Cayman Islands: Mutual Funds Local Audit Sign-Off

Introduction

Since 1 July 2002, the Cayman Islands' Monetary Authority ("CIMA") has required local audit sign-off on all mutual funds and mutual fund administrators regulated by CIMA.

Summary Of Policy

Private equity funds

This policy does not apply to closed ended private equity funds. Private equity funds are not regulated by CIMA under the Mutual Funds Law (as amended).

Location of auditors

Only auditors with a physical presence in the Cayman Islands are approved as auditors of record for locally incorporated or established mutual funds and other entities subject to regulation by CIMA.

Location of audit

The policy does not however, require that all of the audit work is carried out locally in the Cayman Islands or carried out solely by the approved auditor of record. The audit can be performed wherever the principal books and records of the entity are maintained provided that a Cayman auditor is included in the process.

Branches

The policy does not apply to branches of international companies licensed in the Cayman Islands and foreign domiciled funds that are administered in the Cayman Islands but not otherwise registered as foreign companies doing business in the Cayman Islands.

Reasons For Local Audit Sign-Off

Discharge of reporting obligations

The policy allows more effective discharge of the reporting obligations placed on auditors under Section 34 of the Mutual Funds Law and enables a more efficient interface with CIMA.

Approved auditors are obliged to report to CIMA any failure on the part of a fund to keep sufficient records or the conduct of business in a manner that is prejudicial to investors or creditors.

Quality control

By limiting final audit sign-off to approved auditors within its jurisdiction CIMA will have immediate and direct access to firms issuing audit opinions on regulated entities which will help ensure that quality control standards and local laws and regulations in respect of audit obligations under the Mutual Funds Law are more effectively enforced (whether or not the audit work is performed in Cayman).

Filing Requirements

Applications for registration or licensing of new regulated mutual funds and mutual fund administrators since 1 July 2002 have had to name an approved local audit firm in the prescribed details and file a letter of consent from such an auditor.

Approved Auditors

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.