|
The Securities and Exchange Board of India (SEBI) is likely to tighten and standardise the internal audit mechanism at market infrastructure institutions (MIIs), as it feels that certain significant observations were not captured by the internal auditors, sources said.
During inspections, SEBI found out that certain substantial observations were not captured by the report of internal auditors of the MIIs. Thus, it is felt that the internal audit mechanism needs to be strengthened and the broad norms for internal audit need to be standardised, said the sources.
The observations of the internal auditor will have to be sent to the heads of departments for their comments, along with a copy to the audit committee. The head of departments will then have to provide their comments in a timeline prescribed by the MIIs’ audit committee.
The proposals also plan to potentially bar the managing directors (MD) from being part of audit committees. This move follows a request for a no objection certificate from the MD of one of the MIIs to be part of its audit committee. The regulator may only allow key managerial personnel (KMPs) to be invited to the audit committee with the approval of the committee’s chairman, according to sources aware of the discussions.
SEBI plans to mandate submitting the internal audit report only to the audit committee and maintain its independence. A consultation paper on the same is expected soon, sources said. An email query sent to the regulator seeking comment went unanswered.
The internal auditor must include all functions and activities of the MIIs, including all verticals such as critical operations, regulatory, compliance, risk management, investor grievances, and business development.
Further, in order to standardise the terms of reference of the internal auditor across similar MIIs, the MlIs may do so in consultation with the industry standards forum of MIIs, said sources.
The final report, after incorporating comments of the department heads, will have to be presented before the audit committee, said sources.
The regulator’s aim is to enable MIIs to accomplish its objectives through a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
|
