SEBI has clarified that members of the Institute of Cost Accountants of India (ICMAI) are eligible to conduct annual compliance audits of Research Analysts (RAs). This provides RAs with more options for selecting an auditor. This article provides a comprehensive technical analysis of this clarification.
Regulatory Basis
Primary Provision: Regulation 25(3)
Regulation 25(3) provides that the annual audit shall be conducted by a member of:
- Institute of Chartered Accountants of India (ICAI)
- Institute of Company Secretaries of India (ICSI)
- Institute of Cost Accountants of India (ICMAI)
Clarification Circular
The circular dated March 25, 2026 (HO/38/12/12(1)2026-MIRSD-SEC-FATF/I/7934/2026) clarified the eligibility of ICMAI members.
Background
The Issue
The Master Circular for Research Analysts initially specified that ICAI and ICSI members could conduct the audit. There was a representation from the Institute of Cost Accountants of India regarding their eligibility.
The Clarification
SEBI clarified that members of ICMAI are also eligible to conduct the audit, as provided in Regulation 25(3).
Eligibility of ICMAI Members
Requirements
- Must be a qualified cost accountant
- Must be a member of ICMAI
- Must hold a valid certificate of practice
- Must be in good standing
Independence
- Must be independent of the RA
- No conflict of interest
Audit Scope
What the Audit Covers
The audit covers compliance with:
- RA Regulations
- SEBI circulars
- Guidelines
- All applicable provisions
Key Areas
- Registration and enlistment
- Qualification and certification
- Deposit requirements
- Fee compliance
- Client onboarding and KYC
- Terms and conditions
- Research report contents
- Disclosures
- Advertisement code
- Trading restrictions
- Compensation restrictions
- Client-level segregation
- Record keeping
- Periodic reporting
Professional Bodies Eligible for RA Audits
| Professional Body | Status |
|---|---|
| ICAI (Chartered Accountants) | Eligible |
| ICSI (Company Secretaries) | Eligible |
| ICMAI (Cost Accountants) | Eligible |
Selection of Auditor
Factors to Consider
| Factor | Consideration |
|---|---|
| Qualification | Member of ICAI/ICSI/ICMAI |
| Experience | Experience in regulatory audits |
| Independence | No conflict of interest |
| Availability | Available to complete the audit |
Common Compliance Gaps
1. Not Considering ICMAI Members
Some RAs do not consider ICMAI members as auditors.
Solution: ICMAI members are now eligible.
2. Using Non-Members
Some RAs use auditors who are not members of ICAI/ICSI/ICMAI.
Solution: Ensure the auditor is a member of one of the three institutes.
3. Not Checking Independence
Some RAs do not check auditor independence.
Solution: Ensure the auditor is independent.
Conclusion and How Anuj Desai & Associates Can Help
ICMAI members are now eligible to conduct RA compliance audits.
Anuj Desai & Associates offers specialized services to help RAs identify and work with eligible auditors:
- Identification of auditors
- Verification of qualifications
- Compliance audit and advisory
Contact us today to ensure your annual compliance audit is conducted by an eligible auditor. Our team will guide you through the process.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.