Following the Securities and Exchange Board of India’s (Sebi’s) directive to the exchanges to carry out internal audits of their stockbrokers and clearing members, the National Stock Exchange (NSE) has asked its brokers and members to appoint an internal auditor for carrying out audits of their operations in all segments of the exchange.
NSE said reports on internal audits were required to be submitted on a half-yearly basis with the first half-year period starting from October 1, 2008. These audits would be carried out by chartered accountants, company secretaries or cost and management accountants, the exchange said.
The purpose of such audits is to ensure that books of account and other records and documents are being maintained in the manner required under stipulated Sebi Acts. These audits are also required to ascertain if adequate internal control systems, procedures and safeguards have been established and followed by intermediaries to fulfil their regulatory obligations.
Internal auditors are required to submit their reports within three months from the end of a half-year period.
While asking its brokers and members to follow the Sebi directive, NSE warned that non-submission of internal audit reports would be treated as non-compliance and appropriate action would be initiated against members concerned. In case the quality of an audit is found unsatisfactory, the exchange would advise the members concerned to change their auditors.