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Taiwan Stock Exchange Corporation Operational Rules for Audits of Securities Firms  CH

Amended Date: 2002.02.01
Article 1     These Rules are adopted pursuant to Article 23, paragraph 1 of the Regulations Governing Stock Exchanges and the 4 December 1995 Letter No. (84) Taiwan-Finance-Securities-(II)-02729 of the Securities and Futures Commission, Ministry of Finance.
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Article 2     Audits of the brokering, dealing, and underwriting operations of securities firms by the Taiwan Stock Exchange Corporation (TSEC) are either general or special audits. Such audits shall be undertaken in accordance with these Rules. In matters for which these Rules make no provision, the TSEC's corporate bylaws and other relevant regulations shall govern.
Article 3     The TSEC will use formal document reviews and on-site audits in its audits of securities firms, which will in principle be test audits. No unit may evade or refuse such an audit.
Article 4     Audit items and audit intervals for TSEC audits of securities firms will be determined in accordance with the annual operations plan and matters specified in instructions from the competent authority.
    Audit items are as follows:
  1. General audits:
    1. Routine audits: audits of finances, operations, and internal auditing operations (or self-auditing operations at the securities firm's branch offices).
    2. Selective audits: audits based on indicators of irregularities, complaints from investors, and matters for which the competent authority requests an audit other than a special audit.
  2. Special audits:
    A special audit shall be conducted in any case where the circumstances of any subparagraph of Article 3 of the Regulations Governing Targeted Examination of and Guidance to Securities Firms are present.
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Article 5     When conducting audits, auditors shall produce an audit report for each audit performed, which shall include the following items:
  1. The audit items.
  2. The circumstances of the audit.
  3. The audit findings.
  4. Recommendations and areas requiring improvement.
Article 6     For any deficiency found in an audit of a securities firm, the TSEC may institute appropriate measures with respect to the securities firm or its affiliated personnel in accordance with relevant regulations, and shall report any violation of the Securities and Exchange Act, or of related laws or regulations, for handling by the competent authority.
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Article 7     Follow-up, assessment, and guidance shall be undertaken when a general audit of a securities firm leads to discovery of a deficiency in its finances or operations or when its internal auditing procedures are rated substandard. Rules governing follow-up, assessment, and guidance shall be separately adopted.
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Article 8     Within one month after a routine audit of a securities firm, auditors shall compile an annual audit report with regard to each audit conducted during the auditing period and the circumstances of any guidance.
    "Auditing period" in the preceding paragraph means the period from the date of the securities firm's previous routine audit until the day preceding the current audit. If the securities firm was not audited during the previous year, the one-year period preceding the date of the current audit shall be taken as the auditing period.
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Article 9     When auditors proceed to the securities firm to conduct an audit, they shall present the audit certification documents issued by the TSEC.
Article 10     Auditors shall maintain a fair and impartial stance and a strict and rigorous attitude when conducting audits, and shall observe the provisions of the TSEC's Securities Firm Finance and Operations Examination Manual and relevant regulations.
Article 11     These Rules, and any amendments hereto, shall enter into force following submission to and ratification by the competent authority.