Getting Ready for Your Annual Fund Audit

Audit Season Essentials:

Audit season is upon us, and there are key practices to embrace to navigate your year-end audit smoothly. These audit practices are crucial not just for the added value they bring to your organization, but also to ensure you can distribute audited financial statements to investors and others on time.

Management's (Fund Manager) Duties:

Preparing accurate financial statements and establishing robust internal controls fall under management's umbrella. This can be handled by an internal accounting team or outsourced, yet the final responsibility for the financial statements always lies with management.

Organizing Your Audit Planning Meeting:

Now’s, the time to arrange a planning meeting with your auditor. Update them about the year's happenings, like changes in partnership agreements, investment activities, and any shifts in internal controls. Also, align the audit timing with your schedule, particularly if you're working with an external fund administrator.

Keeping Up with Accounting Developments:

Check with your auditors about any new accounting standards that may affect your financial statements. For instance, the current expected credit losses (CECL) methodology for credit losses and updates on fair value measurements are crucial to understand.

Getting the Auditor’s Document List:

Request your auditor's needed document list (the PBC list) well before the fiscal year's end. Share this with your team, including any external fund administrators, and clarify the need for each document.

Utilizing Previous Audit Records:

Maintain copies of documents from previous audits. They can help in preparing for current audits, especially useful if there's been staff turnover in your accounting department.

Ensuring Accuracy in Submitted Documents:

Before handing over documents to your auditor, confirm they align with your internal financial statements. Rectify any mismatches to prevent miscommunication and additional audit costs.

Appointing an Audit Liaison:

Choose a person to manage audit-related interactions. Regular meetings with auditors are beneficial to address and solve any emerging issues promptly.

Prompt Confirmation Submissions:

Timely submission of audit confirmations, like for bank and investment accounts, is crucial. This helps ensure accuracy and reduces the need for additional follow-up.

Requesting Early Tests and Interim Audits:

Auditors can't reveal all their testing plans, but you can ask for early tests or interim audits to minimize surprises at the year's end.

Evaluating Private Investments:

Prepare a thorough year-end valuation report for private investments (Level III under FAS 157). Update the valuation policy based upon current macro environment (High inflation and higher discount rate). Clear justifications in your report will ease the audit process.

Adapting to the New Audit Regulation: Stay informed about the SEC's latest requirement for private fund advisers to conduct annual financial statement audits, replacing the surprise exam option. Ensure your organization complies with these updated rules.


Proactive Audit Preparation A successful audit demands continuous effort from management to keep a sound financial reporting system. It's a collaborative process, requiring both management and auditors to meet their obligations. Planning and adopting the practices outlined above are key for a successful annual audit.