PracticeAuditUS investment funds to face ‘surprise exam’ from auditors

US investment funds to face 'surprise exam' from auditors

Fallout from Madoff continues: Accountants to undertake surprise visits on investment funds

Annual surprise visits will be made on US investment funds, under new rules
from the markets regulator.

The Securities and
Exchange Commission
is introducing a host of new rules to ensure
better governance of the investment funds industry.

A “surprise exam” will be undertaken by an independent accountant once a year
on investment advisers.

It would provide “another set of eyes” on the client’s assets, and provide
additional protection against theft or misuse. The accountants would have to
contact the SEC if they discovered client assets were missing.

“The Madoff Ponzi scheme and other frauds have caused investors to question
whether their assets are safe when they entrust them to an investment adviser,”
said SEC chairman Mary L Schapiro.

“These new rules will apply additional safeguards where the safeguards are
needed most – that is, where the risk of fraud is heightened by the degree of
control the adviser has over the client’s assets.”

A controls review would also be undertaken on the investment firms by an
US-registered accountant.

The new rules will come into effect in 60 days.

Further reading:

The
good, the bad and the future

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