How frequently must an internal audit be conducted?
The market standard – which we also consider to be MAS' general expectation – is for the internal audit to be carried out on an annual basis – for LFMC as well as for an RFMC.
A fund management company must ensure that its business activities are subject to adequate internal audit (reg. 13(b)(iv) SF(LCB)R), for an RFMC read in conjunction with reg. 54A SF(LCB)R).
The internal audit arrangements should be commensurate with the scale, nature and complexity of its operations but must include inquiring into the fund management company's compliance with all relevant laws (reg. 13(b)(v) SF(LCB)R), for an RFMC read in conjunction with reg. 54A SF(LCB)R).
For RFMCs, taking into consideration the size of the assets managed and the 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. For LFMCs, no such option is indicated. LFMCs, therefore, must conduct internal audits.
MAS does not prescribe a specified frequency for the internal audit of a fund management company. As indicated above, the internal audit arrangements must be commensurate with the scale, nature and complexity of the fund management company's operations.