Audit season brings a predictable surge of document requests, follow-up questions, and tight deadlines. For investment funds that outsource accounting to a third-party administrator, the quality of that relationship often determines whether the audit runs smoothly or becomes a scramble.
What Role Does the Fund Administrator Play During an Audit?
Fund administrators serve as the primary operational interface between the fund and its auditors. Their core function is preparing and maintaining the books and records that auditors examine: general ledgers, trial balances, financial statements, and supporting schedules.
Typical administrator responsibilities during audit season include:
Preparing draft financial statements and footnotes (often in Q3 or Q4 for calendar-year funds)
Generating the schedules and workpapers auditors request
Responding to PBC (Prepared by Client) list items on behalf of the fund
Coordinating investment and investor confirmation letters
Providing auditors with portal access to organized documentation
Fielding follow-up questions and clarification requests throughout fieldwork
The fund's management retains ultimate responsibility for the accuracy of financial statements, but the administrator handles much of the operational execution.
What's Typically Included in Standard Audit Support?
Most fund administration agreements include baseline audit support as part of ongoing service fees. This commonly covers:
Year-end financial statement preparation
Standard PBC list responses (trial balance, bank reconciliations, investment schedules)
Coordination with auditors on timing and document delivery
Basic footnote drafting
Partner capital account reconciliations
Many administrators provide auditor portal access, allowing audit teams to self-serve organized documents rather than requesting everything via email.
What Might Trigger Additional Fees?
Scope creep during audit season is common. Services that often fall outside standard arrangements include:
Complex valuation support for hard-to-price securities
Extensive custom schedules beyond standard reporting
Re-work caused by late fund-level decisions or partnership agreement amendments
Expedited turnaround when audit timing shifts unexpectedly
Support for first-year audits, which typically require more footnote development
Fund managers benefit from reviewing their administration agreement before audit season to understand what's included. A $200M credit fund with Level 3 assets, for example, may face different support needs than a vanilla long-only equity fund.
How Can Managers Work Effectively with Their Administrator During Audit Season?
Planning meetings in Q3 or early Q4 often prevent problems. Key discussion points include:
Sharing the auditor's PBC list early and assigning responsibilities
Communicating any fund changes (new service providers, partnership amendments, material transactions)
Confirming document-sharing protocols and technology platforms
Establishing a regular cadence of status calls during fieldwork
Designating a single point of contact for audit-related matters
For first-year audits, administrators often prepare draft footnotes during the interim period, having auditors review these early reduces iteration cycles after year-end.
Funds that proactively communicate changes, maintain organized records throughout the year, and treat audit prep as an ongoing process rather than a January scramble typically experience fewer delays and cleaner opinions.