On Mar. 4, IND BSE notified about internal audit of trading members.
IND BSE issued notice, with reference to IND BSE Notice no. 20231215-55 (of Dec. 15, 2023), wherein detailed procedure for empanelment of the auditors eligible for conducting the internal audit of trading members was intimated to the members.
Follows IND NSE Apr. 2023 appointed auditors to conduct forensic audits, #170379.
Eligibility to Conduct Internal Audit
As advised by IND SEBI, and to enhance ease of doing compliance, reduce operational difficulties faced by members/audit firms, auditors empanelled with any exchange, shall be eligible to conduct internal audit of the trading members of any exchange.
Trading members (TMs) may choose any of the empanelled auditors at any exchange.
It said eligibility criteria along with detailed procedure for empanelment of the auditors as prescribed in Notice no. 20231215-55 is once again enclosed as annexure 1.
Audit firms who meet prescribed eligibility criteria may submit an online application.
Namely, for empanelment for undertaking assignments re internal audit of TMs.
Format of undertaking-cum-affidavit to IND BSE to be submitted by audit firm is also enclosed as annexure 2; IND BSE shall accept the internal audit report certified by empanelled auditor only with effect from half year (HY) ended Mar. 31, 2024 onwards.
All members are advised to take note of above, bring provisions of this circular to the notice of their respective internal auditors, ensure compliance of the obligation above.
IND NSE Reciprocal Circular
On the same day, IND NSE issued a reciprocal circular to all members of IND NSE.
The IND NSE notice references its Circular no. NSE/INSP/59789 (of Dec. 15, 2023).
Effectiveness
Internal audit report shall only be accepted from HY ending Mar. 31, 2024 onwards.
Apr. 2024 Audit Report Submission
On Apr. 12, 2024, IND BSE, IND NSE reminded of internal audit report submission.
Internal audit report shall be certified by empaneled auditor effect from half year ending Mar. 31, 2024; TMs shall submit report by May 31, 2024 or be subject to penalty.
Highlighted changes such as the sampling criterion/methodology for sample selection.
Auditor shall provide the no. of instances verified, no. of % instances/ amount/value involved where non-compliance is observed, for each not complied observations.
Provide internal audit certificate, format for internal audit report, guidelines on sample selection & other points to be noted, list of indicative processes/ references of circulars and procedure for empanelment for the auditors for conducting the internal audit.
Document dated Apr. 12, 2024, received from NSE Apr. 15, summarized on Apr. 17.
Apr. 22, 2024 IND NSE Half Yearly Report
On Apr. 22, 2024, IND NSE issued circular re submission of the half yearly internal audit report; the format and guidelines for the submission were provided separately.
Auditors must procure data from members, providing details for non-compliance observations, justifying remarks for not applicable points, detailing verified samples.
Internal audit certificate must be digitally signed by the auditor, annexure II should be submitted in excel, pdf, with latter being digitally signed by auditor, clearing member.
Auditors empaneled with any exchange are eligible to conduct internal audits.
Clearing members engaged in clearing activities for other stock-brokers and/or custodian participants must undergo internal audit and submit the report to IND NSE.
Due date for submission of internal audit report is May 31, 2024.
Document dated Apr. 22, 2024, received from IND NSE Apr. 24, summarized Apr. 26.
Apr. 26, 2024 IND BSE
On Apr. 26, 2024, IND BSE said the internal audit report for the half year ended Mar. 31, 2024 is to be submitted on or before May 31, 2024 in electronic form only.
Submission is through BEFS and the module for submission is now enabled.
The quality of internal audit reports received shall be monitored and appropriate steps shall be taken if the reports do not meet minimum expected quality levels.
In cases where internal audit report submitted is incomplete and not as per the guidelines, same would be treated as non-submission of internal audit report.
Stock brokers are strictly advised to submit the report in format prescribed by BSE.
Auditors are requested to mandatorily adhere to the sample selection guidelines specified therein and mention the sample size selected along with details of the instances of non-compliance (if any) against each of the checklist points.
All working papers and records with respect to the audit should be retained by the auditors for verification by the exchange as and when required.
Submission of internal audit report shall be considered complete only after member submits the report to the exchange and receives an acknowledgment email.
May 14, 2024 IND NSE Reminder
On May 14, 2024, IND NSE reminded clearing members to submit their half yearly internal audit report for the period ending Mar. 31, 2024 by May 31, 2024.
The report must be in the prescribed format to comply with regulatory requirements.
Failure to submit report on time may result in penalties as outlined in previous circular.
Document dated May 14, 2024, received from IND NSE May 15, summarized on May 20.
May 30, 2024 Due Date Extended
On May 30, 2024, IND BSE issued notice extending the due date for submission of the internal audit report for the half year ended Mar 31, 2024, to Jun. 30, 2024.
Members must submit internal audit report mentioned above on/before Jun. 30, 2024.
Jun. 2024 IND BSE Reminder
On Jun. 21, 2024, IND BSE reminded members to submit internal audit report for the half year ended Mar. 31, 2024, via the electronic filing system on or before Jun. 30, 2024.
Report must be in the prescribed format and comply with regulatory requirements.
Oct. 4, 2024 IND NSE Internal Audit Reminder
On Oct. 4, 2024, IND NSE issued circular on trading members' internal auditing.
Audit report to be submitted through inspection module in electronic member portal.
Audit must be conducted by independent qualified chartered accountant, company secretary, or cost and management accountant in practice, without conflict of interest.
Exchange to accept internal audit reports certified by empaneled auditors only.
Late/non-submission/non-compliance penalty per Circular no. NSE/INSP/53530 (Sep. 2, 2022), members to submit undertaking about not passing penalties on to clients.
Members to comply with IND SEBI Circular no. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/ 95 (of Sep. 26, 2016) with respect to appointment and rotation of internal auditors.
Auditors to follow methodology for sample selection in annexure III; for not complied observations, auditors to provide number of instances verified and amount/value.
Circular (of Oct. 4) includes other points to be noted by auditors re internal audit.
Internal audit to cover period ending Sep. 30, report submission due by Nov. 30, 2024.
Oct. 11, 2024 IND NSE Half-year Internal Audit
On Oct. 11, 2024, IND NSE issued circular on half-yearly internal audit report submission for clearing members clearing for other stockbrokers, custodial participant.
Internal audit reports to be submitted to included email in the appropriate formatting.
Auditors are to follow the specific guidelines for sample selection in annexure III.
For not complied observations, auditors must provide number of instances verified, amount/value involved; not applicable points require justifying remarks to be included.
Internal audit certificate as per annexure I must be digitally signed by the auditor.
Auditors to verify action letters issued by Clearing corporation (CC) for last 6 months, compliance with violations in said letters to be commented on in audit checklist.
Auditors empaneled with any exchange eligible to conduct internal audits for CCs.
Audit required for clearing members undertaking clearing activities for other brokers/ participants for at least one trade during Apr. 1, 2024 to Sep. 30, 2024 period.
Due date for submission is Nov. 30, 2024, within two months from half-year end.
Failure to submit report on time may result in penalties as outlined in previous circular.
Regulators
IND BSE; IND NSE
Entity Types
Auditor; B/D; Corp; Depo; Exch
Reference
Cir NCL/CMPL/64520, 36/2024, 10/11/2024; Cir NSE/INSP/64378, 71/2024, 10/4/2024; Nt 20240621-49, 6/21/2024; Nt 20240530-8, 5/30/2024; Cir NCL/CMPL/62004, 14/2024, 5/14/2024; Nt 20240426-69, 4/26/2024; Cir NCL/CMPL/61662, 10/2024, 4/22/2024; Nt 20240412-45, Cir NSE/INSP/ 61585, 26/2024, 4/12/2024; Nt 20240304-60, Cir 13/2024, NSE/INSP/60986, 3/4/2024; Cir NSE/INSP/59789, Nt 20231215-55, 12/15/2023;
