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CS Professional · Compliance Management, Audit and Due Diligence · Secretarial Audit

The secretarial auditor of Kaveri Textiles Ltd, a listed company, has recorded in Form MR-3 that two Board meetings were held without proper notice. The directors prefer not to mention this in their report to avoid embarrassment. What does section 204 require?

The Board must explain in full, in its report under section 134(3), every qualification, observation or other remark made by the secretarial auditor. Ignoring it, discussing it only in the audit committee or pressing the auditor to drop it would breach section 204(3).

  1. ANothing, as the Board is not obliged to respond to observations of the auditor
  2. BThe Board must explain in full the qualification, observation or remark in its report under section 134(3)Correct
  3. COnly the audit committee need discuss it, with no disclosure in the Board's report
  4. DThe Board must remove the observation by requesting the auditor to revise the report

Explanation

Section 204(3) says the Board, in its report under section 134(3), shall explain in full any qualification or observation or other remarks made by the company secretary in practice. Silence or asking for removal of the remark is inconsistent with this duty.

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