Regulatory Compliance, Governance and Security

Jun 3 2009   6:34PM GMT

SAS 70 | Surprise Examination | Internal Control Report for Investment Advisers

Charles Denyer Charles Denyer Profile: Charles Denyer

The SAS 70 auditing standard is sure to become a necessary element of the proposed changes for the Investment Advisers Act of 1940. The SEC released a draft of proposed changes regarding “Custody of Funds or Securities of Clients by Investment Advisers” (File No. S7-09-09). In short, this comprehensive document is proposing the use of “surprise examinations” and a “internal control report” on entities that have custody of client funds or securities or instead serves as a qualified custodian for client funds or securities.

Currently the “surprise examination” is discussed as a “written report from an independent public accountant” while the “internal control report” is being described as that of a SAS 70. At this point, what distinctions will be made, if any, between the auditing framework for the “surprise examination” and “internal control report” are not completely clear. More than likely, the SAS 70 auditing standard will be utilized for both the “surprise examination” and the “internal control report”.

You can obtain a sample SAS 70 Type II Report and list of sample custodial control objectives by visiting the SAS 70 Resource Guide.

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