INVESTMENT AND
BROKERAGE FIRM AUDITS
Audit Services for Investment Companies and Brokerage Firms
When regulatory scrutiny intensifies and stakeholder expectations rise, investment companies and broker-dealers need more than technical compliance. They need an audit partner who understands the industry’s nuanced challenges and delivers insights that strengthen your operations, not just check the boxes.
At Gray, Gray & Gray, LLP, we bring the Power of More® to every engagement. As a PCAOB-registered firm with deep expertise in financial services, we currently work with over 80 investment partnerships and funds. We combine regulatory knowledge with practical business advice to help investment partnerships, registered investment advisers, management service organizations, and broker-dealers navigate an increasingly complex compliance landscape.
Investment Partnership Audits
Investment partnerships face unique accounting and reporting challenges that demand specialized expertise. From complex financial instruments to intricate capital account calculations, partnership audits require auditors who understand both GAAP requirements and the operational realities of fund management.
Our investment partnership audit services encompass:
- Fund Financial Statement Audits. We audit hedge funds, private equity funds, venture capital funds, real estate funds, and funds of funds. Our team has an in-depth understanding of the valuation methodologies, fee structures, and allocation policies that drive partnership accounting.
- Capital Account Analysis. We thoroughly review capital contributions, distributions, profit and loss allocations, and redemptions to ensure accurate reporting to limited partners. Our detailed testing helps identify discrepancies before they become material issues.
- Valuation Review. Investment valuation remains one of the most scrutinized aspects of fund reporting. We evaluate your valuation policies and procedures, assess the reasonableness of fair value determinations, and test controls around pricing sources and methodologies.
The Power of More means we do not stop at issuing an opinion. Throughout the audit process, we identify operational improvements, discuss emerging accounting standards, and help you anticipate regulatory changes that may impact future reporting periods. Our partners remain accessible year-round to address technical questions as they arise.
SEC Surprise Custody Examinations
For registered investment advisers that hold client assets in custody, SEC Rule 206(4)-2 requires an annual surprise examination by an independent public accountant. This examination verifies that client securities and funds are truly maintained in accounts under the adviser’s control, providing critical investor protection.
Many firms view the surprise examination as a compliance burden. We see it as an opportunity to strengthen your custody controls and demonstrate your commitment to safeguarding client assets.
Our SEC surprise custody examination services include:
- Coordinated Planning. While the examination date remains undisclosed to your firm, we coordinate logistics in advance to minimize disruption upon arrival. We establish clear communication protocols and define the scope in line with your custody arrangements.
- Comprehensive Asset Verification. We confirm client securities and funds by directly communicating with qualified custodians and comparing holdings against your records. Our testing covers all account types and validates that client assets are properly segregated from firm assets.
- Control Assessment. Beyond the required asset verification, we evaluate your custody-related policies and procedures. We identify gaps in controls, document best practices, and recommend enhancements to your compliance program.
- Clear Reporting. We deliver the required written report to the SEC within 120 days of the examination date, presenting the findings clearly to both regulators and your compliance team.
Our Power of More approach extends beyond the examination itself. We help you understand evolving custody rules, discuss implications of new client arrangements, and prepare for regulatory changes that may affect your examination requirements. Our goal is to transform a compliance obligation into a value-added process that strengthens investor confidence in your firm.
Broker Dealer Audits
Broker-dealers operate in one of the most heavily regulated segments of financial services. From net capital requirements to customer protection rules, compliance demands constant vigilance and specialized accounting expertise.
Our broker-dealer audit services address the full spectrum of regulatory and financial reporting requirements:
- Annual Financial Statement Audits. We audit broker-dealers subject to SEC and FINRA oversight, ensuring compliance with industry accounting practices and regulatory reporting requirements. Our team understands the unique aspects of broker-dealer accounting, including securities positions, customer receivables and payables, and regulatory reserves.
- Regulatory Compliance Testing. Our audits include testing of compliance with net capital requirements under SEC Rule 15c3-1, customer protection requirements under SEC Rule 15c3-3, and books and records requirements under SEC Rule 17a-3 and 17a-4. We assess your compliance calculations and controls to identify potential deficiencies before they trigger regulatory issues.
- Exemption Reports. For broker-dealers seeking exemptions from reserve requirements, we prepare the required exemption reports and review the conditions that qualify your firm for exemptive relief.
- Internal Control Assessment. We evaluate your internal controls over financial reporting and regulatory compliance, providing management letters that identify weaknesses and recommend practical solutions.
The Power of More means delivering insights that matter to your business. We discuss margin trends, analyze how operational changes may affect net capital calculations, and help you prepare for regulatory examinations. Our partners understand the business pressures broker-dealers face and provide counsel that balances regulatory compliance with business objectives.
Why Gray, Gray & Gray, LLP
Our financial services practice combines PCAOB registration, industry specialization, and a service philosophy grounded in accessibility and responsiveness. We understand that audit season does not define your needs. Accounting questions, regulatory developments, and business decisions arise throughout the year.
When you work with Gray, Gray & Gray, LLP, you gain a partner committed to your success. We invest time understanding your business model, risk profile, and growth objectives. We communicate in plain language, not just technical jargon. We remain available to address questions between audit cycles.
The Power of More reflects our belief that audit services should drive value beyond compliance. Contact us to discuss how our investment company and broker-dealer audit expertise can strengthen your organization.
The Advisor Newsletter
Sign up for our newsletter and receive tax tips, event invitations, important reminders and more.
Join Now!
We Are Independent and Client-Focused
Gray, Gray & Gray brings a level of independence that sets us apart in today’s accounting landscape. Unlike firms owned by private equity investors or consolidated into larger national networks, we have remained independently owned for more than 80 years. This independence means our priorities align entirely with your interests, not the financial objectives of outside investors or parent companies. We make decisions based on what serves our clients best, not what maximizes returns for stakeholders removed from client relationships.
Our partners have built this firm on lasting client relationships and technical excellence, and that foundation remains unchanged after eight decades. When regulatory pressures mount or complex accounting issues arise, you can trust that our guidance stems from professional judgment and your best interests, free from conflicts or external influences that might compromise our objectivity. This true independence, combined with our deep industry expertise, ensures you receive counsel you can rely on completely.
News & Events
Frequently Asked Questions (FAQ)
If your registered investment advisory firm holds custody of client assets, SEC Rule 206(4)-2 mandates an annual surprise examination by an independent public accountant. This confirms that client assets recorded are present, properly segregated from firm assets, and held in accounts your firm controls. The “surprise” means your firm does not know the auditor’s arrival in advance, ensuring effective oversight. For clients, this offers protection; for advisers, it fulfills compliance and demonstrates sound custody controls.
Fund audits include financial statement preparation under GAAP, investment valuation, capital account calculations for limited partners, and testing fee structures and allocation policies. Valuation is often the most complex, as hard-to-value assets like private equity, real estate, or illiquid securities require auditors skilled in both methodology and control assessment. Valuation errors affect distributions and management fees, making accuracy critical for all parties.
Broker-dealers operate under a regulatory framework administered by the SEC and FINRA. Key requirements include maintaining adequate net capital under SEC Rule 15c3-1, which limits asset leverage, and complying with SEC Rule 15c3-3, mandating segregation of customer funds and securities from firm assets. SEC Rules 17a-3 and 17a-4 govern recordkeeping requirements. Broker-dealer audits assess financial statements and comprehensive compliance with these regulations.
PCAOB registration signifies that an audit firm undergoes ongoing inspection and oversight by a federal regulator. For investment partnerships, registered investment advisers, and broker-dealers, working with a PCAOB-registered auditor enhances credibility with the SEC, FINRA, and institutional investors who demand the highest audit quality. It also ensures that our work is regularly evaluated by an independent authority, providing assurance beyond internal quality controls.
Big Four firms offer name recognition but often treat clients as mid-sized accounts, resulting in less partner attention, greater involvement of junior staff, and reduced flexibility. As a specialized regional firm with deep investment company expertise, we provide equivalent technical capability with a different service model: dedicated partners, consistent staffing, and a genuine understanding of your business. Fund managers and advisers who switch often cite improved day-to-day responsiveness as the key benefit.
Lead Contacts
