Fund Accounting Audit in the UAE
What auditors test, key risk areas, the audit process, documents needed, and how to be audit-ready
Quick Summary: A fund accounting audit is an independent examination of a fund's financial statements, focusing on investment valuation, existence and ownership of assets, NAV, investor capital, and fee and carry calculations. Many UAE funds need audited accounts, depending on structure and regulator. This guide covers the audit scope, risk areas, process, document requests, readiness checklist, and common findings.
For an investment fund, the audit is where reported numbers meet independent evidence. Investors rely on the audited statements to trust the NAV, their capital balances, and the fees charged to them.
Fund audits differ from audits of ordinary companies. The focus falls on valuation of investments, existence and ownership through custodians, fee and carry calculations, and investor-level accounting, often with outsourced administrators involved.
This guide explains what a fund accounting audit covers, the key risk areas, the audit process, documents you will need, an audit readiness checklist, and common findings. Our audit and assurance services team supports managers and funds across the UAE.
Need an independent fund audit or audit-readiness review? Speak to our team.
Table of Contents
- What Is a Fund Accounting Audit?
- Why Funds Are Audited
- What the Auditor Examines
- Key Audit Risk Areas
- The Audit Process Step by Step
- Documents the Auditor Will Request
- Valuation and Fair Value Evidence
- Auditor Independence and Roles
- Audit Readiness Checklist
- Common Audit Findings
- Choosing a Fund Auditor
- Frequently Asked Questions
1. What Is a Fund Accounting Audit?
A fund accounting audit is an independent examination of a fund's financial statements and the records behind them. The auditor tests whether investments exist and are fairly valued, whether investor balances, fees, and distributions are correct, and whether the statements follow the applicable accounting framework, usually IFRS, and the fund's own documents.
- Gives investors, lenders, and regulators comfort on reported numbers
- Tests NAV, valuations, and investor capital accounts
- Reviews controls over trades, cash, fees, and reporting
- Ends with an auditor's opinion on the financial statements
Audit quality depends on the quality of the underlying records; see our guide to investment fund accounting in the UAE and our audit and assurance services.
2. Why Funds Are Audited
| Reason | Explanation |
|---|---|
| Regulatory requirement | Many funds must file audited financial statements, depending on structure, regulator, and fund documents |
| Fund documents | The offering memorandum or partnership agreement often requires an annual audit |
| Investor confidence | Investors expect independently verified performance and capital balances |
| Fundraising and due diligence | Audited accounts support new investor onboarding |
| Lender and counterparty needs | Banks and prime brokers may ask for audited statements |
| Tax and compliance | Reliable accounts support tax and regulatory filings |
Please verify before relying on this: Whether your fund must be audited, which standards apply, and who may act as auditor depend on its legal form, regulator (for example SCA, DFSA, or FSRA), and location. Confirm with your regulator and legal adviser.
Need an independent audit or audit-readiness review for your fund? Speak to our team.
3. What the Auditor Examines
| Area | What is tested |
|---|---|
| Investments | Existence, ownership, and fair value of holdings, confirmed with custodians, brokers, or investee companies |
| NAV and units | NAV calculation, unit or share balances, and dealing dates |
| Investor capital | Subscriptions, redemptions, capital calls, distributions, and allocations |
| Fees and carry | Management fees, performance fees, hurdle, and carried interest calculations against fund documents |
| Income and expenses | Completeness, cut-off, and correct classification |
| Cash and borrowings | Bank confirmations, reconciliations, and loan terms |
| Related parties | Identification, disclosure, and arm's length terms |
| Disclosures | Fair value hierarchy, risks, commitments, and subsequent events |
4. Key Audit Risk Areas
- Hard-to-value assets: private equity, real estate, and other unlisted holdings rely on judgement
- Management override: managers may influence valuations or fees
- Complex waterfalls: errors in carry or hurdle calculations are common
- Outsourced processes: reliance on an administrator or custodian requires understanding their controls
- Multi-currency and multi-class funds: FX and class allocations add complexity
5. The Audit Process Step by Step
Engagement and planning
Agree scope, timetable, and fees; assess risk and plan procedures.
Understand controls
Review the manager's, administrator's, and custodian's processes.
Test balances and transactions
Confirmations, valuation testing, and fee recalculations.
Review statements
Check disclosures, fair value hierarchy, and consistency with records.
Opinion and reporting
Resolve findings, obtain representations, and issue the audit report.
6. Documents the Auditor Will Request
Fund and governance
- Constitutional documents and offering memorandum
- Investment management and administration agreements
- Board or investment committee minutes
- Valuation policy and procedures
- Regulatory correspondence and filings
Financial and investor records
- Trial balance and general ledger
- Custodian, broker, and bank statements
- Investment schedules with valuations
- Investor register and capital account statements
- Fee, carry, and expense calculations
See our general list of documents needed for accounting services.
7. Valuation and Fair Value Evidence
| Asset type | Typical audit evidence |
|---|---|
| Listed securities | Quoted market prices from independent sources and custodian confirmations |
| Private equity and venture holdings | Valuation models, recent transactions, investee financials, and expert reviews |
| Real estate | Independent valuations, rental data, and title documents |
| Loans and credit | Loan agreements, repayment status, and impairment assessment |
| Derivatives | Counterparty confirmations and pricing models |
The fair value hierarchy affects how much evidence and disclosure is needed. A written valuation policy, applied consistently and reviewed by someone independent of the portfolio team, is one of the strongest ways to make the audit smoother.
8. Auditor Independence and Roles
| Role | Responsibility |
|---|---|
| Fund manager | Manages investments and is responsible for the financial statements |
| Fund administrator or accountant | Maintains records, calculates NAV, and prepares statements |
| Custodian | Holds assets and provides statements and confirmations |
| External auditor | Independently audits and gives an opinion |
| Board or governing body | Oversees the fund and approves the statements |
Independence: The auditor must stay independent of the fund and its manager. The firm that prepares the books should not be the one that audits them, so use separate teams or providers for accounting and audit.
9. Audit Readiness Checklist
- Reconcile bank, custodian, and broker balances monthly
- Keep a written valuation policy and documented valuation files for each holding
- Maintain a current investor register and capital account statements
- Retain fee, carry, and waterfall workings with approvals
- Document related parties and transactions
- Prepare draft IFRS statements and disclosure notes early
- Agree a timetable and a single contact for audit queries
- Consider an advance review by an independent adviser; see our accounting and bookkeeping services
Funds based in the UAE should also check tax positions; see what expenses are deductible for Corporate Tax and penalty for late filing. Our tax services and advisory team can help.
10. Common Audit Findings
- Valuation inputs not documented or not approved
- Fee or carry calculations that do not match the fund documents
- Unreconciled differences between records and custodian or bank statements
- Incomplete related-party disclosures
- Late NAV, investor statements, or draft accounts
- Weak oversight of outsourced administrators or service providers
- Missing evidence of approvals for key transactions
Compliance and process audits in other sectors follow a similar approach; see our manufacturing compliance audit article for another example.
11. Choosing a Fund Auditor
| Ask this | Why it matters |
|---|---|
| Are you licensed and approved for this type of fund? | Regulators may restrict who can audit certain funds |
| Have you audited similar funds and asset types? | Experience with valuation and waterfalls is essential |
| Which standards and team will be used? | Clarity on IFRS, ISA, and staffing |
| How will you stay independent? | Avoid conflicts with accounting or advisory work |
| What are the timetable and deliverables? | Align with investor and regulatory deadlines |
Setting up a new vehicle or entity? Review the pre-setup planning and research checklist, the mainland business setup requirements checklist, and the future of business formation in Dubai, or speak to our business setup team.
Frequently Asked Questions
What is a fund accounting audit?
It is an independent audit of a fund's financial statements and supporting records, testing that investments exist and are fairly valued, investor balances and fees are correct, and the statements follow the applicable framework such as IFRS.
Do investment funds in the UAE have to be audited?
Many do, depending on the fund's structure, regulator, and fund documents. Confirm the requirement with your regulator and legal adviser.
What do auditors check in a fund audit?
They test existence and valuation of investments, NAV and unit balances, investor capital accounts, fee and carry calculations, income and expenses, cash, related parties, and disclosures.
How are unlisted investments audited?
Auditors review the valuation policy and models, test inputs against evidence such as recent transactions or investee financials, challenge assumptions, and may use valuation specialists. Documentation of valuation judgements is critical.
Can the fund administrator and auditor be the same firm?
Generally no. The auditor must stay independent of the books it audits, so accounting and audit are usually handled by separate teams or firms. Check your regulator's independence rules.
Ready for a smooth, independent fund audit? Let's talk.
