Compliance Management, Audit and Due Diligence · Secretarial Audit

Secretarial Audit Process, Planning and Checklist

Updated 11 October 2026 · Fact-checked

The secretarial audit process is a sequence of steps by which a company secretary in practice checks a company's compliance with applicable laws: accept the engagement, plan, prepare a programme, test records, document in working papers, and report. Section 204 requires the report to be annexed to the Board's report.

Understand Secretarial Audit Process, Planning and Checklist

A secretarial audit is an independent check of whether a company has complied with the laws, rules and standards that apply to it. Under Section 204, every listed company and other prescribed classes of companies must annex a secretarial audit report, given by a company secretary in practice, to the Board's report made under Section 134(3).

The process matters because the report is only as good as the work behind it. A good auditor does not start by reading records at random. You first understand the company, then decide what to test, then test it, then record the evidence, and only then form a view.

Planning comes first. You study the company's business, its industry, its constitution, its past reports and its past defaults. From this you list the laws that apply to this company. A bank-like NBFC, a listed manufacturer and an unlisted public company will not have the same list. Planning also fixes the team, the timeline and the areas of higher risk.

The audit programme turns the plan into tasks. It lists each law or area, the records to examine, the procedure to apply and who will do it. Working papers are your proof. They hold the checklist, the extracts, the observations and the conclusions. If a point is not in the working papers, you will find it hard to defend later.

The checklist of laws is the core tool. It usually covers the Companies Act, 2013 and its rules, the Securities Contracts (Regulation) Act and SEBI regulations for listed companies, FEMA for foreign investment and borrowings, and other laws specific to the sector. Which laws apply is for you to judge in each case, and the report should say so.

The company must give you all assistance and facilities to audit the secretarial and related records. The Board must explain in full any qualification, observation or remark in your report. Contravention of Section 204 attracts a penalty of two lakh rupees on the company, every officer in default and the company secretary in practice in default.

Key rules to remember

Who must get it done (Section 204(1)): Listed company + prescribed classes of companies → secretarial audit report by a company secretary in practice, annexed to the Board's report under Section 134(3); The prescribed classes come from the rules. State them as 'prescribed' unless the question gives the thresholds.
Company's duty (Section 204(2)): Company must give all assistance and facilities for auditing secretarial and related records; Cite this when a question deals with refusal of access to records.
Board's duty on remarks (Section 204(3)): Board's report must explain in full any qualification, observation or remark in the secretarial audit report; Silence or partial explanation is not enough.
Penalty (Section 204(4)): Company, every officer in default and the CS in practice in default → penalty of ₹2,00,000; The auditor is also exposed, so quality of work matters.
Process sequence: Engagement → Planning → Programme → Checklist testing → Working papers → Draft and discussion → Report; Use this as the skeleton for any 'steps' answer.

How to solve Secretarial Audit Process, Planning and Checklist questions

Most questions ask you to describe the process, prepare a plan or checklist for a given company, or advise on a situation. Use one method and adapt it to the facts.

1Read the facts and note the company type: listed or unlisted, sector, size, foreign investment, borrowings.
2State the provision: Section 204 applicability, the CS in practice, and the report annexed to the Board's report.
3Set out the planning steps: understanding the business, past reports, risk areas, team and timeline.
4List the applicable laws for this company only, and name the records to check under each.
5Describe the programme and working papers: what is tested, how evidence is kept, how findings are recorded.
6Apply the facts: identify the non-compliance, its law and its effect on the report.
7Conclude with reporting: observation or qualification, Board's explanation under Section 204(3), and penalty exposure if relevant.

Quickest way: Engage, Plan, Test, Record, Report

When to use it: Use it for short-answer or 'explain the steps' questions where time is limited.

Write the five words: Engage, Plan, Test, Record, Report.
Add one line on Section 204 at the start.
Under Plan, name the laws that apply to the company in the question.
Under Record, mention working papers and the checklist.
Under Report, mention the Board's explanation and the penalty.

Common mistakes in Secretarial Audit Process, Planning and Checklist

Listing every law in India as applicable to the company.
Students memorise a long generic checklist.
Fix: Choose the laws that fit the company's type, sector and facts, and say why others are not applicable.
Skipping planning and jumping to the report.
The report format is more familiar than the process.
Fix: Always open with understanding the company, risk areas and the programme.
Treating working papers as optional.
They seem like internal paperwork.
Fix: Explain that they are the evidence supporting every observation in the report.
Saying the auditor can be any professional.
Confusion with internal audit under Section 138.
Fix: Secretarial audit under Section 204 is by a company secretary in practice. Section 138 allows a chartered accountant, cost accountant or other professional the Board decides.
Forgetting the Board's duty to respond to remarks.
Students focus on the auditor's role only.
Fix: Cite Section 204(3): the Board must explain in full every qualification, observation or remark.
Quoting wrong penalty amounts.
Older figures are remembered.
Fix: Section 204(4) now provides a penalty of two lakh rupees.

Worked examples

Example 1

Sunrise Textiles Ltd, a listed company in Coimbatore, has appointed you as secretarial auditor. Explain how you would plan the audit and what checklist of laws you would prepare.

Show the solution

Section 204(1): a listed company must annex a secretarial audit report by a company secretary in practice to the Board's report.
Planning: study the business, the articles, previous reports, board and committee minutes, and past defaults. Identify risk areas such as related party dealings and filings.
Programme: assign areas to team members, fix the timeline and list records and procedures.
Checklist: Companies Act, 2013 and rules; SEBI regulations and securities laws applicable to a listed company; FEMA if it has foreign investment or overseas borrowings; sector laws such as labour and environment laws as they apply to a manufacturer.
Working papers: record each test, evidence seen and conclusion.
Reporting: state observations or qualifications in the report.

Answer: Plan by understanding the company and its risk areas, prepare a programme, apply a checklist limited to the laws that apply to a listed textile manufacturer, keep working papers, and report under Section 204.

Example 2

During a secretarial audit of Gangotri Foods Ltd, the management delays giving you minute books. After the report is issued, it contains a qualification on late filings. The Board's report is silent on it. Advise.

Show the solution

Section 204(2): the company must give all assistance and facilities to the company secretary in practice for auditing the records. Delay is a failure of that duty.
Record the delay and your follow-up in the working papers.
Section 204(3): the Board must explain in full any qualification, observation or remark in the report. Silence is non-compliance.
Section 204(4): contravention attracts a penalty of ₹2,00,000 on the company, every officer in default and the company secretary in practice in default.
Advice: the Board should add a full explanation of the qualification, and the company should provide records on time.

Answer: The company has breached Section 204(2) and Section 204(3). It and its officers in default face a ₹2,00,000 penalty under Section 204(4). The Board should explain the qualification in full.

Exam tips

Begin every answer with Section 204 and the CS in practice. It anchors your marks.
When asked for a checklist, tailor it to the company in the facts. A generic list loses marks.
Show the link between working papers and the report. Examiners look for it.
Use the penalty and the Board's duty as your concluding lines in case-based answers.
Be careful not to quote thresholds for prescribed classes unless the question gives them.

Practice questions from Secretarial Audit

Secretarial Audit Process, Planning and Checklist 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 Process, Planning and Checklist: frequently asked questions

What are the main steps in a secretarial audit?

Accept the engagement, plan the audit, prepare the programme and checklist, test records, document in working papers, discuss findings, and issue the report. The report is annexed to the Board's report under Section 204.

Who conducts a secretarial audit under Section 204?

A company secretary in practice. This applies to every listed company and to other companies of prescribed classes.

What is the penalty for contravening Section 204?

Section 204(4) provides a penalty of two lakh rupees. It applies to the company, every officer in default and the company secretary in practice in default.

Do I need to cover every law in the checklist?

No. Cover the laws that apply to the company based on its type, sector and activities. State clearly in your working papers why other laws were left out.