Q.What is Secretarial Audit? Explain its applicability and the manner in which it is reported, under Section 204 of the Companies Act, 2013.

A Secretarial Audit is an independent check on how well a company has followed company law, and the law insists it be carried out by someone outside the company's own staff.

Secretarial Audit, under Section 204 of the Companies Act, 2013, is an independent examination of a company's compliance with the Companies Act and other applicable corporate laws for a given financial year. Applicability: it is mandatory for every listed company and for certain other prescribed classes of companies, as specified under the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, based on thresholds (such as paid-up capital or turnover) that the Rules prescribe from time to time. Who conducts it: the audit must be carried out by a Company Secretary in Practice — that is, an independent, practising ICSI member holding a Certificate of Practice — and specifically not by the company's own employed Company Secretary, since the audit is meant to provide an independent, outside opinion on the company's compliance record, similar in spirit to how a statutory financial audit must be conducted by an independent auditor rather than the company's own accountant. Reporting: the auditor's findings are furnished in the prescribed form, Form MR-3, and this report is annexed to the company's Board's Report, so that shareh …

A common error is stating that the company's own employed Company Secretary can perform the Secretarial Audit — the audit's value lies precisely in its independence, so it must be performed …