why auditors use airas
Accountants who audit institutional funds that hold alternative investments should use ARIAS as support for their fair value opinions. With alternative investments becoming an increasingly larger percentage of endowment funds, retirement funds, and foundations, it is more important than ever to follow the appropriate guidelines when auditing these funds. One of the major difficulties is the lack of transparency for the underlying AI interests in these funds.
Transparency is one of the most important parts of an audit. It helps to prevent fraud and lets the auditor feel confident that the information that they are getting is accurate. When there is a lack of transparency, it is incumbent on the investor management to go to different sources to verify the accuracy of the information that is being received.
In the case of an audit containing alternative investments, transparency is essential to ensure that the fair value NAV assessment, which is required for GAAP reporting, is being reported accurately. It is the responsibility of the investor management to provide this information to the auditor.
AIRAS has been vetted by auditors as a product that can provide supporting documentation for an audit consistent with AICPA requirements. Many auditors suggest AIRAS to their clients as a cost effective product which minimizes the risk that their clients face with investment which are not transparent and highly illiquid.