THE BELOVED CPA FIRM™
Guide for Financial Services Leaders:
5 Things Every Financial Services Leader Should Own About Their Financial Reporting (Before Investors Start Asking)
A Note Before We Start
A financial statement audit has a defined scope. What investors, due diligence counsel, and regulators look for often goes beyond that scope — and the gap usually becomes visible at the worst possible moment.
I've spent 20 years in audit and financial advisory — including time at PwC and Deloitte — working with funds, RIAs, fintech firms, family offices, and SPVs. The most consistent thing I observe is this:
Financial services firms that handle audits and external reviews well are not necessarily the most sophisticated. They are the ones where management has thought carefully about their reporting infrastructure between engagements — not just during fieldwork.
What follows are five things financial services leaders should own actively — not delegate to the audit process — to ensure their financial reporting is ready for what sophisticated capital, acquirers, and regulators actually ask of it.
A note on scope: A GAAP financial statement audit expresses an opinion on whether your year-end financials are fairly presented. It is not investor relations. It is not transaction preparation. It is not a year-round monitoring function. Those are management responsibilities — and this guide addresses them as such.
THING 1
Own your valuation methodology — document it before someone asks for it.
Most fund valuation methodologies work perfectly well internally. The problem is that 'we've always done it this way' is not a sufficient answer when institutional capital or an acquirer asks for the written policy.
Investment valuation is the highest-risk area in a financial services audit — and the area where the gap between internal practice and external documentation is most likely to surface as a problem.
Your auditor will assess whether your valuation methodology is reasonable and consistently applied. What they are not doing is building your written valuation policy for you. That documentation — the methodology itself, the basis for inputs on level-3 assets, the comparable data, the approval process — is a management deliverable. It should exist independently of the audit process.
Organizations that handle this well have a written valuation policy that a new team member could follow, and that an outside reviewer could understand without additional context. Organizations that handle it poorly reconstruct their methodology documentation in the weeks before fieldwork — under time pressure, with prospective investors waiting.
What strong valuation documentation looks like:
• A written valuation policy that describes the methodology for each asset class — not a summary, the actual policy
• For level-3 assets: documented inputs, assumptions, comparable data, and the rationale for any changes from prior periods
• An approval process for valuations that doesn't rely on one person's judgment alone
• Valuation documentation that is updated each quarter — not assembled at year-end
The audit question this prepares you for: when your auditor tests investment valuations, they should find documentation that supports the numbers without requiring management to reconstruct the story. That makes fieldwork faster and the resulting opinion more defensible.
Case study: VC Funds
For All Major Home Appliances
CA based Crypto focused VC Funds
The General Partner (GP) needed support in enhancing their internal documentation around their valuation methodology for their $100m portfolio with about 23 investments across their two funds.
Lessons learned:
A bespoke valuation methodology guide was created to cover how they value their level I, II and III (the majority) investments with specific attention to the Crypto market which has unique aspects as well as Venture Capital Valuation methods. Additionally a quarterly investment memo is prepared to support the quarterly reporting to investors and for support for the audit.
THING 2
Know what your related-party disclosures actually say to someone who doesn't know you.
Related-party transactions in financial services are normal and expected. How they are disclosed determines whether they create questions — or answer them.
Management fees, carried interest arrangements, expense allocations between funds, co-investment rights, loans between affiliated entities — these are standard features of how investment firms operate. None of them are problematic in principle. All of them require clear documentation and transparent disclosure.
The standard that investors and regulators apply is not technical compliance. It is whether the disclosure is clear enough that an outside reader — with no prior context and no relationship with the firm — could understand exactly what the arrangement is and why it exists.
The most useful test you can apply to your own related-party disclosures is to read each note as if you'd never met the people involved. Does it make sense on its own terms? Or does it rely on context that only insiders have? If it requires explanation, it needs rewriting — before someone outside the firm asks for that explanation.
Questions for your finance and legal team:
• Are all related-party relationships identified — including indirect relationships and affiliated entities?
• Can each disclosure be understood by an outside reader without additional context?
• Have any related-party arrangements changed this year — and are those changes documented and disclosed?
• Has outside counsel reviewed your related-party disclosures in the past two years?
The investor-readiness standard: your related-party disclosures should be written for the most skeptical reader in the room — not the most informed one.
THING 3
Understand your own technology stack well enough to explain it.
Financial services entities run on systems — portfolio platforms, trading tools, payment processors, fund administrators, cloud accounting software. Each system is a potential point of failure in your financial reporting. Management should understand where those points are.
A financial statement audit considers whether your financial data comes from reliable systems, whether access is appropriately controlled, and whether the reports feeding your financial statements are complete and accurate. What auditors assess during fieldwork is a snapshot. The ongoing oversight of whether your systems are functioning correctly is a management responsibility.
The specific risk in financial services is dependence on third-party platforms — fund administrators, custodians, payment processors — without sufficient oversight of what those platforms are actually producing. When a discrepancy surfaces between the administrator's records and the general ledger, the question is whether anyone was checking regularly or whether the reconciliation is happening for the first time at year-end.
What management should be able to answer:
• Which systems generate our financial data — and how does information flow between them?
• Who is responsible for reconciling each system to the general ledger — and how often?
• For fund administrators and custodians: do we have their SOC 1 reports — and have we reviewed them?
• When did we last review login access to our core financial systems?
One useful exercise: ask your finance team to trace a single transaction — from execution through the administrator's records to the general ledger to the financial statements. If that trace requires reconstruction rather than documentation, the gap is worth closing.
Case study: AI platform
For All Major Home Appliances
Entity with complex revenue
The entity uses AI to measure aspects like pedestrian counts, occupancy and heat mapping which allows them to support clients in various industries. The audit was need to support funding applications.
Lessons learned:
Being a SAAS entity (thus not purely financial services), it nevertheless had challenges in explaining the correlation between it's technology stack and the revenue in the financial statements. Additionally, while they had the SOC 2 report, they couldn't provide documents to support the audit undertaken. Indicating they hadn't applied rigor in the process. The audit was delayed significantly as a result.
THING 4
Build internal controls that match the complexity of what you're managing.
A control environment that worked at $50M AUM may not be adequate at $200M. Controls should grow with the business — not lag behind it.
Internal controls in financial services matter for the same reasons they matter anywhere — they protect the organization, protect the team, and provide the foundation for financial reporting that can be relied upon. But they also matter specifically because investors, regulators, and counterparties assess them.
The most common control weakness in growing financial services firms is not fraud risk or bad intent. It is concentration — key processes that depend on one person, access rights that haven't been reviewed since the firm was smaller, approval workflows that were adequate at an earlier stage of development and have never been updated.
Your auditor will communicate material weaknesses and significant deficiencies in writing. Below that threshold, observations that don't rise to a required finding may be mentioned informally or not at all. The strongest firms don't wait for the finding. They assess their own control environment as the business grows.
Questions worth asking annually:
• Is any single person handling a complete financial process from authorization through recording and reconciliation?
• When did we last review who has access to our portfolio systems, accounting software, and payment platforms?
• Do our approval thresholds and authorization limits still reflect the scale of transactions we're processing?
• If our CFO or controller were unavailable for a month, what would break — and what documentation exists to support continuity?
The investor lens: sophisticated LPs and their counsel increasingly ask about operational controls during due diligence. A well-documented control environment is not just an audit consideration — it is a fundraising asset.
THING 5
Be transaction-ready before a transaction appears — not after.
The firms that move through due diligence, capital raises, and regulatory reviews most cleanly are not always the most sophisticated. They are the most prepared. Preparation is a management discipline, not a transaction service.
Transaction-ready financial reporting means more than having audited financials on file. It means your capital account statements reconcile to your general ledger. It means your investor waterfall calculations are documented and defensible. It means your financial statements are prepared on a basis that buyers, investors, or counterparties can work with — not one that requires two weeks of explanation before analysis can begin.
The gap between audit-clean and transaction-ready is real and it is management's responsibility to close it. An auditor who completes a clean engagement has fulfilled their obligation. Whether the output of that engagement is useful in a transaction context depends on decisions management made throughout the year — about documentation, about disclosure clarity, about the depth of financial records maintained.
A self-assessment worth running before the next opportunity:
☐ Our valuation methodology is documented in writing and would be understandable to an outside reviewer
☐ Our related-party disclosures are clear to someone with no prior context
☐ Our capital accounts reconcile to the general ledger — regularly, not just at year-end
☐ We have current audited financial statements
☐ We could produce an organized data room within two weeks if a process began today
☐ Access to our core systems has been reviewed in the past 12 months
☐ We have discussed our reporting readiness with our CPA proactively — not just during fieldwork
If three or more of these are uncertain, the conversation worth having is a short one — with your CPA, your finance team, or both — before someone else makes it a longer one.
That is also exactly the conversation Jedidiah CPA's advisory work is built around.
Case study: Fund Administrator
For All Major Home Appliances
Guernsey (UK) based Group
The entity was acquired by a large Private Equity Group that was consolidating offshore administrators in deals of $10m - $20m (GBP equivalent).
Lessons learned:
Prior to the acquisition, the entity had made itself transaction ready through undertaking sell side due diligence to ensure that its core systems were appropriate, that any vulnerabilities in the succession plan were identified and that it had recurring revenue that was defensible.
A Final, Honest Note
Most financial services firms have a competent audit relationship. What varies is whether the CPA is a genuine thinking partner — or a service provider who shows up once a year.
The firms I've worked with longest are the ones where the relationship extends beyond fieldwork — where there's a conversation about reporting readiness, investor-facing disclosures, and what the next 12 months will require, not just whether last year's financials were accurate.
That's the kind of relationship Jedidiah CPA was built around. If what you've read here prompted a question that belongs in a conversation — or if a raise, a transaction, or a regulatory review is on the horizon — a 20-minute call is the right first step.
No pitch. If there's no fit, I'll tell you honestly.
Dickson E. Wasake, CPA (US) | FCCA (UK)
Managing Partner, Jedidiah CPA PLLC
20 years | PwC · Deloitte · Baker Tilly · Jedidiah CPA
Serving investment funds, RIAs, fintech firms, family offices, and capital-raising entities across the United States.
This article is provided for informational purposes only and does not constitute accounting, legal, or financial advice. The appropriate level of financial reporting depends on your specific circumstances, investor requirements, and regulatory context. Jedidiah CPA PLLC is a licensed CPA firm in Illinois.