SEBI Introduces Standardised Audit Report Format for Market Infrastructure Institutions

In a significant step to enhance transparency and audit efficiency, the Securities and Exchange Board of India (SEBI) on Friday unveiled a standardised format for system and network audit reports for Market Infrastructure Institutions (MIIs). 

These include stock exchanges, clearing corporations, and depositories. The new framework will be applicable to audits conducted in the fiscal year 2024–25 or from the second half of the year, depending on the audit frequency.

Unique ID-Based Tracking for Audit Observations

To streamline monitoring and improve traceability, SEBI will assign unique identification numbers to each observation recorded during the audit. This will help both the regulator and MIIs to efficiently track current and historical audit issues.

According to SEBI’s circular, the move is aimed at increasing data quality, capturing relevant information in line with regulatory requirements, and ensuring uniform reporting across all MIIs. Presently, different institutions use varied templates for system and network audit reports, which leads to inconsistency and inefficiencies in regulatory oversight.

Detailed Reporting Format to Ensure Comprehensive Oversight

The standardised format includes several key sections to ensure thorough reporting. MIIs will be required to disclose:

• Basic information such as the name, address, and contact details of the auditee and the audit team

• Audit specifics, including the period of review, the methodology followed, and tools used

• An IT environment overview, highlighting major projects or developments during the audit period

• Scope of audit, covering compliance with SEBI regulations and identification of any technical issues

• Observations and findings with each issue tagged with a unique ID for easy tracking

Additionally, the format mandates a compliance status section, which will assess the MII’s adherence to SEBI mandates, such as disaster recovery drills, stress testing, and business continuity planning.

Focus on Pending Issues and Final Auditor Assessment

MIIs will also need to provide a list of pending issues, including unresolved observations from previous audits and explanations for non-closure. The report concludes with final notes covering any limitations of the audit, auditor remarks, and an overall assessment.

SEBI believes the new system will facilitate more focused monitoring of compliance requirements and offer ease of traceability for both open and closed audit observations.

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