Compliance Management, Audit and Due Diligence · Secretarial Audit

Secretarial Audit Report and Form MR-3 Format

Updated 11 October 2026 · Fact-checked

The secretarial audit report is the report a company secretary in practice gives after auditing a company's secretarial and related records. It is made in Form MR-3 and annexed to the Board's report. Qualifications or observations in it must be explained in full by the Board.

Understand Secretarial Audit Report and Form MR-3

Section 204 requires every listed company, and other prescribed classes of companies, to annex a secretarial audit report to the Board's report. The report must be given by a company secretary in practice, in the form prescribed. That form is Form MR-3.

The report is the auditor's opinion on whether the company has complied with the laws and processes that apply to it. It is not a financial audit. The auditor checks records such as minutes, registers, filings and board processes against the applicable Acts, rules, regulations and standards.

The company must give all assistance and facilities to the auditor for auditing the secretarial and related records. If the company withholds access, the company and its officers are exposed to penalty.

A report need not be clean. The auditor may record a qualification, an observation or other remarks. The Board cannot ignore these. Under section 204(3), the Board must explain in full each qualification, observation or other remark in its report under section 134(3). Section 134(3)(f) also requires explanations or comments on every qualification, reservation or adverse remark made by the company secretary in practice in the secretarial audit report.

In the exam, think of MR-3 as a structured document: opening statement of the audit period, the list of laws checked, the findings, the qualifications, the limitations of the auditor, and the signature block with annexures. The exact wording of the prescribed form is in the Rules, so learn its structure and the logic behind each part.

Key rules to remember

Who gives the report: Secretarial audit report = given by a company secretary in practice, in the prescribed form (MR-3); Section 204(1). It is annexed to the Board's report made under section 134(3).
Duty of the company: Company must give all assistance and facilities for auditing secretarial and related records; Section 204(2).
Board's duty on qualifications: Board's report must explain in full any qualification, observation or other remark in the secretarial audit report; Section 204(3). Section 134(3)(f) also requires comments on every qualification, reservation or adverse remark or disclaimer.
Penalty for default: Company, every officer in default, or the CS in practice in default: penalty of ₹2,00,000; Section 204(4). It applies to the company, its officers and the auditor.
Signing of Board's report: Chairperson (if authorised by the Board), else at least two directors, one being managing director; or the sole director; Section 134(6). The secretarial audit report is annexed to this report.

How to solve Secretarial Audit Report and Form MR-3 questions

Questions on MR-3 are usually either drafting questions or case questions on qualifications and the Board's reply. Use the same structure each time: provision, facts, conclusion.

1Identify what is asked: content of the report, a draft of the report, or the Board's response to a qualification.
2State the provision first: section 204 for the report, and section 134(3)(f) for the Board's explanation.
3List the facts given: company type, period, the lapse found, and who is responsible.
4If drafting, follow the MR-3 structure: period covered, the laws and regulations examined, the basis of opinion, the findings, qualifications and limitations, then signature, date, place and UDIN.
5Classify each finding as a compliance, a qualification or observation, or a matter outside the scope. Do not mix them.
6Link the finding to the Board's duty to explain it in full in the Board's report.
7Conclude clearly, and add the practical point, such as rectification, filing or penalty exposure.

Quickest way: Four-line answer for MR-3 questions

When to use it: Use when time is short and the question asks you to explain the report or the Board's duty on qualifications.

Line 1: Section 204(1) requires a report by a CS in practice in Form MR-3, annexed to the Board's report.
Line 2: The auditor records findings, including qualifications or observations.
Line 3: Section 204(3) and section 134(3)(f) require the Board to explain each one in full.
Line 4: Default attracts penalty under section 204(4), and the facts decide who is liable.

Common mistakes in Secretarial Audit Report and Form MR-3

Treating the secretarial audit report as optional for all companies
Students remember the report but forget that applicability is limited to listed companies and prescribed classes.
Fix: Start the answer with the applicability test. Section 204(1) covers every listed company and other prescribed classes of companies.
Saying the Board may ignore the auditor's qualification
Students confuse the report with advice that the Board can accept or reject.
Fix: The Board need not agree with the auditor, but it must explain in full each qualification, observation or remark in its report.
Placing the report in the wrong document
The report is annexed, so students think it is a separate filing with no link to the Board's report.
Fix: Write that it is annexed to the Board's report made under section 134(3), and that the Board's explanations appear in that report.
Citing the wrong penalty or only one party
Students recall that a penalty exists but not who bears it.
Fix: Section 204(4) applies to the company, every officer in default and the company secretary in practice in default, at ₹2,00,000.
Writing MR-3 as a free-form letter
Students ignore that the form is prescribed.
Fix: In a drafting answer, use the prescribed structure, with headings for scope, laws examined, findings, limitations and signature details.

Worked examples

Example 1

Sundaram Textiles Ltd, a listed company, receives a secretarial audit report in Form MR-3 in which the secretarial auditor notes that two board meetings were held without proper notice to all directors. The Board proposes to leave the matter out of its report to avoid embarrassment. Advise the Board.

Show the solution

Provision: under section 204(3), the Board must explain in full any qualification, observation or other remark made by the company secretary in practice in the report.
Section 134(3)(f) also requires the Board's report to include explanations or comments on every qualification, reservation or adverse remark or disclaimer in the secretarial audit report.
Facts: the auditor has recorded a lapse about notice of two board meetings. This is a remark on the company's compliance and falls within the Board's duty.
Conclusion: the Board cannot omit it. It must give a full explanation, for example the reason for the lapse and the corrective steps taken.
Consequence: failure to comply with the section can attract penalty under section 204(4) on the company and the officers in default, and default in the Board's report can attract penalty under section 134(8).

Answer: The Board must explain the remark in full in its report. Omitting it breaches sections 204(3) and 134(3)(f) and exposes the company and officers to penalty.

Example 2

CS Anita Rao, a company secretary in practice, is engaged by Kaveri Pharma Ltd, a listed company. The company refuses to give her access to its statutory registers. Explain the position and what she should do.

Show the solution

Provision: section 204(2) places a duty on the company to give all assistance and facilities to the company secretary in practice for auditing the secretarial and related records.
Facts: the company is refusing access to statutory registers, which are secretarial records.
Conclusion: the company is in breach of its duty.
Penalty: section 204(4) makes the company and every officer in default liable to a penalty of ₹2,00,000.
Practical step: CS Rao should record the refusal in writing and state it in the report as a limitation on her audit. She should not issue a report implying a full audit.

Answer: The refusal breaches section 204(2). The company and the officers in default are each liable to a penalty of ₹2,00,000 under section 204(4), and CS Rao should disclose the limitation in her report.

Exam tips

Open every answer with section 204 and the words 'company secretary in practice' and 'Form MR-3'.
Link section 204(3) with section 134(3)(f). Examiners reward the cross-reference.
In case questions, separate the auditor's duty, the company's duty and the Board's duty, as each has its own consequence.
Quote the penalty of ₹2,00,000 under section 204(4) only when the facts show a default.
For drafting questions, present the report in the order of period, laws examined, findings, qualifications and limitations, then signature.

Practice questions from Secretarial Audit

Secretarial Audit Report and Form MR-3 in other exams

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

CMA IntermediateSecretarial Audit Report (Form MR-3)

Secretarial Audit Report and Form MR-3: frequently asked questions

What is Form MR-3?

Form MR-3 is the prescribed form for the secretarial audit report. A company secretary in practice gives it under section 204. It is annexed to the Board's report.

Who must the Board answer for qualifications in the secretarial audit report?

The Board must explain each qualification, observation or other remark in its own report made under section 134(3). That report is laid before members at the general meeting.

Is a qualification in MR-3 an offence?

No. A qualification records a compliance lapse or limitation noted by the auditor. The offence or penalty arises under the provision that was breached, or for failing to comply with section 204 itself.

What penalty applies under section 204?

Section 204(4) provides a penalty of ₹2,00,000. It applies to the company, every officer in default and the company secretary in practice in default.