A secrete reserve is a reserve that is created but not stated in a balance sheet. There are various ways of creating secrete reserves. The banks insurance companies and other financial institutions wants to win public confidence for there successful working. These business concerns can create secret reserves. It is a technique to show poor financial position to reveals and in case of need such reserves are available to meet crisis.
There are merits and demerits of such reserves. The auditor can examine the existence of such a situation. The amount may not be high