Most business owners think about audits in financial terms — revenue, expenses, whether the numbers add up. But there is a second kind of audit that quietly decides whether your company is legally sound, and far fewer founders pay attention to it until something goes wrong. That audit is the secretarial audit — and as a Company Secretary, I would argue it is the most underrated risk-protection tool a growing company has.
What is a secretarial audit?
A secretarial audit is an independent verification of whether a company has complied with the corporate, securities, and other applicable laws that govern it. Where a financial audit asks "do the numbers add up," a secretarial audit asks "has the company followed the law in how it is run."
It examines board processes, statutory registers, filings, resolutions, shareholder records, and compliance with the Companies Act, SEBI regulations, FEMA, and other laws that apply to your business.
The audit is conducted by a Practising Company Secretary and the findings are recorded in Form MR-3 — annexed to the company's Board report and placed before the members. In plain terms, it is a professional, on-the-record statement of how clean your compliance house actually is. It draws directly on the quality of your statutory registers and minutes and your routine annual filings — so the audit is only as smooth as the records behind it.
How is a secretarial audit different from a statutory audit?
The short answer: a statutory audit checks your finances; a secretarial audit checks your legal compliance. They are separate exercises, run by different professionals, and one cannot substitute for the other.
| Feature | Secretarial Audit ⭐ | Statutory (Financial) Audit |
|---|---|---|
| Legal Basis | Section 204, Companies Act 2013 | Section 139, Companies Act 2013 |
| Conducted By | Practising Company Secretary (PCS) | Chartered Accountant (CA) |
| What It Examines | Legal & governance compliance — board processes, filings, registers, SEBI, FEMA | Accuracy of financial statements — P&L, balance sheet, cash flows |
| Report Form | Form MR-3 — annexed to Board report | Audit report — annexed to financial statements |
| Can Substitute the Other? | No — completely distinct exercises | No — completely distinct exercises |
| What It Catches | Missed filings, defective resolutions, lapsed registrations, unmaintained registers | Incorrect revenue recognition, misclassified expenses, balance sheet errors |
Is a secretarial audit mandatory? Applicability and thresholds
A secretarial audit is mandatory under Section 204 of the Companies Act 2013, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, for any company that meets any one of the following criteria:
All companies listed on NSE, BSE, or any other recognised stock exchange — regardless of size.
Every public company with paid-up share capital of ₹50 crore or more at any point during the financial year.
Every public company with an annual turnover of ₹250 crore or more — regardless of paid-up capital.
Any company including private companies with outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more.
Who can conduct a secretarial audit?
Only a Practising Company Secretary (PCS) holding a valid Certificate of Practice can conduct a secretarial audit and sign Form MR-3. This is an exclusive professional power. A Chartered Accountant, cost accountant, or lawyer cannot perform it. That exclusivity is precisely why a Company Secretary sits at the centre of corporate governance in India.
There is also a recent tightening worth knowing. Under the SEBI (LODR) amendments effective from April 2025, listed companies can only appoint a peer-reviewed Practising Company Secretary as secretarial auditor, the appointment needs shareholder approval, and there is a cooling-off period before reappointment. The direction of travel is clear: regulators are raising the bar on who signs off on your governance, not lowering it.
What does a secretarial audit cover?
The scope is deliberately broad. A thorough secretarial audit typically reviews all of the following:
All provisions and rules made under the Companies Act that apply to your company type and size.
Meeting procedures, notices, quorum, and minutes — assessed against Secretarial Standards SS-1 and SS-2.
Maintenance of all registers required under Companies Act — members, directors, charges, contracts, and more.
All event-based and annual filings made with the Registrar of Companies — timeliness and completeness.
For listed companies: SEBI LODR, Insider Trading regulations, Takeover Code, and ICDR compliance.
Foreign exchange compliance, sector-specific laws, and any other statutes applicable to your business.
Key Managerial Personnel appointments, related disclosures, and compliance with appointment rules — a commonly overlooked area.
Validity and proper passage of board and shareholder resolutions, and execution of material contracts and agreements.
What happens if you skip a mandatory secretarial audit?
Non-compliance is not a paperwork footnote. Under Section 204(4) of the Companies Act 2013, if a mandatory secretarial audit is not conducted:
The company, every officer in default, and the Practising Company Secretary in default — each — face a penalty ranging from ₹1 lakh to ₹5 lakh. These are per-person penalties, not a single combined fine.
For listed companies, SEBI can impose further penalties for failing to file the Annual Secretarial Compliance Report. And the reputational cost — with investors, lenders, and acquirers who all read these reports — often outlasts the fine.
If a gap has already crept in, the better route is to regularise it deliberately. The MCA Compliance Amnesty Scheme 2026 is designed precisely for this.
Why even non-mandatory companies should consider a voluntary audit
Here is the part I wish more founders heard early. A secretarial audit is valuable long before the law forces it on you. Think of it as an insurance policy you actually want to claim on — because every issue it surfaces is one you get to fix on your own timeline rather than under a regulator's notice.
A voluntary secretarial audit pays for itself in three situations that hit growing companies hard:
Investors run a compliance review before they wire money. A clean secretarial audit shortens diligence, reduces risk flags, and protects your valuation.
Buyers price in compliance risk. Unresolved secretarial gaps become deductions from your sale price — or deal-breakers entirely.
If you are growing toward the ₹50 crore or ₹250 crore marks, a voluntary audit now means the mandatory one later finds nothing. Get ahead, not behind.
The secretarial audit process — step by step
A well-run secretarial audit follows a defined, predictable arc. Here is exactly what to expect:
The board appoints a Practising Company Secretary as secretarial auditor — with shareholder approval where required (mandatory for listed companies under SEBI LODR amendments from April 2025). The PCS must be independent of the company.
The company shares statutory registers, board and committee minutes, all ROC filings and acknowledgements, resolutions, material agreements, and applicable certificates — securely and digitally. The quality of this material determines how smooth the audit runs.
The auditor reviews all records against each applicable law — Companies Act, SEBI regulations, FEMA, Secretarial Standards SS-1 and SS-2 — and flags gaps, qualifications, or observations. This is the professional judgement phase where the PCS's expertise matters most.
Findings are shared with management so the company can correct what is correctable before the report is finalised. This is the most valuable phase — a good auditor is a partner here, not just a reporter. Issues addressed at this stage never appear in the final report.
The final Form MR-3 is issued, signed, and dated by the PCS. It is annexed to the Board report and placed before the members at the AGM. The board must address any qualifications in full in the Director's Report. Folding this into your mandatory compliances calendar means no surprises at year-end.
How a Company Secretary makes the difference
A secretarial audit is only as good as the professional behind it. A Company Secretary does not just tick boxes — the role is to read your company's compliance the way a regulator or an acquirer eventually will, and to close the gaps before they do.
That is the core value of the profession: independent assurance that your governance holds up under scrutiny. Whether you are legally required to conduct a secretarial audit, or you want a voluntary one to get ahead of growth, fundraising, or an exit — we can help you scope it and run it properly.