Internal Audit for Fund Management Company
Updated: Nov 9, 2022
MAS expects the business activities of an FMC to be subject to adequate internal audit. The internal audit arrangements should be commensurate with the scale, nature and complexity of its operations. The internal audit may be conducted by the internal audit function within the FMC, an internal audit team from the head office of the FMC, or outsourced to a third-party service provider.
FMCs are required to submit their outsourcing registers to MAS when required. Similarly, internal audit reports on FMC’s outsourced arrangements are to be submitted upon MAS’ request.
Fund Management Company [“FMC”]. This term is used to refer to LFMC and RFMC collectively.
Adequate internal audit arrangements for an RFMC
Taking into consideration the size of the assets managed and number of investors that an RFMC may serve, MAS would consider there to be adequate audit arrangements if the RFMC has in place a process for regular internal reviews on the effectiveness of internal systems and controls. The CEO and directors of an RFMC are ultimately responsible for ensuring there are adequate internal controls within the RFMC and should take reasonable measures to ensure that internal controls are effective to address the risks arising in the course of the RFMC’s operations.
Engaging the same audit firm who audits the annual financial statements or the funds managed or advised
As good governance, MAS generally discourages the appointment of the same audit firm to provide both external and internal audit services to an FMC. There are areas where the scope of review by both external and internal auditors may overlap, such as expense charging, and compliance with capital and business conduct requirements. The employment of the same audit firm may impair the objectivity and diminish the check and balance between the two functions. In exceptional circumstances where an FMC would like to do so, it should demonstrate to MAS that the audit firm has appropriate safeguards to minimize threats that may impair the independence of the audit firm in providing both external and internal audit services to the FMC.