Once your financials are finally complete and distributed to investors after an annual fund audit, you may be tempted to sit back and relax until the next audit season comes around

However, savvy fund managers know it’s worth taking the time now—while the fund audit process is fresh in your mind—to reflect and evaluate how this past audit season went. What went well? What are areas for improvement?

Whether this was your inaugural fund audit season or you’re an audit veteran, you’ll find that holding a fall planning meeting is a valuable way to capture lessons from the last audit experience and plan for the next.

Topics for a fund audit fall planning meeting

As fall approaches, schedule a planning meeting that includes your auditors, internal accounting team, and third-party administrator. A structured conversation can set the stage for a smoother audit. Here are key discussion points:

  • The audit team: request a list of contacts for the audit associates assigned to the engagement. Request an audit kickoff call to get an understanding of audit associate experience.
    • Will there be continuity across the audit team from the prior year, or will there be new faces? Do the audit associates have expertise in private fund audits?
    • Identifying key points of contact and assign responsibilities to prevent confusion.
    • Establish the audit engagement through a formal audit engagement letter.
  • The prepared-by-client (PBC) list: Request the auditor’s PBC list to establish a timeline and assignments for the next audit season. Setting expectations for audit deliverables can ensure a more synchronized process.
    • Establish recurring calls with the audit team and fund administrator.
    • The PBC list may be used as an ongoing agenda throughout the duration of the audit.
  • Fund changes: Communicate any changes in the fund during the year, such as alterations to the partnership agreement, the fund’s performance, portfolio changes, liquidation plans, new service providers, investor changes and more. A comprehensive update can help your auditors better understand the fund’s position.
  • Interim testing: Determine whether the auditors will conduct any interim testing during the fall, potentially lightening the workload after year end. Lean on your third-party administrator to organize documentation and support during the reporting year.
  • Hard-to-value investments: Establish and maintain a valuation policy at inception of the fund using a third-party valuation service, or an internal team. Review the valuation policy with the audit team to ensure the policy aligns with accounting policies. If the fund purchases any new investment types that are difficult to value, discuss and validate your valuation method with the auditors to avoid surprises during the audit.
  • New accounting pronouncements: Stay ahead of the curve by asking the audit partner for updates on any new accounting pronouncements that may impact your fund’s financial statements.
  • Footnotes for first-year audit: In the fund’s first-year audit, your third-party administrator typically prepares notes to the financial statements during the interim period. Review the notes and ask your auditors to review and provide comments. This will reduce draft iterations during the audit and result in a timely audit issuance.
  • Technology use: Confirm the method for sharing documents securely with your audit team. Audit firms may utilize a secure file sharing portal, email, or other technology.
    • UMB offers auditor portal access to AltPro for our clients. Allowing auditors to securely access organized documents and workpapers.

These discussion points will serve as a roadmap, guiding you toward a more efficient and smoother fund audit experience.

In the spirit of continuous improvement, we encourage taking proactive steps today that will lead to a more streamlined audit tomorrow.

To learn more about how UMB Fund Services can support you during your audit process, contact us today.