HKSI Paper 6 Asset management regulations question: Fund Manager Code of Conduct (2)

HKSI Paper 6Asset management regulations

Tsing Yi Fund Management Ltd is too small to justify a separate internal audit function. Under the Fund Manager Code of Conduct, how should the audit of its management, operations and internal controls be covered?

A No audit cover is expected, because the audit function applies only where practicable
B The portfolio managers should review each other's work every quarter instead
C The SFC's supervisory inspections take the place of the audit function for small firms
D The relevant audit roles should be performed or reviewed by external auditors

Show the answer and explanation

Answer: D. The relevant audit roles should be performed or reviewed by external auditors

Paragraph 1.9 says that, where practicable, a Fund Manager should maintain an independent and objective audit function to report on the adequacy, effectiveness and efficiency of its management, operations and internal controls. Where the size of the Fund Manager does not justify a separate internal audit function, the relevant roles and responsibilities should be performed or reviewed by external auditors. So the gap is not simply left open, peer review by front-office staff is not independent, and SFC inspections are not a substitute for the firm's own audit cover. Source: SFC Fund Manager Code of Conduct (October 2024), para 1.9 (as at October 2026).

Common mistake

Reading 'where practicable' as an exemption. A small firm still needs the audit roles covered, by external auditors.

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Original study material mapped to the public HKSI Paper 6 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.