Regulatory Policy - Local Audit Sign-off for Private Funds

Summary

This is a CIMA regulatory policy, issued February 2021, setting out requirements for local audit sign-off applicable to registered private funds (PFs) under the Private Funds Act (PFA). It builds on the statutory requirement that PFs have their accounts audited annually by an auditor approved by CIMA, and clarifies that such approved auditors must have a physical presence in the Cayman Islands, though not all audit fieldwork needs to be performed locally.

Appointment and Audit Obligations

• Registration appointment: When applying for registration, a PF must appoint a local auditor from CIMA's List of Approved Auditors and submit the auditor's name, address, and a letter of consent confirming awareness of its obligations under the PFA.
• Accounts preparation and submission: Audited accounts must be prepared under IFRS or US/Japan/Switzerland GAAP (or GAAP of a non-high-risk jurisdiction) and submitted to CIMA within six months of financial year end (or an extension CIMA allows).
• Auditor notification duty: Auditors have a duty to immediately notify CIMA in writing if, during an audit, they obtain information or suspect the PF is insolvent or likely to become so, is winding up in a manner prejudicial to investors or creditors, lacks adequate accounting records, is engaging in fraudulent or criminal conduct, or is otherwise non-compliant with relevant laws or registration conditions.

Removal or Change of Auditor

• Notification of removal: A PF that removes its auditor must notify CIMA in writing of the reasons and the name of the proposed replacement.
• CIMA verification: CIMA will verify the new auditor is on its approved list and may seek consent confirmation.
• Restriction on reappointment: A PF cannot reappoint an auditor previously removed under the PFA unless CIMA is satisfied the person will comply with the PFA going forward.

The policy does not apply to foreign-domiciled funds that are administered but not registered in the Cayman Islands.

Key obligations

• PFs must have their accounts audited annually by an auditor approved by CIMA, with local sign-off by an approved local auditor.
• When applying for registration, a PF must appoint a local auditor from CIMA's List of Approved Auditors and submit the auditor's name and address plus a letter of consent from the auditor confirming awareness of its obligations under the PFA.
• Audited accounts must be prepared in accordance with IFRS or US, Japan, Switzerland GAAP, or GAAP of a non-high-risk jurisdiction.
• PFs must send audited accounts to CIMA within six months of the end of the financial year, or within any extension CIMA allows.
• Auditors must immediately give CIMA written notice (with reasons, if based on suspicion) if they obtain information or suspect the PF is unable/likely unable to meet its obligations, is winding up prejudicially to investors/creditors, lacks sufficient accounting records, is acting fraudulently/criminally, or is otherwise non-compliant with the PFA, Monetary Authority Act, AML Regulations, or a condition of registration.
• Where an auditor is removed, the PF must notify CIMA in writing of the reasons for removal and the name of the proposed new auditor.
• A PF must not appoint as auditor a person previously removed under the PFA unless CIMA is satisfied the person will in future comply with the PFA.

Applies to

private funds (PFs) registered under the Private Funds Act, approved local auditors of private funds

Deadlines

• within six months of the end of the financial year: PFs must send their audited accounts to CIMA within six months of the end of each financial year, or within such extension as CIMA may allow.