Management audit of amc of mutaul fund

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Munajm (Querist)
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16 March 2012 Dear Sir,

Can any body provide the areas to be covered in management audit of asset management company of mutual fund or some guidelines to be followed by the AMC

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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17 March 2012 Internal Audit and Risk Management in BFSI sector is primarily intended to provide the
management with clear, comprehensive and unbiased analysis of the adequacy, existence
and effectiveness of internal controls and risk management framework of the entity. It
reviews the functional efficiency of the organisation with a view to suggest areas for
possible improvements. It is an important tool which enables an organisation in achieving
its strategic business goals, meeting operational and business environmental challenges,
complying with regulatory norms and managing reporting requirements.
Internal Audit includes:
Critical evaluation of internal controls, performing GAP analysis and suggesting
areas for strengthening;
Constructive review of business operations by keeping the organisation's
business needs in focus;
Identification and recommendation of areas for cost reduction, revenue
optimisation and improvement in operational efficiency;
Critical evaluation of systems and procedures and adherence to Standard
Operating Procedures;
Review of Information Technology (IT) controls and Business Continuity Plan;
Identification, assessments and control of risks;
Review of compliances with the various regulatory provisions and operations
manuals;
Review of adherence to the corporate governance requirements.
As per the Institute of Internal Auditors ‘Enterprise-Wide Risk Management (ERM) is a
structured, consistent and continuous process across the whole organisation for
identifying, assessing, deciding on responses to and reporting on opportunities and
threats that affect the achievement of its objectives’. The responsibility of ERM is with the
Board of Directors.
Internal audit is an independent, objective assurance activity and can provide valuable
insight in providing assurance that major business risks are being managed appropriately
and the risk management and internal control framework is operating effectively.
ERM role shall include the following:
Facilitating identification and evaluation of key risks;
Evaluating and reporting of key risks;
Consolidating risks across the organisation;
Developing and maintaining the ERM framework.
However, internal audit should not be involved in setting risk appetite, taking decision on
risk response, implementing risk response or taking accountability of risk management.
Internal Audit's core role in relation to ERM should be providing assurance to management
and to the Board on the effectiveness of risk management.
Internal Audit and Risk Management in today's global competitive environments depends
heavily on Information System for decision making. Business processes are increasingly
getting automated and controls becoming less person dependant. In such a scenario, the
significance of Information Technology (IT) and Information System (IS) cannot be
undermined as these are pervasive throughout the business. Some areas that can benefit
include Information System Development, Assessment of risks and its management,
Business Continuity Plan and Disaster Recovery Plan, Hardware, Software and Network
audits etc.