Difference between Statutory Audit and Secretarial Audit
Statutory audit: financial statements by CA under §139. Secretarial audit: legal compliance by PCS under §204. Different scope, statutes and signatories.
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Secretarial Audit
Prepare for compliance beyond the checklist. Section 204, Secretarial Standards, MR-3 reporting, audit planning, observations, compliance reporting, and governance reviews.
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Scope of Secretarial Audit — laws covered in MR-3
Companies Act, SCRA, Depositories Act, FEMA (FDI/ODI/ECB), SEBI regulations, industry-specific laws and Secretarial Standards (SS-1, SS-2).
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What is the secretarial audit requirement under Section 204 for listed entities?
Every listed company + prescribed unlisted (paid-up ≥ ₹50 cr or turnover ≥ ₹250 cr or borrowings ≥ ₹100 cr) must annex a Secretarial Audit Report in Form MR-3 from a PCS to the Board's Report.
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Form MR-3 — structure and key annexures
MR-3 covers period, applicable laws, audit observations, board composition, adequate systems and processes, and specific events affecting compliance.
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Internal audit vs Secretarial audit — interface and overlap
Internal audit (§138) is operational; Secretarial audit is compliance. PCS may rely on internal-audit findings for systems but draws independent opinion.
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Difference between Secretarial Audit and Annual Secretarial Compliance Report (ASCR)
MR-3 under §204 covers all laws; ASCR under LODR Reg. 24A covers only SEBI regulations. Different signatories, different filing channels.
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Compliance certificate from Practicing CS for unlisted public companies
Mandatory for unlisted public companies with paid-up capital ≥ ₹10 cr or turnover ≥ ₹50 cr. Issued in Form MGT-8 annexed to MGT-7.
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Applicability of Secretarial Audit under Section 204
Every listed company, every public company with paid-up capital ≥ ₹50 cr or turnover ≥ ₹250 cr, and every company having outstanding loans/borrowings ≥ ₹100 cr.
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Auditing Standards issued by ICSI for Secretarial Audit
CSAS-1 (Auditing), CSAS-2 (Engagement), CSAS-3 (Audit Procedures), CSAS-4 (Audit Reporting). Effective from April 2020 for §204 audits.
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How does a PCS plan a Secretarial Audit?
Engagement letter → understanding of business → identification of applicable laws → risk-based sampling → audit evidence → drafting MR-3 → communication with management.
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Secretarial compliance for listed companies — annual reporting matrix
Listed entities must file Annual Secretarial Compliance Report (Reg 24A) signed by a PCS, alongside MR-3, within 60 days of year-end. Covers all SEBI regulations applicable.
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Reporting fraud during Secretarial Audit — Section 143(12) read with Section 204
If PCS suspects fraud, report to Audit Committee/Board if < ₹1 cr, and to Central Government via ADT-4 within 60 days if ≥ ₹1 cr.
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Common qualifications in MR-3 reports — what to look for
Late filings, non-constitution of committees, delayed disclosures, RPT approval gaps, SS-1/SS-2 non-compliance, FEMA filing delays.
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