Many Registered Investment Advisory Firms are taking action to be in compliance with the amended Custody Rule which requires advisers with custody of client assets to undergo a surprise examination of those client assets by an independent certified public accountant. Because this is new to many RIAs, there are many questions in regards to the process and requirements. One common question we hear when talking with RIAs: “If I hire you to perform the surprise exam, then how is it considered a surprise?”
When an RIA engages HLB Gross Collins, P.C. to perform the required surprise exam, we typically will provide a time frame, but not a specific date, during which we will show up to perform the work. Generally we will give a 2-3 week period during which we will arrive to begin the work. Upon engagement, we will ask about vacation schedules and availability of key personnel who must be present during the surprise exam. For example, the Chief Compliance Officer must be present.
Keep in mind that RIA Surprise Exams are an annual requirement and therefore many of our engagements include subsequent years which will have even more of a “surprise” factor. The audit must be performed prior to the end of the year. Note that having your RIA Surprise Exam performed sooner rather than later within the year could be more cost effective as there well be a shorter time frame within which transactions must be reviewed. If you are required to have an RIA Surprise Exam, contact HLB Gross Collins, P.C. We are registered with the PCAOB and a premier provider of SEC compliance audits.