Why AIF Audits Are Different From a Standard Company Audit An AIF audit isn't just a financial-statement sign-off. It has to reconcile SEBI regulatory filings, investor-level capital account statements, valuation of unlisted holdings, and management fee/carry computations — all of which sit outside a standard statutory audit scope.
The Core AIF Audit Checklist
1. Fund Financial Statements
• Balance sheet and statement of profit & loss prepared per the applicable accounting framework • Fund-level vs scheme-level financials (for multi-scheme AIFs), clearly segregated • Related-party transaction disclosures — manager, sponsor, and their affiliates
2. Capital Account Reconciliation
• Drawdowns/capital calls reconciled against PPM-committed capital • Catch-up contributions and equalisation amounts for subsequent-closing investors correctly computed and recorded • Investor-wise capital account statements matching the fund's books
3. Valuation Verification
• Independent valuation of unlisted securities, in line with SEBI's prescribed valuation norms and industry valuation guidelines • Consistency of valuation methodology period-over-period • Documentation supporting any fair value adjustments
4. Fee and Carry Computation
• Management fee computed per the PPM's stated basis (committed capital, invested capital, or NAV — whichever applies) • Carried interest calculation checked against the distribution waterfall and hurdle rate defined in the PPM • Any fee offsets or rebates correctly applied
5. SEBI Regulatory Reporting Reconciliation
• Annual Activity Report and Quarterly Activity Report figures traceable to audited books • Compliance with reporting deadlines on the SEBI Intermediary Portal • Any regulatory correspondence or observations from SEBI addressed and documented
6. Tax Compliance
• Pass-through statements issued to investors (Category I/II) or fund-level tax computation (Category III) • Withholding tax compliance on distributions to resident and non-resident investors • Advance tax and return filing status
7. FEMA Compliance (Where Applicable)
• Reporting of foreign investments received (FVCI/FPI/other routes as applicable) • Overseas investment reporting, if the fund has made outbound investments
Common Gaps Auditors Find
The most frequent issues we encounter are misaligned catch-up contribution calculations at subsequent closings, valuation documentation that doesn't match the methodology stated in the PPM, and management fee computations that quietly drift from what the PPM actually specifies.
Build Your Audit Around the PPM, Not a Generic Template Every AIF audit checklist has to be customised to that specific fund's PPM — generic checklists miss fund-specific waterfall structures and closing mechanics. Anuj Desai & Associates supports AIF managers with pre-audit reviews, valuation coordination, and full statutory audit engagements. This checklist is for general guidance. Please consult us for an audit approach tailored to your fund's structure. text