Revised Eligibility Criteria for Auditors Conducting Internal Audit of Trading Members

May 12, 2023

In reference to Exchange Circular No. NSE/INSP/56678 dated May 11, 2023, which outlined the framework for empanelment of auditors and prescribed eligibility criteria for conducting internal audits of Trading Members, we are pleased to inform you of significant updates following a joint review by the Exchanges.

Revised Eligibility Criteria

The revised eligibility criteria, detailed in Annexure A, will be applicable from the half year ending March 31, 2024, and onwards. This is a crucial step towards enhancing accountability and ensuring compliance with regulatory requirements in the domain of internal audits.

Key Revisions

1. Qualification of Auditor in Audit Firm: The auditor in the Audit Firm must be an independent qualified Chartered Accountant, Company Secretary, or Cost and Management Accountant in practice, without any conflict of interest.

2. Experience: The Audit Firm should have a minimum of 5 years' experience in conducting audits, with a preference for experience in securities markets.

3. Partnership Requirement: The Audit Firm must maintain at least two partners at all times.

4. Regulatory Compliance: The Audit Firm must not be debarred or restrained from issuing certificates by professional bodies such as ICAI, ICSI, ICMAI, RBI, SEBI, or any other regulator/law enforcement agency.

5. Certification Requirements: Any partner or employee of the Audit Firm involved in the internal audit process must hold a valid NISM Series III-A: Securities Intermediaries Compliance Certification or possess certification in "Financial Market & Securities Laws" as provided by ICAI or an equivalent certification from another institution. Additionally, those with valid NISM-Series-XIV: Internal Auditors for Stockbrokers certification are eligible until the expiration of the certification.

6. Additional Requirement for Audit Firms Working with Qualified Stock Brokers (QSBs): Audit Firms undertaking the internal audit of Qualified Stock Brokers ("QSBs") must maintain at least five partners at all times, of which at least two partners should be full-time partners.

Continued Applicability of Previous Criteria

Please note that the eligibility criteria outlined in Exchange Circular NSE/INSP/54080 dated October 14, 2022, will remain applicable for the half year ending September 30, 2023.