Audit Preparation Checklist

As we turn the page on Q3, it’s time to begin thinking about year-end reporting and audit preparedness. Aumni has years of experience working with hundreds of venture funds as they prepare for their annual audit — from first-time managers to the world’s largest firms. One thing that’s consistent: many finance teams begin their preparation months in advance of year-end to ensure the audit process runs smoothly. Aumni helps these customers save time and improve outcomes at year-end.

We created this checklist to help finance and reporting teams stay on track for audit season and understand how Aumni can support throughout the process.

____    T-3 months to year-end: Gather all your investment documents

Start by collecting all the necessary documents related to your portfolio, including closing sets from financings (share purchase agreements, certificates of incorporation, investor rights agreements, etc.), fund organizational documents (LPAs, Side Letters, Subscription Agreements), and historical financial statements/audit reports. In particular, auditors will request to review financing closing sets for any portfolio company financing that had occurred within that calendar year.

When checking the assumptions made in preparing valuations and financial reports, auditors will often ask the fund to produce documentation that validates certain assumptions (original issue price, liquidation preference multiples, distribution waterfalls, etc.). Finance teams should have all these documents at their fingertips to reference during the audit process.

‍How Aumni Can Help: Aumni’s platform securely stores and organizes your key financing and fund documents alongside your investment data, ensuring you can quickly access them for audit preparation. Once you have all your documents uploaded, you can easily download your documents in a structured file format to share across your service providers.

____   T-2 months: Understand capitalization and ownership 

Receive the latest cap table from portfolio companies and confirm or update your ownership stakes across holdings. Ensure this data is accurate and up-to-date.

‍How Aumni Can Help: Aumni can help update company capitalization details with the data you receive from equity financings, providing visibility into ownership structures and investment details.

____    T-2 months: Gather Key Performance Metrics (KPIs) and/or financial statements from portfolio companies 

Request quarterly and annual KPIs and/or financial statements from your portfolio companies to inform fair valuations of your portfolio holdings. Although valuations can be supported with a number of different KPIs, the top 5 KPIs we see customers request from their Series A or later portfolio companies are revenue, net burn rate, cash on hand, gross margin and headcount. 

How Aumni Can Help: Leverage Aumni’s KPI Solutions to collect KPIs from Portfolio Companies or extract information from company reporting documents. Aumni KPI Solutions help to put portfolio performance in context, allowing users to quickly identify trends and export KPIs to support end-of-year valuation workflows. For more on this, see our blog post on: What KPIs do venture firms care about across stages?

____    T-1 month: Review portfolio according to valuation policy and make action plan for names that need valuations   

Reference your firm’s valuation policy to begin identifying portfolio holdings that may require full valuations (i.e., ones for which you can’t rely on the last priced round). Valuation policies vary by firm, but we’ve seen most commonly that finance teams will run more detailed valuation processes on holdings that have not raised within the last 9-12 months.

‍How Aumni Can Help: Aumni users can run a “Audit Summary Data” report and filter by the “Latest Equity Financing Date” column for companies who haven’t had equity financings within the time period specified in the valuation policy.

____    T-1 month: Generate in-house valuations / build confidence with independent valuations 

Using the capitalization and KPI data that has been collected from portfolio companies, begin generating in-house valuations and consult with your auditors to confirm which portfolio companies may need independent valuations. For names that have had equity financing events in the last 9-12 months, we’ve noticed many funds rely on the latest post-money valuation (PMV) and account for any accretion on warrants or interest paid on convertibles in calculating fair value.

For holdings where there hasn’t been an equity financing event in the last 9-12 months, many funds will conduct in-house valuations using both the latest PMV and the Market Approach, considering a percentage weighting between the two depending on the amount of time since last financing. For more detail on valuation approaches and complex valuation scenarios, see the American Institute of Certified Public Accountants (AICPA) nonauthoritative guide for valuing portfolio companies and the International Private Equity & Venture Capital Valuation (IPEV) Guidelines, both of which help private funds navigate the nuances of valuing portfolio companies.

Many venture firms also retain the services of an independent valuations provider for select names in their portfolio. The reasons we’ve seen for obtaining an independent valuation include auditor requirements, Limited Partner-requests or LPA requirements, justifying a mark-up or -down, or simply increasing confidence in complex fair value calculations.

‍How Aumni Can Help: Aumni has partnered with PricingDirect, a JPMorganChase company, to provide streamlined access to trusted independent valuations that adhere to a private fund adviser’s requirements to report portfolio holdings considering ASC 820 inputs. This partnership currently has a waitlist for access, so please contact your Aumni sales or customer success representative to learn more or join the waitlist.

Bonus: Check Trends in Private Markets Data‍

Review Aumni’s Market Insights to track trends and compare valuations within your portfolio. Our platform delivers insights into market trends and valuation shifts, helping you stay informed and prepared for discussions with auditors.

‍There's more! Our full checklist includes essential steps for the months following your year-end financials, including T+1 month and beyond. Download the full PDF from the sidebar.

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