Diagnostic audit is one of the important audit tools that examine the marketing operation of a specific business unit. Objective of the study The study has provided the backdrop for the crystal clear review of the marketing components and activities of the companies under the small and medium scale enterprise. The study has been conducted considering three companies such as Jain Estates, Multisoft Systems and Infinity Informatics. Multisoft Systems is an India-based software development company listed under growing SMEs in India. Infinity Informatics is an information technology products development company situated in Bangalore. Jain Estates is one of the emerging real estate company listed under SMEs list in India. These three small and medium scale enterprises are increasing their market reputation slowly and gradually. The major objective of the study is to review or assess the marketing and business capabilities for these small and medium-scale enterprises. In order to uncover the study, the following objectives can be set for the purpose of research work. Determining and closing the marketing and business capability gap. Implementation of marketing audit and toolkits in order to betterment the SMEs business and marketing capabilities. Importance of the Diagnostic audit to measure the marketing performances of the three companies. Elaborating the findings of thorough analysis and recommendation plan for the problem statements. In order to draw a decision, the study needs a conclusion whether the marketing audit is effective or not in terms of the business practices of the three small and medium-scale enterprises. Marketing and business capability gap The gap between the…It is necessary as it identifies and rectifies the problems in business practices. The marketing audit efficiently assesses the business performance of a company. The owners of SMEs need to learn and implement the audit for the betterment of their business practices. The government should organize some events or programs related to the awareness and importance of the marketing audit considering the SMEs as the SMEs significantly contribute to countries’ economical development. The SMEs owner can be benefited by such awareness programs. Moreover, it is necessary that small and medium-scale enterprises appoint an external market auditor due to the small size of industry. In order to evaluate marketing planning and performances and establishment of improved and integrated business strategy, the marketing auditor is need to be appointed in a SME. Conclusion Without effective assessment of previous business performance, SMEs cannot rectify and improve their business performance in the near future. The above study has clearly stated the potential of small and medium-scale enterprises. Moreover, it is feasible from the research work that effective marketing audit will help structure the marketing budget for sales and marketing activities of specific products and services.