Privately Held Investment Firms?

Are privately held investment firms audited (GAAP requirements) the same way as publicly traded companies since they are constantly trading/buying stocks?

It is not a requirement for private investment firms (e.g., hedge funds) to get audited; however, most investors will not invest in a fund that is not only audited but also audited by one of the "top" firms. (I would never invest in an unaudited firm.)

Other regulations may force you to produce audited returns. If the firm is run by a registered investment adviser, there may be an auditing requirement. CFTC regulated firms must deliver annually audited reports to the NFA each year. The domicile of the fund may also require audited statements. It will be difficult to legally present any past return data to prospective investors if they are not audited at least annually.

In essence, while not required, auditing is de facto required if you want to actually raise money. By the way, if you are audited by an accounting firm worth their salt, there is no way that they will allow you to produce anything but GAAP reports, if you are dealing with any US investors.

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