Submission of Internal Audit Report for the half year ended on March 31, 2026

Multi Commodity Exchange, vide Circular No. MCX/COMP/190/2026 dated April 11, 2026, has announced an important update regarding submission of the Internal Audit Report for the half year ended March 31, 2026.

Key Details of the Update –
• All members of the Exchange are required to ensure that the internal audit for the half year ended March 31, 2026 is conducted by independent qualified Chartered Accountants, Company Secretaries, or Cost and Management Accountants in practice who do not have any conflict of interest.
• The circular reiterates compliance with SEBI norms on appointment and rotation of internal auditors under clause 4.2 of SEBI Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016, and specifically states that members must not appoint or re-appoint internal auditors who have completed the permissible tenure prescribed under the applicable rotation requirements.
• Members are required to appoint Internal Auditors and create login IDs for them so that the Internal Audit Report may be submitted through the Exchange’s electronic system. The circular also states that the Internal Audit Certificate and Audit Report must be digitally signed by the auditors, and the member must digitally sign the report after incorporating management comments against each reported non-compliance.
• The circular specifies that no physical submission is to be made to the Exchange, and the process is to be completed electronically through the prescribed portal.
• Members are also required to submit, along with the Internal Audit Report, an undertaking on a half-yearly basis confirming that penalties levied by clearing corporations for short/non-collection of upfront margins from clients have not been passed on to the respective clients. This undertaking is to be submitted through the Internal Audit Tab in the Enhanced Supervision portal and must be digitally signed by the Proprietor, Partner, or Designated Director.
• The circular introduces and highlights several important audit-related requirements for auditors, including revised sampling criteria and methodology under Annexure III and Annexure III A, mandatory disclosure of sample size and instances of non-compliance, and specific reporting obligations where the Exchange had issued action letters for material non-compliances during the relevant period.
• With effect from the half year ended March 31, 2026, certain information that was earlier required under Risk Based Supervision is now to be submitted through the Internal Audit Report, including details of foreign branches/subsidiaries/representative offices, fraud-related non-compliances and SEBI penalties, and SEBI inspections, adverse observations, and regulatory actions during the assessment period.
• Internal auditors are required to immediately report critical non-compliances within 2 days of detection by email to the Exchange, specifically where there is shortfall of client funds/net worth not recouped or cases involving offering fixed/assured/periodic returns to clients or mobilizing deposits from investors.
• The circular further requires internal auditors to upload the list of all samples selected and supporting documents through the portal, retain working papers and records for verification, provide complete auditor remarks for each “Not Complied” observation, and include separate UDINs on the Certificate of Compliance and the Internal Audit Certificate wherever applicable.
• The circular encloses Annexures I to VII, covering the Internal Audit Certificate, format of Internal Audit Report, sample selection guidelines, manual for submission, QSB-specific reporting format, and relevant extracts of SEBI circulars, thereby providing a complete compliance framework for the reporting cycle.
• Members are also required to close all non-compliances reported in the internal audit report within 2 months from the due date of submission, failing which penalties, disciplinary actions, or immediate remedial action may follow in accordance with the relevant Exchange circulars.

Actions if Any –
• Members must appoint eligible internal auditors, create auditor login IDs, and facilitate electronic submission of the Internal Audit Report for the half year ended March 31, 2026.
• The internal auditor must submit the audit report electronically to the member, and the member must place it before the Board of Directors / Proprietor / Partners and then forward it to the Exchange with para-wise management comments.
• Members must submit the required undertaking confirming that penalties for short/non-collection of upfront margins have not been passed on to clients.
• Internal auditors must follow the revised sampling methodology, upload sample lists and supporting documents, report critical non-compliances within 2 days, and ensure digital signatures and UDIN compliance on the prescribed certificates.
• Members must close all reported non-compliances and submit the required Action Taken Report within the prescribed timeline to avoid regulatory action.

Compliance Deadline –
The Internal Audit Report for the half year ended March 31, 2026, along with para-wise management comments and the prescribed undertaking regarding non-passing of upfront margin penalties, must be submitted electronically to the Exchange on or before May 31, 2026. Further, all non-compliances reported in the Internal Audit Report must be closed within 2 months from the submission due date, i.e. by July 31, 2026. In addition, critical non-compliances such as shortfall of client funds/net worth not recouped and offering fixed/assured/periodic returns or mobilizing deposits must be reported by the internal auditor within 2 days from the date of detection.