The 120-day audit clock is counted from year end, but it starts in December
The custody rule gives a fund 120 days after year end to deliver GAAP statements audited by a PCAOB-registered firm. Audit firms are booked in the autumn, so the engagement date decides whether a first fund makes it.
Rule 206(4)-2's audit route requires a fund's financial statements, prepared under GAAP and audited by an independent accountant registered with and subject to regular inspection by the PCAOB, to reach every limited partner within 120 days of fiscal year end. Most LPAs copy the date, including for exempt reporting advisers the rule does not bind.
For a calendar-year fund that is April 30. The firms that audit venture funds plan their season in the autumn, so the practical deadline is the engagement letter, which belongs in December, with the prepared-by-client list agreed at the same time. The full procedure is in year-end audit preparation for a first fund.
Sources
- Rule 206(4)-2, custody of client funds or securities (Cornell LII)www.law.cornell.edu/cfr/text/17/275.206(4)-2
Terms used in this article
- Fund audit A fund audit is the annual examination of a private fund's financial statements by an independent accounting firm, which issues an opinion on whether the statements, including the schedule of investments at fair value and the partners' capital, are fairly presented.
- Custody rule The custody rule is Advisers Act Rule 206(4)-2, which requires a registered adviser with custody of client assets to keep them with a qualified custodian and submit to independent checks.