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CS Professional · Compliance Management, Audit and Due Diligence · Signing and Certification

Meghna Steels Ltd, a listed company, annexed a secretarial audit report from CS Tara Iyer, a company secretary in practice, to its Board's report. The report contained a qualification about delayed filing of a return. The Board's report did not mention or explain this qualification. Which statement is correct under the Companies Act, 2013?

The Board must explain in full every qualification, observation or remark in the secretarial audit report. Failing to do so contravenes Section 204, making the company and every officer in default liable to a penalty of two lakh rupees. The practising secretary who reported honestly is not the defaulter.

  1. AThe Board must explain in full any qualification or observation in its report; failing this, the company and every officer in default are liable to a penalty of two lakh rupeesCorrect
  2. BOnly CS Tara Iyer is liable to a penalty, since she made the qualification
  3. CNo explanation is needed because secretarial audit reports are advisory
  4. DThe Board need explain only qualifications that relate to financial statements

Explanation

Section 204(3) requires the Board, in its report, to explain in full any qualification, observation or other remark made by the company secretary in practice. Section 204(4) makes the company and every officer in default liable to a penalty of two lakh rupees on contravention. Option B is wrong since the contravention lies with the company and officers, not the auditor who qualified honestly.

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