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CMA Intermediate · Corporate Accounting and Auditing · Secretarial Audit

Shanti Textiles Ltd, a listed company, receives a secretarial audit report from its secretarial auditor containing an adverse observation on delayed filing of a return. What must the Board of Directors do under Section 204?

The Board must explain in full the qualification or observation in its report. Section 204(3) requires the Board of Directors, in the report made under section 134(3), to give a full explanation of any qualification, observation or remark made by the company secretary in practice.

  1. AIgnore it, as the observation is the auditor's responsibility alone
  2. BExplain in full the qualification or observation in the Board's reportCorrect
  3. CRemove the secretarial auditor at once
  4. DHave the observation ratified by the statutory auditor

Explanation

Section 204(3) requires the Board, in its report under section 134(3), to explain in full any qualification, observation or other remark made by the company secretary in practice. Nothing requires removal of the auditor or ratification by the statutory auditor.

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