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Compliance Management, Audit and Due Diligence · Secretarial Audit

Secretarial Audit: Meaning, Scope and Objectives

Updated 11 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 procedures that apply to it. Under Section 204 of the Companies Act, 2013, listed companies and prescribed classes must annex the report to the Board's report. You answer by stating meaning, objectives, scope, benefits and differences.

Understand Secretarial Audit: Meaning, Scope and Objectives

A company must follow many laws: the Companies Act, SEBI rules, FEMA and others. It also keeps records such as minutes, registers and filings. Secretarial audit is an independent examination of these secretarial and related records to check whether the company has complied with the laws and its own procedures.

The legal base is Section 204. Every listed company, and companies of other classes as prescribed, must annex a secretarial audit report to the Board's report under Section 134(3). The report is given by a company secretary in practice, in the prescribed form. The class of companies and the form are set by rules, so state them as prescribed. Do not quote thresholds unless you are sure of them.

The objectives are to check compliance with applicable laws, to find gaps early, to give the Board and stakeholders assurance, and to improve record-keeping and governance. The scope covers the secretarial and related records: whether the company follows the Companies Act and its rules, other laws applicable to it, the secretarial standards, and its own articles and internal procedures. The auditor gives an opinion on compliance. The auditor does not certify the true and fair view of the accounts.

The benefits are fewer penalties, better Board discipline, stronger investor confidence and early warning of defaults. The company must give the auditor all assistance and facilities (Section 204(2)). The Board must explain in full any qualification, observation or remark in the report (Section 204(3)).

Do not confuse it with other audits. A financial audit looks at the financial statements and gives an opinion on whether they are true and fair. A compliance audit is a broader term: it checks adherence to any set of laws or policies, and may be done internally. Secretarial audit is a formal, statutory compliance audit by a company secretary in practice, focused on corporate and secretarial laws.

Key rules to remember

Section 204(1): who needs it
Listed company + prescribed classes → secretarial audit report annexed to Board's report (Section 134(3))
Given by a company secretary in practice, in the prescribed form.
Section 204(2): company's duty
Company must give all assistance and facilities to the auditor
For auditing the secretarial and related records.
Section 204(3): Board's duty
Board must explain in full every qualification, observation or remark
Done in the Board's report under Section 134(3).
Section 204(4): penalty
Company, every officer in default, or the company secretary in practice → penalty of ₹2,00,000
Applies on contravention of the section. Penalty amount as substituted in 2020.

How to solve Secretarial Audit: Meaning, Scope and Objectives questions

Use this method for any question on meaning, scope, objectives or differences.

  1. 1Define secretarial audit in one line and cite Section 204.
  2. 2State who must get it done and who performs it: listed and prescribed companies; company secretary in practice.
  3. 3List the objectives in points: compliance, early detection, assurance, governance.
  4. 4Describe the scope: records examined and laws checked, and what is outside scope such as true and fair view of accounts.
  5. 5If asked for a difference, use clear heads: purpose, auditor, subject matter, opinion, law basis.
  6. 6Add the duties of company and Board under Section 204(2) and (3), and the penalty under 204(4).
  7. 7Close with benefits or a conclusion tied to the facts given.

Quickest way: Four-line frame: Define, Who, Scope, Value

When to use it: Short-note questions of 5 to 8 marks, or when time is short.

  1. Define: independent check of compliance by a CS in practice under Section 204.
  2. Who: listed and prescribed companies; report goes with the Board's report.
  3. Scope and objectives: secretarial records, applicable laws, standards; assurance and early detection.
  4. Value: Board must explain remarks; penalty for default; reduced non-compliance risk.

Common mistakes in Secretarial Audit: Meaning, Scope and Objectives

  • Saying secretarial audit gives an opinion on true and fair view of accounts.

    Students mix it with statutory financial audit.

    Fix: Write that it reports on compliance with laws and secretarial records, not on the accounts.

  • Stating that the auditor can be any professional.

    Confusion with internal audit under Section 138, which allows a CA, a cost accountant or another professional.

    Fix: Section 204 requires a company secretary in practice.

  • Quoting turnover or paid-up capital limits from memory.

    Students try to add detail to the applicability point.

    Fix: Say listed companies and other prescribed classes. Give limits only if certain of the rules.

  • Forgetting the Board's duty to explain qualifications.

    Focus stays on the auditor's role only.

    Fix: Always add Section 204(3): the Board must explain in full any qualification, observation or remark.

  • Treating secretarial audit and compliance audit as identical.

    Both check compliance.

    Fix: Note that secretarial audit is statutory, by a CS in practice, with a prescribed report. Compliance audit is a wider term, often internal and voluntary.

  • Omitting the penalty.

    Students treat it as a minor detail.

    Fix: State that under Section 204(4) the company, each officer in default and the auditor are liable to a penalty of ₹2,00,000.

Worked examples

Example 1

Define secretarial audit and explain its objectives and scope. (Short note)

Show the solution
  1. Meaning: an independent examination of a company's secretarial and related records to check compliance with applicable laws, rules and procedures.
  2. Legal base: Section 204 requires listed companies and prescribed classes to annex a secretarial audit report, given by a company secretary in practice, to the Board's report.
  3. Objectives: confirm compliance with laws, detect lapses early, give assurance to the Board and stakeholders, improve governance and record-keeping.
  4. Scope: Companies Act and rules, other applicable laws, secretarial standards, articles and internal procedures. The audit does not certify a true and fair view of the accounts.
  5. Support: the company must give all facilities (204(2)) and the Board must explain any qualification in full (204(3)).

Answer: Secretarial audit is a statutory compliance check by a company secretary in practice under Section 204. Its objectives are assurance, early detection of lapses and better governance. Its scope is secretarial records and applicable laws, not the financial statements.

Example 2

Distinguish between secretarial audit and financial audit.

Show the solution
  1. Purpose: secretarial audit checks compliance with laws and procedures. Financial audit checks whether the financial statements give a true and fair view.
  2. Auditor: secretarial audit is done by a company secretary in practice. Financial audit is done by a chartered accountant as statutory auditor.
  3. Subject matter: secretarial audit covers secretarial records, registers, minutes, filings and applicable laws. Financial audit covers books of account and financial statements.
  4. Report: the secretarial audit report is annexed to the Board's report under Section 204. The auditor's report goes to members with the financial statements.
  5. Applicability: secretarial audit applies to listed and prescribed companies. Financial audit applies to every company.

Answer: Secretarial audit is about legal and procedural compliance and is done by a CS in practice. Financial audit is about the true and fair view of accounts and is done by a chartered accountant.

Exam tips

  • Open every answer with the Section 204 definition. Examiners look for the section number.
  • For difference questions, use at least four heads: purpose, auditor, subject matter and report.
  • In case studies, state the provision, apply it to the facts, then conclude on whether a secretarial audit report is required.
  • Mention Section 204(3) and 204(4) in the conclusion for extra marks.
  • Avoid quoting applicability thresholds unless the question gives them.

Practice questions from Secretarial Audit

Secretarial Audit: Meaning, Scope and Objectives 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, Scope and Objectives: frequently asked questions

What is secretarial audit under the Companies Act, 2013?

It is an audit of secretarial and related records by a company secretary in practice, required by Section 204 for listed companies and prescribed classes. The report is annexed to the Board's report. It checks compliance with applicable laws.

What is the difference between secretarial audit and financial audit?

Secretarial audit checks legal and procedural compliance and is done by a company secretary in practice. Financial audit gives an opinion on the true and fair view of the financial statements and is done by a chartered accountant.

Who can conduct a secretarial audit?

Section 204 requires a company secretary in practice. Other professionals cannot sign the report under this section.

What happens if the secretarial audit report has a qualification?

The Board must explain in full any qualification, observation or remark in its report under Section 134(3), as required by Section 204(3).