SEBI Internal Audit & Net Worth Certification: The Process, Start to Finish
The mechanics of SEBI Internal Audit & Net Worth Certification are what clients ask about once they have decided to proceed. The questions below are the ones raised most often in practice; the full scope of the service is on the SEBI Internal Audit & Net Worth Certification page.
What is net worth certification and how is it different from the internal audit?
Net worth certification is a separate deliverable in which a Chartered Accountant computes the intermediary's net worth using the specific formula prescribed under the applicable SEBI regulations and exchange/depository bye-laws — which differs from standard accounting net worth — and certifies whether it meets the minimum prescribed for that category of registration. The internal audit, by contrast, is a review of operational processes and controls. Both are required, but they are distinct engagements with different underlying methodologies.
In practice: Intermediaries may assume their statement of net worth in the audited financial statements automatically satisfies the SEBI net worth requirement. It usually does not — the SEBI formula applies specific adjustments that a standard balance sheet net worth figure does not reflect.
How is net worth computed for SEBI purposes — why is it different from balance sheet net worth?
The SEBI-prescribed net worth formula for market intermediaries starts from paid-up capital and free reserves, but then applies specific inclusions, exclusions, and adjustments — for example, adjustments relating to fixed assets, certain non-allowable or illiquid assets, and specified contingent liabilities — that are set out in the applicable regulations and bye-laws for that category of registration. The resulting figure can differ materially from the net worth shown in a standard balance sheet presentation.
In practice: We always compute both figures for a client during onboarding — the balance sheet net worth and the SEBI-adjusted net worth — so management sees exactly where and why the two numbers diverge, rather than being surprised by the difference at certification time.
How long does the half-yearly audit process typically take from fieldwork to submission?
For a mid-sized broking or DP operation, the typical cycle from the start of fieldwork to final report submission runs several weeks — covering checklist finalisation, sample selection and testing, draft findings and management response, and final sign-off. Larger, multi-location, or multi-segment operations take proportionately longer given the wider sample and reconciliation scope.
In practice: We begin scoping and requesting preliminary data before the half-year period even formally closes, wherever the underlying records are available — this compresses the effective post-period-end timeline and gives more buffer before the submission deadline.
Does the half-yearly audit report get shared with our clients or made public?
The half-yearly internal audit report is submitted to the relevant exchange or depository as a regulatory compliance filing — it is not typically a document that is proactively published or shared with the intermediary's own clients. Exchanges and depositories use the report as part of their own supervisory oversight of registered members.
In practice: That said, a consistently clean audit history is a genuine credibility signal when raising capital, seeking a strategic partnership, or being evaluated by an institutional counterparty — we advise clients to keep a clean summary trend of audit outcomes available for exactly these situations.
How does PNPC price the half-yearly audit and net worth certification engagement?
Fees are quoted based on the scope of your registration — the number of segments, whether a DP function is also involved, transaction and client volume, and the complexity of your fund/securities flows — and confirmed in writing before the engagement begins. Many clients take PNPC on a standing half-yearly retainer covering both cycles for the year, which keeps the compliance calendar continuous rather than re-engaging afresh each cycle.
In practice: A standing arrangement also means we already hold your prior-cycle working papers and observation-tracking file when the next cycle begins — this materially speeds up fieldwork compared to a fresh engagement each time.
If we are both a broker and a DP under the same legal entity, is the net worth requirement combined or separate?
This depends on how the applicable regulations for each registration category treat net worth adequacy for an entity holding multiple registrations — in some structures the same net worth base can be relied upon across registrations subject to meeting each category's specific minimum, while in others distinct computations or allocations may be expected. We review this specifically for the entity's combination of registrations rather than assuming a default treatment.
In practice: This is exactly the kind of question that should be resolved with your CA before a shortfall is discovered at certification time, not after — the treatment materially affects how much net worth headroom the entity actually has for each registered activity.
Can PNPC also help if we discover a compliance gap during the audit that needs correcting before the report is filed?
Yes. Where fieldwork surfaces a correctable gap — for example, an incomplete KYC file, a reconciliation break, or a documentation lapse — before the report is finalised, we flag it to management immediately so it can be corrected within the audit period itself, rather than being reported as an open finding that then needs to be tracked and closed in the next cycle.
In practice: A gap corrected during the audit window, with evidence, is a materially better outcome in the final report than the same gap reported as an unresolved observation — we build enough time into our fieldwork schedule specifically to allow for this.
How does PNPC's presence across Chennai, Bangalore, Hyderabad, and Dubai help a broking or DP business?
For intermediaries with operations or branch offices across these cities, we can coordinate fieldwork across locations under a single engagement team rather than requiring separate local auditors at each branch. For groups with related entities or promoter interests in the UAE, our Dubai office provides continuity of relationship without needing to brief a separate firm on the group's structure.
In practice: Multi-branch broking operations in particular benefit from a single coordinated audit team — it keeps the checklist, sampling approach, and observation-tracking consistent across branches rather than each branch producing a differently scoped local report.
What if we are a newly SEBI-registered intermediary and don't yet know our exact audit and certification calendar?
This is exactly the starting point of our engagement — we begin with a registration and applicability mapping step that confirms your exact half-year audit periods, submission deadlines, and net worth certification timing based on your specific registration category, exchange(s), and segment(s), and set this up as a standing compliance calendar from Day 1.
In practice: Getting this calendar right at the very first cycle avoids the single most common early-stage mistake we see: a new intermediary assuming the audit and certification calendar mirrors their statutory Companies Act filing calendar, when in fact the two run on entirely separate timelines.
Where this sits in the wider engagement
SEBI Internal Audit & Net Worth Certification rarely arrives on its own. The statutory basis and the current requirements are set out on the SEBI Internal Audit & Net Worth Certification service page, and the related services are grouped under Audit Assurance.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On SEBI Internal Audit & Net Worth Certification we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.