Framework for Monitoring and Supervision of System Audit of Stock Brokers (SBs) through Technology based Measures.
1.SEBI vide Master Circular No. SEBI/HO/MRD2/PoD-2/CIR/P/2023/171 dated October 16, 2023 in Clause 8.2 of Chapter 2 has specified the comprehensive framework for System Audit for Stock Brokers (SBs)/Trading Members (TMs). Considering the complexities of technology 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 Audit process through online mechanism:
3.1Stock Exchanges shall develop web portal/ web based platform and create technology based mechanisms to monitor and supervise the entire system audit lifecycle of a stock broker.
3.2Stock Exchanges shall monitor process of carrying out of system audit of SBs through online monitoring mechanism. As part of the monitoring mechanism, exchanges shall capture the geo location of the auditor to ensure that physical visit is carried out by auditor in the premises of the stock broker.
3.3The web based monitoring & supervision framework shall be accessed by the auditor during the audit. Exchanges shall ensure that only the authorized auditor or person of the audit firm shall have access to the web portal while conducting audit through secure OTP mechanism.
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