March arrives. The statutory auditor is camped in the finance room. And the company secretary gets a call from the practicing CS: "We're starting the secretarial audit next week. Please keep the last three years of board minutes, all ROC challans, and the RPT register ready." The CS takes a deep breath. They know what's in those files — and what isn't.

As practicing company secretaries who conduct secretarial audits, we see both sides. Here is what the audit actually examines, why companies dread it, and how to turn it from an annual ordeal into a non-event.

What secretarial audit actually is

Section 204 of the Companies Act requires every listed company — and large unlisted public companies (₹50 crore paid-up capital or ₹250 crore turnover) — to get a secretarial audit from a practicing company secretary. The report, in Form MR-3, is annexed to the board's report. It is public. Investors read it.

The audit covers compliance with the Companies Act, SEBI regulations (LODR, PIT, Takeover Code, Buyback, Delisting — whichever apply), FEMA, and other corporate laws. It also examines board processes: were notices sent on time, were agenda papers circulated seven days prior, is dissent recorded, are minutes signed within thirty days.

What it is not: a financial audit. We don't verify your numbers. We verify that you followed the law while producing them.

Why companies dread it

Because the secretarial auditor finds what internal teams normalised. The board meeting where notice went out five days before instead of seven — "it was urgent." The related-party transaction approved by the board but not the audit committee — "it was below the threshold, we thought." The insider trading disclosure filed on day three instead of day two — "the designated person was travelling."

Each of these becomes a qualification or observation in the MR-3. Individually minor. Collectively, they paint a picture — and that picture goes into the annual report that every institutional investor, lender, and potential acquirer reads.

The dread isn't about the audit itself. It's about the gap between what the company thinks its compliance looks like and what the records actually show.

The qualifications we see most

Late ROC filings. AOC-4 or MGT-7 filed after the due date, even by a week. With ₹100/day penalties now routine, late filings are both a qualification and a cash drain.

RPT approval gaps. Transactions with related parties that went to the board but skipped the audit committee, or vice versa. Section 188 and LODR Regulation 23 have different thresholds and different approval chains — companies mix them up constantly.

PIT violations. Trading window not closed on time, pre-clearances missing, the structured digital database incomplete. SEBI takes PIT seriously; so does the secretarial auditor.

Board process lapses. Minutes not signed within 30 days, agenda papers circulated late, independent director meetings not held. These seem procedural until an acquirer's lawyer flags them in diligence.

Website disclosures. LODR requires a staggering list of policies and disclosures on the company website. Half the companies we audit are missing something — the archival policy, the familiarisation programme details, the updated shareholding pattern.

How to sail through

Start in Q3. Don't wait for March. A pre-audit health check in October-November gives you four months to fix gaps before the auditor arrives. Most qualifications we report could have been cured if someone had looked in Q3.

Maintain a compliance calendar. Every filing, every disclosure, every board process — on a calendar, with owners and deadlines. The companies that sail through aren't lucky; they're organised.

Document as you go. The RPT approved verbally in a corridor conversation doesn't exist for audit purposes. If it isn't minuted, it didn't happen. Train your team: no approval without paper.

Reconcile quarterly. LODR filings vs actual event dates. ROC filings vs board approvals. PIT disclosures vs trading data. Quarterly reconciliation catches the drift before it becomes a qualification.

The best secretarial audit outcome isn't "no qualifications" — it's "no surprises." When you know exactly what the auditor will find because you've been tracking it all year, the audit becomes a verification exercise. That's the goal.

Questions boards ask

Every listed company, plus unlisted public companies with ₹50 crore+ paid-up capital or ₹250 crore+ turnover. Private companies are exempt. The MR-3 report is annexed to the board's report.

Companies Act compliance, SEBI regulations (LODR, PIT, Takeover Code), FEMA, board processes, and compliance mechanisms. It is not a financial audit.

They're public — annexed to the annual report. Investors, lenders, and acquirers read them. Common qualifications trigger questions; repeated ones signal weak governance.

₹3-8 lakh for a mid-cap listed company depending on complexity. A thorough auditor who finds issues before SEBI does is worth multiples of the fee difference.

Start in Q3. Ensure ROC filings are current, minutes signed, registers updated, RPT approvals documented, PIT disclosures filed. Good year-round compliance makes the audit a verification, not an excavation.

Due for secretarial audit, or want a pre-audit health check before the auditor arrives? We'll tell you exactly where you stand.

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