Blueprint Intelligence / Institutional Readiness / Fund audits, when LPs expect one in place
Institutional Readiness
Fund audits, when LPs expect one in place
Fund II, or roughly $30 million in assets under management, whichever arrives first, is the point institutional LPs expect an audit to already be running, not the point a manager starts looking for an auditor.
Fund II, or roughly $30 million in assets under management, whichever comes first, is the threshold institutional LPs use as their default expectation for when a fund should have a full audit in place. Arriving at that point without an auditor already engaged reads as behind schedule, not as an item still open on a to-do list.
What Fund I gets away with, and what Fund II does not
Quarterly reports and reviews carry a fund through Fund I. By Fund II, or roughly $30 million in AUM, institutional LPs expect audited financial statements rather than internally prepared ones. The shift is not a courtesy step up in rigor. It is the point where LPs stop taking the GP's own numbers on their own terms.
What the audit actually covers
A venture fund audit is broader than a check on the numbers. It touches the mechanics an LP is specifically watching for signs of drift or misalignment.
- Audited financial statements, a minimum of three years for an existing fund, prepared by the fund's auditor rather than assembled in-house.
- A fee transparency schedule and the waterfall mechanics and carry model, a detailed illustration of how carried interest is actually calculated.
- GP commitment documentation, amount, source, and timeline, consistent with what the fund formation checklist above already establishes.
- Capital account statements from prior funds, where existing LPs have authorized their disclosure.
Subscription lines of credit distort IRR and DPI timing, so bank LPs specifically require a written policy stating the maximum line size, the maximum borrowing duration, and how capital calls get reported relative to line usage. A fund using a facility with no written policy on file is a specific, checkable red flag, not a general impression of disorganization.
Engaging the auditor before the threshold, not at it
Auditor relationships take time to establish properly, the same way fund administrator and counsel relationships do. An LP evaluating a fund approaching the Fund II or $30 million threshold is checking whether that relationship already exists, not whether the fund intends to find one once it becomes necessary. Treat the engagement itself, not just the eventual audit opinion, as the item on the checklist.
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