 "FMC sharpens & widens auditor remit in exchange inspection")
On Friday, it issued an inspection manual for examination of books of accounts and other documents of commodity exchanges, in which it has listed the objectives and scope of the audit. FMC ensures an inspection of exchanges once a year.
It appears the special audit report of Price Waterhouse in the case of Multi Commodities Exchange has provided enough ground for FMC to move in this regard. Soon after the MCX issue, the problems have emerged in the newest commodity bourse, Universal Comm-odity Exchange (UCX), in whose case the promoter is facing allegations of siphoning of funds. FMC has ordered a forensic audit.
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Earlier, said an exchange official, there were norms but the difference this time is that the regulator had put everything at one place, with several specific instructions. These include finding out details of related party transactions in the case of exchanges, not prescribed earlier. FMC has also said any matter found during the course of an inspection and requiring urgent attention should be immediately brought to its attention.
Prescribing everything in the form of a manual, the regulator has made audits and inspections of commodity exchanges a virtual forensic audit. Details of actions against members by the exchange, and all details regarding the settlement and guarantee fund have to be provided.
The exchanges also have to present internal audit reports and system audit reports. The inspecting auditor shall have to check if action based on past such audits have been taken or not.
The manual also says the auditor must check everything from membership and trading & settlement process to risk management systems. In the case of National Spot Exchange, violations in all these areas were found by the forensic auditor.