The Securities and Trade Board of India (Sebi) has proposed a brand new on-line system to enhance the monitoring and supervision of stockbrokers’ system audits. This proposal, aimed toward enhancing audit high quality and accountability, will create a web-based platform for inventory exchanges to supervise the system audit course of for brokers in real-time. It comes as a part of Sebi’s ongoing efforts to strengthen expertise governance in India’s capital markets.
The proposed on-line mechanism seeks to deal with a number of dangers recognized within the present audit course of, which has been in place since 6 November 2013. These dangers embody audits carried out with out bodily visits to stockbrokers’ premises, poor audit high quality as a result of inadequate pattern sizes and insufficient proof, and audits carried out by non-qualified auditors. Moreover, there was an absence of unbiased supervision all through the audit lifecycle.
Sebi’s new proposal goals to rectify these points by implementing a web based system that ensures larger accountability. Underneath the brand new framework, inventory exchanges will monitor each stage of the audit course of, from pre-audit necessities to the ultimate audit report submission. Auditors will likely be required to go to stockbrokers’ places of work bodily, and their visits will likely be verified by a geo-location monitoring system built-in into the online portal. This may also stop the outsourcing of audit actions, guaranteeing auditors are instantly concerned within the verification of IT techniques.
Standardization of the audit course of
A crucial a part of the proposal is the standardization of the audit course of. Inventory exchanges will use the online portal to make sure consistency within the audit report format, and to observe the audit’s progress. The portal will seize particulars such because the audit begin and finish dates, the techniques lined, and proof of bodily inspections, with the system robotically logging audit group members’ visits and interactions with stockbrokers’ representatives.
The brand new system additionally mandates that auditors submit proof of the audit course of on the portal, together with information, experiences, and techniques examined. Exchanges will have the ability to carry out shock visits to confirm that audits are carried out correctly and can conduct offsite assessments of third-party digital belongings utilized by stockbrokers, corresponding to these offered by cloud service distributors. In instances the place auditors fail to satisfy requirements, inventory exchanges could have the authority to de-empanel them, guaranteeing excessive audit high quality throughout the sector.
Moreover, the proposed framework consists of the creation of an unbiased supervisory mechanism by inventory exchanges. This can assist preserve the integrity of the audit course of and make sure that auditors are held accountable. The system may also enable for extra interplay between auditors and exchanges, that can assist the latter to determine deficiencies earlier than the audit is finalized.
The proposal requires inventory exchanges to develop the proposed internet portal and supply mechanisms to observe your entire audit lifecycle. This consists of capturing auditor particulars, verifying bodily visits, and standardizing audit experiences. Auditors may also be topic to extra stringent necessities, together with certification of {qualifications} and expertise, to make sure solely certified professionals conduct these crucial audits.
Sebi has referred to as for feedback or strategies on the proposal by 26 December, with the brand new framework set to be applied on the beginning of the 2025-26 fiscal yr.
