show each test with the figures given.
5State the consequence: report annexed to the Board's report, and the Board explains every qualification in full.
6Mention the penalty of ₹2,00,000 where the question asks about default.
7For a difference question, compare on auditor, subject matter, purpose and report, point by point.

Quickest way: Listed first, then thresholds

When to use it: Short MCQs and 'is secretarial audit applicable?' questions with company data.

Listed company? Then Section 204 applies. Stop.
Not listed? Compare the given figures with the thresholds in the rule you have memorised.
Check who is named as auditor: it must be a company secretary in practice.
Remember the report sits with the Board's report, not with the auditor's report.

Common mistakes in Secretarial Audit: Meaning and Applicability

Saying the statutory auditor does the secretarial audit.
Both are called audits and both are annexed to annual reports.
Fix: Secretarial audit is given by a company secretary in practice. A statutory auditor is a chartered accountant.
Saying only listed companies need secretarial audit.
Students remember only the first words of Section 204(1).
Fix: The section also covers other prescribed classes of companies. Learn those thresholds.
Quoting Section 204 for the thresholds themselves.
The section and the rule are merged in memory.
Fix: The Act says 'as may be prescribed'. The thresholds are in the rule.
Writing that the Board may ignore qualifications in the report.
Students think the report is only advisory.
Fix: Section 204(3) says the Board shall explain in full any qualification, observation or remark in its report.
Saying secretarial audit checks the true and fair view of accounts.
Mixing it up with statutory audit.
Fix: It reports on legal and secretarial compliance, not on financial statement opinion.

Worked examples

Example 1

Explain the meaning and objectives of secretarial audit and state who must get it done under Section 204. (Short note, 5 marks)

Show the solution

Meaning: an independent examination of secretarial and related records of a company by a company secretary in practice, to report on compliance with applicable laws, rules and secretarial standards.
Objectives: assure the Board, shareholders and regulators about compliance; point out weak areas for correction; support good governance.
Who must get it done: every listed company and companies of other classes as prescribed by the rules (Section 204(1)).
Procedure and effect: the company gives all assistance and facilities; the report is annexed to the Board's report under Section 134(3); the Board explains in full any qualification or remark.

Answer: Secretarial audit is a compliance audit by a company secretary in practice. Section 204 requires it for every listed company and prescribed classes of other companies. The report is annexed to the Board's report and the Board must explain all qualifications.

Example 2

Distinguish between secretarial audit and statutory audit on four points.

Show the solution

Auditor: secretarial audit is by a company secretary in practice; statutory audit is by a qualified auditor appointed under the Act, usually a chartered accountant.
Subject matter: secretarial audit covers compliance with applicable laws and secretarial records; statutory audit covers the financial statements.
Purpose: secretarial audit gives assurance on legal compliance; statutory audit gives an opinion on true and fair view.
Report: secretarial audit report is annexed to the Board's report (Section 204(1)); the auditor's report is addressed to members on the financial statements.

Answer: The two audits differ in who performs them, what they examine, why they are done and which report they produce, as shown above.

Exam tips

Write 'company secretary in practice' exactly. Examiners look for it.
Quote Section 204 sub-sections accurately: (1) applicability, (2) assistance, (3) Board explanation, (4) penalty of ₹2,00,000.
For applicability problems, write each threshold test as a separate line so you earn step marks even if one figure is wrong.
In difference questions, give at least four points in a two-column style using bullet lines.
In MCQs, watch for options that name the statutory auditor or a company secretary in employment as the secretarial auditor. Both are wrong.

Practice questions from Secretarial Audit

Secretarial Audit: Meaning and Applicability 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: Meaning and Applicability: frequently asked questions

What is secretarial audit under the Companies Act, 2013?

It is an audit of the secretarial and related records of a company by a company secretary in practice. Section 204 requires it for listed companies and other prescribed classes. The report is annexed to the Board's report.

Which companies need a secretarial audit under Section 204?

Every listed company, and companies of other classes as may be prescribed by rules. The Act does not list those classes itself. Learn the thresholds from the rule in your study material.

What is the difference between secretarial audit and statutory audit?

Statutory audit examines the financial statements and gives an opinion on true and fair view. Secretarial audit examines compliance with laws and secretarial records, and is done by a company secretary in practice. Their reports also go to different places.

What is the penalty for not complying with Section 204?

The company, every officer in default, or the company secretary in practice in default is liable to a penalty of two lakh rupees under Section 204(4).