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.
Regulators
IND BSE; IND NSE
Entity Types
Auditor; B/D; Corp; Exch
Reference
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;
