Hedge Fund Returns: Auditing and Accuracy
30 Pages Posted: 9 Mar 2007
There are 2 versions of this paper
Hedge Fund Returns: Auditing and Accuracy
Abstract
In this paper, we investigate why the same hedge fund may report different performance measures in different places. We find that auditing plays an important role in explaining this difference. Although majority hedge funds state they have auditors, a significant proportion of hedge funds are not effectively audited. Especially, dead funds are less effectively audited than live funds. We find that audited funds have a much lower return discrepancy than non-audited funds. There is a significantly positive correlation between the auditing variable and fund size. Large funds tend to be audited while small funds tend not to be. Funds listed on exchanges, fund of funds, funds with broad investors, funds open to the public, funds invested in a single industrial sector, and unleveled funds have less return discrepancy than the other funds. These findings suggest a need for hedge fund auditing.
Keywords: auditing effectiveness, return consistency
JEL Classification: G23, G28
Suggested Citation: Suggested Citation
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