Introduction
Cybersecurity has become a central theme in audits and regulatory reviews of Alternative Investment Funds (AIFs). Auditors and trustees no longer limit their assessment to financial controls and disclosures; they now closely examine whether IT systems and cybersecurity practices adequately protect investor data, fund operations, and market-sensitive information. This shift reflects a broader regulatory reality—cyber risk is a fiduciary risk, and failure to manage it can directly harm investor interests.
For many AIFs, cybersecurity audits are challenging not because controls are entirely absent, but because they are informal, undocumented, or inconsistently applied. Auditors and trustees typically look for evidence of governance, accountability, and repeatable processes rather than sophisticated technology stacks. AIFs that understand what reviewers expect are far better positioned to respond confidently and avoid adverse observations.
This article provides a practical, audit-focused cybersecurity compliance checklist for AIFs. It explains what auditors and trustees expect to see, why each area matters, and how funds can demonstrate due care and oversight. The checklist is designed to be actionable, proportionate, and aligned with SEBI’s evolving expectations—without unnecessary complexity.
Why Auditors and Trustees Are Focusing on Cybersecurity
Auditors and trustees are mandated to protect investor interests and ensure regulatory compliance. In today’s digital operating environment, cybersecurity failures can:
- Expose confidential investor data
- Disrupt fund operations and reporting
- Leak market-sensitive information
- Damage the reputation and credibility of the fund
As a result, cybersecurity is increasingly treated as a governance and oversight issue, not a technical one. Trustees, in particular, are expected to ask whether fund managers have exercised due care in identifying and mitigating cyber risks.
How to Use This Compliance Checklist
This checklist reflects common themes observed during security audits in cyber security and trustee reviews. It is structured around what auditors and trustees typically ask for evidence of, rather than what IT teams think is important.
Each section answers three questions:
- What reviewers expect to see
- Why it matters from a fiduciary perspective
- How AIFs can demonstrate compliance
Checklist Area 1: IT & Cybersecurity Governance
What auditors and trustees expect to see
- Defined ownership of IT and cybersecurity
- Clear reporting lines to fund management or trustees
- Periodic oversight discussions or reviews
Why this matters
Without governance, accountability is unclear during incidents. Reviewers expect cyber risk to be managed, not ignored or delegated blindly.
Evidence to demonstrate
- IT/cyber governance policy
- Role definitions or responsibility statements
- Meeting minutes or review notes
Checklist Area 2: Cyber Risk Identification and Risk Register
What auditors and trustees expect to see
- Cyber risk explicitly included in the risk register
- Periodic cyber risk assessments
- Defined risk appetite or tolerance
Why this matters
Cyber threats are foreseeable. Failing to identify them suggests lack of due diligence.
Evidence to demonstrate
- Risk register entries
- Risk assessment reports
- Management sign-off on risk acceptance
Checklist Area 3: Asset and Application Inventory
What auditors and trustees expect to see
- List of IT assets (devices, servers, cloud systems)
- Inventory of applications and SaaS tools
- Identification of systems handling sensitive data
Why this matters
Controls cannot be applied to unknown assets. Lack of visibility is a foundational compliance gap.
Evidence to demonstrate
- Asset and application inventory documents
- Ownership and usage details
- Update or review records
Checklist Area 4: Access Control and User Management
What auditors and trustees expect to see
- Role-based access controls
- Periodic user access reviews
- Prompt removal of access on role change or exit
Why this matters
Excessive or outdated access increases insider risk and breach impact.
Evidence to demonstrate
- Access control policies
- Access review reports
- Joiner–mover–leaver records
Checklist Area 5: Privileged Access Management
What auditors and trustees expect to see
- Limited number of administrative accounts
- No shared admin credentials
- Justification for privileged access
Why this matters
Privileged accounts are high-value targets. Weak controls amplify cyber incidents.
Evidence to demonstrate
- Privileged access lists
- Approval and review records
- Logs or monitoring summaries
Checklist Area 6: Patch and Vulnerability Management
What auditors and trustees expect to see
- Documented patch management process
- Defined timelines for updates
- Visibility into patch status
Why this matters
Unpatched systems are a leading cause of breaches. Informal patching is viewed as negligence.
Evidence to demonstrate
- Patch management policy
- Patch compliance reports
- Exception documentation
Checklist Area 7: Endpoint and System Security Controls
What auditors and trustees expect to see
- Baseline security controls on endpoints
- Protection against malware and unauthorised software
- Consistent enforcement across devices
Why this matters
Endpoints are common entry points for attackers.
Evidence to demonstrate
- Endpoint security configurations
- Monitoring or alert summaries
- Compliance dashboards
Checklist Area 8: Data Protection and Confidentiality
What auditors and trustees expect to see
- Identification of sensitive data
- Controls to restrict data access and sharing
- Secure storage and transmission practices
Why this matters
Investor and deal data confidentiality is central to fiduciary duty.
Evidence to demonstrate
- Data classification policy
- Access and sharing controls
- Encryption or protection standards
Checklist Area 9: Third-Party and Vendor Risk Management
What auditors and trustees expect to see
- Due diligence on IT and cloud vendors
- Defined cybersecurity responsibilities
- Ongoing oversight of vendor risk
Why this matters
Outsourcing does not remove accountability. Vendor failures still impact the fund.
Evidence to demonstrate
- Vendor risk assessments
- Contracts or SLAs
- Review or monitoring records
Checklist Area 10: Backup, Recovery, and Resilience
What auditors and trustees expect to see
- Regular backups of critical data
- Evidence of recovery testing
- Protection of backups from tampering
Why this matters
Backups determine whether incidents become crises.
Evidence to demonstrate
- Backup policies
- Restore test reports
- Backup architecture summaries
Checklist Area 11: Incident Response and Breach Preparedness
What auditors and trustees expect to see
- Documented incident response plan
- Defined escalation and decision-making process
- Awareness of regulatory reporting obligations
Why this matters
Preparedness reduces impact and regulatory fallout.
Evidence to demonstrate
- Incident response plan
- Contact and escalation matrix
- Incident logs or simulations
Checklist Area 12: Logging, Monitoring, and Alerting
What auditors and trustees expect to see
- Basic logging of system and access activity
- Monitoring for suspicious behaviour
- Defined response to alerts
Why this matters
Without detection, incidents can persist unnoticed.
Evidence to demonstrate
- Log retention policies
- Monitoring summaries
- Alert handling records
Checklist Area 13: Policies, Documentation, and Evidence
What auditors and trustees expect to see
- Documented IT and cybersecurity policies
- Evidence that policies are followed
- Periodic review and updates
Why this matters
Undocumented controls are treated as non-existent.
Evidence to demonstrate
- Approved policies
- Review and update records
- Compliance checklists
Checklist Area 14: Training and Awareness
What auditors and trustees expect to see
- Basic cybersecurity awareness for staff
- Guidance on data handling and phishing
- Evidence of periodic communication
Why this matters
Human error remains a leading risk factor.
Evidence to demonstrate
- Training materials
- Attendance or acknowledgement records
- Awareness communications
Checklist Area 15: Trustee and Management Oversight
What auditors and trustees expect to see
- Periodic reporting on IT and cyber risk
- Evidence of oversight and challenge
- Clear escalation paths
Why this matters
Oversight demonstrates fiduciary diligence.
Evidence to demonstrate
- Management reports
- Trustee meeting notes
- Action tracking records
Common Reasons AIFs Fail Cybersecurity Audits
Across types of audit in cyber security and inspections, failures typically occur due to:
- Informal practices without documentation
- Over-reliance on vendors
- Lack of evidence, not lack of intent
- Absence of ownership and oversight
Most of these issues are governance-related rather than technical.
How Infodot Helps AIFs Meet Auditor and Trustee Expectations
Infodot Technology helps AIFs prepare for audits and trustee reviews by translating cybersecurity expectations into practical, inspection-ready controls. Infodot’s approach focuses on governance, evidence, and proportionality—exactly what auditors and trustees look for.
Infodot supports AIFs by:
- Building IT and cybersecurity governance frameworks
- Creating audit-ready policies and documentation
- Implementing access, patching, and monitoring controls
- Establishing vendor risk oversight mechanisms
- Preparing evidence packs for audits and inspections
This enables fund managers to demonstrate due care, oversight, and readiness with confidence.
Conclusion
Cybersecurity audits for AIFs are no longer informal or optional. Auditors and trustees now expect clear governance, documented controls, and defensible evidence that cyber risks are being managed responsibly. Funds that treat cybersecurity as a fiduciary obligation rather than a technical afterthought—are far better positioned to pass audits and maintain investor trust.
This checklist provides a practical reference for what reviewers expect to see. Addressing these areas proactively not only reduces audit risk but also strengthens the overall resilience and credibility of the fund.
FAQs
Why do auditors review cybersecurity in AIFs?
Because cyber failures directly affect investor protection, operational continuity, and fiduciary responsibility of fund managers.
Are small AIFs subject to cybersecurity audits?
Yes, expectations apply to all AIFs, scaled according to size, complexity, and risk profile.
Is documentation mandatory for compliance?
Yes, undocumented controls are usually treated as non-existent during audits and inspections.
Can AIFs outsource cybersecurity responsibilities?
Execution can be outsourced, but accountability and oversight must remain with the AIF.
Do trustees have cybersecurity oversight duties?
Yes, trustees are expected to oversee governance and ensure risks are managed appropriately.
Is patch management reviewed during audits?
Yes, patching practices and timelines are common audit focus areas.
Are cloud systems included in scope?
Yes, all systems handling fund or investor data are included.
Do auditors expect incident response plans?
Yes, preparedness and escalation clarity are key expectations.
Is vendor risk part of cybersecurity audits?
Yes, third-party oversight is increasingly scrutinised.
Are backups reviewed by auditors?
Yes, especially recovery readiness and protection against ransomware.
Is access control a major audit issue?
Yes, excessive or unreviewed access is a common finding.
Does SEBI prescribe cybersecurity tools?
No, outcomes and governance matter more than tools.
Are periodic access reviews required?
Yes, they demonstrate ongoing control and oversight.
Is cybersecurity training mandatory?
Basic awareness is strongly expected for all staff.
Can lack of evidence cause audit failure?
Yes, absence of evidence often leads to adverse observations.
Are cyber risks considered foreseeable?
Yes, regulators expect them to be anticipated and managed.
Is IT governance different from cybersecurity?
IT governance includes cybersecurity as a core component.
Do auditors expect risk registers to include cyber risk?
Yes, cyber risk should be formally documented.
Can MSPs support audit readiness?
Yes, under clear governance and accountability.
Does Infodot help with audits?
Yes, by preparing governance frameworks and evidence packs.
Are deal teams subject to cybersecurity controls?
Yes, access and data controls apply to all users.
Is encryption expected for sensitive data?
Yes, proportionate data protection controls are expected.
Can informal practices pass audits?
Rarely, structured and documented practices are required.
Is operational resilience assessed?
Yes, continuity and recovery planning are reviewed.
Are legacy systems allowed?
Yes, but risks must be documented and managed.
Is monitoring required for compliance?
Yes, basic monitoring demonstrates active control.
Can audits lead to remediation actions?
Yes, findings often result in corrective action requirements.
Are policies alone sufficient?
No, evidence of execution is required.
Does cybersecurity impact fundraising?
Yes, institutional investors increasingly assess cyber posture.
Are inspections becoming more frequent?
Cyber scrutiny is increasing across regulatory reviews.
Is proportionality recognised by auditors?
Yes, controls should match fund size and complexity.
Do trustees expect regular reporting?
Yes, periodic updates on cyber risk are expected.
Is third-party SaaS usage risky?
Yes, without oversight it creates unmanaged exposure.
Can AIFs prepare proactively for audits?
Yes, structured readiness significantly reduces audit risk.
Why address gaps before inspection?
Because proactive remediation reduces regulatory pressure and reputational risk.
