Who Audits Mutual Funds – An Overview

Mutual funds are often seen as a safer, more predictable method of investing in the capital markets. Warren Buffet, the legendary investor and one of the world’s richest men, consistently espouses the benefits of investing in “an S&P 500 low-cost index fund.” But fund investors, like stock and bond investors, rely on external auditors to provide assurance on fund annual accounts.

This leads to the question – which firms are responsible for the audits of mutual funds and their series?

In this post, we will explore the composition of the audit market across mutual funds (’40 Act filers) at the series level. In subsequent pieces, we will take a more granular look at how the market is affected by regional variances, as well as fund type.

Like most audit market segments, the Big Four firms are the dominant players of the mutual fund market. As mentioned in a recent Accounting Today article, PricewaterhouseCoopers LLP has a particularly strong hold over the mutual fund market – with more than 40% of all fund and series audits.

Much of this can be attributed to the engagement of many of the largest investment management companies; PwC is the auditor of over 400 BlackRock, 300 Fidelity, and 200 Vanguard funds and series.

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The Big Four audit firms are engaged by nearly all large (total investments of $10 billion or more) and mid cap (total investments between $2 billion and $10 billion) funds and series. Small (total investments between $50 million and $2 billion) and micro cap (total investments up to $50 million) funds and series start to see the emergence of some smaller audit firms. Cohen & Company is the fourth largest auditor of micro cap funds and series, with more clients than KPMG and nearly as many as Deloitte.

This analysis uses data from the Mutual Fund Auditor Engagements database, part of the new Funds + Securities module, powered by Audit Analytics.

For more information about Audit Analytics or this analysis, please contact us.

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