Scheme auditor

A mutual fund scheme's money and an AMC's own corporate money are kept strictly apart, and so are the auditors who check each set of books.

The scheme auditor checks the scheme's accounts. The AMC auditor checks the AMC's own accounts, as a company. They are never the same person or firm, and they answer to different masters — the scheme auditor to the trustees, the AMC auditor to the AMC itself.

Chapter 3, section 3.4.3, states the rule directly: scheme accounts must be maintained independently of the AMC's own accounts, and the auditor appointed to audit the mutual fund scheme accounts needs to be different from the auditor of the AMC.

Who appoints whom is equally specific: the scheme auditor is appointed by the Trustees, while the AMC auditor is appointed by the AMC. The separation exists because the AMC manages the scheme's money on the investors' behalf, and an auditor answerable only to the AMC would have every incentive problem that separation is designed to avoid.

An asset management company runs 18 schemes across equity, debt and hybrid categories — an illustrative count; the workbook gives no figure of its own here. Its own Board of Directors appoints Auditor A to audit the AMC's corporate accounts — salaries, office expenses, the AMC's own profit and loss.

The Board of Trustees, a separate body overseeing the schemes on investors' behalf, appoints Auditor B — a different firm entirely — to audit the accounts of each of the 18 schemes: the NAV computations, the portfolio valuations, the income and expenses charged to each scheme.

If Auditor A also audited the schemes, the AMC would effectively be marking its own homework on how it manages investors' money. Keeping Auditor B separate, and answerable to the trustees rather than the AMC, is exactly what the independence rule is built to prevent.

Chapter 3 (Legal Structure of Mutual Funds in India), section 3.4.3 ("Auditors"), states the independence requirement and the two separate appointing authorities in a single short passage. Expect a direct recall question on who appoints the scheme auditor (the trustees, not the AMC).

• The scheme auditor is appointed by the Trustees; the AMC auditor is appointed by the AMC — reversing the two is the obvious trap.
• They must be different auditors, not merely different engagement teams within the same firm, in the workbook's framing.
• This is about audit independence for investor protection, not a general accounting formality — the whole point is that the AMC does not choose who checks how it has handled investors' money.