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TMI BlogFramework for Monitoring and Supervision of System Audit of Stock Brokers (SBs) through Technology based Measures.X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy and system used by stock brokers and emanating technology risk thereof, there is a need to further strengthen the system audit framework. Therefore, it has been decided to introduce technology based mechanism to monitor and supervise the way in which the system audits are conducted and to prescribe eligibility criteria for the empanelment of auditors to ensure that audits are conducted in a stipulated manner. 2. Based on the discussions with Stock Exchanges (SEs) and Technical Advisory Committee (TAC) of SEBI as well as in Intermediary Advisory Committee (IAC) wherein representative of ICAI was also invited, the following guidelines shall be prescribed for the conduct of system audit of SBs. 3. Monitoring and Supervision of System Aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... systems/processes, * SBs/TMs name, address, PAN, SEBI registration no. etc. Requirements during the audit: 4.3 During every visit to the SBs' premises, auditor shall log in to the web portal of the exchange from SBs' location. The login into the web portal shall be enabled only to authorized auditor through secured mechanism such as OTP on mobile device of the auditor. 4.4 Web portal shall capture the geo location of the auditor to confirm physical visits by the auditor. 4.5 During audit, the auditor shall provide following details through online web portal: * Audit start date, Date of visit, entry time, exit time, audit team members visited, person with whom interacted, details of systems covered, audit end date etc. * Evidence s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose it, the percentage of the total that was chosen as a sample etc. 4.10 The system audit report and the Action Taken Report (ATR) shall be submitted to Exchanges through web portal. The ATR shall be validated by the same auditor who has carried out the system audit. 4.11 QSBs are mandated to submit the system audit report and the ATR to Stock Exchanges after approval from their respective Governing Board and Standing Committee on Technology (SCOT) or equivalent Technology Committee (TC). Other SBs/TMs are mandated to submit the system audit report and the ATR to Stock Exchanges on approval of Proprietor/Partner or equivalent responsible official through SCOT or TC. 5. Framework for Empanelment of System Auditors: 5.1 Appointment of Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done by stock exchanges through web portal. 5.6 Reassessment of audit: Exchanges shall define the critical audit area and place them in the online web portal. The reassessment shall be carried out by the same system auditor if gaps/deficiencies are found in such critical areas of system audit. Further, such reassessment shall also be carried out by such auditor in case of other stock brokers where he has conducted the audit. 5.7 De-empanelment: In case it is observed by stock exchanges that auditor has not done audit prudently or gaps/deficiencies are found in audit report repeatedly, exchanges shall de-empanel such auditor and also refer such matters to the National Financial Reporting Authority (NFRA)/ICAI/ISACA, as applicable for appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial disincentive on SBs for instances where serious lacunas found in the system audit process and/or non-closure of observations found during the audit within defined timelines. 7.4 Exchanges shall prescribe the period for preservation of documents such as working papers, logs, screenshots, records of visit to the premises of the entity and other evidence in support of the audit. 7.5 Stock Exchanges are mandated to submit summary of system audits of SBs/TMs to SEBI on half yearly basis giving details of stock brokers who have carried out the audit, action taken on non-compliant stock brokers, details of surprise visits carried and findings thereof, action taken on the auditor if any etc. 8. The web portal shall be developed by stock exch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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