Performance Audit

AAA

DEFINITION of 'Performance Audit'

An audit performed on an asset manager by an outside accounting firm to verify that the performance figures shown to the public on marketing materials represent the true aggregate results of the firm's clientèle. The CFA Institute has established performance presentation guidelines, called global investment performance standards (GIPS), that must be maintained by asset managers.

INVESTOPEDIA EXPLAINS 'Performance Audit'

There are many stories about money managers showing the performance of only one or two specific accounts out of hundreds or more because the numbers looked much better than the rest. A performance audit allows for the verification of the performance numbers reported by the company to ensure that they are an accurate reflection of the true returns generated by the firm.

RELATED TERMS
  1. Comparison Universe

    A comprehensive grouping of investment managers with similar ...
  2. Certificate in Investment Performance ...

    A certificate which signifies competency in the area of evaluating ...
  3. Annual Return

    The return an investment provides over a period of time, expressed ...
  4. Audit

    1. An unbiased examination and evaluation of the financial statements ...
  5. Global Investment Performance Standards ...

    Ethical standards to be used by investment managers for creating ...
  6. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
RELATED FAQS
  1. Does location matter for taxes when calculating gross sales?

    Tax policies regarding gross sales differ by state and region. Some city jurisdictions, counties and states require a percentage ... Read Full Answer >>
  2. Why would you use the TTM (trailing twelve months) rather than the data from the ...

    Public companies report their yearly financial statements along with an annual report. However, financial professionals are ... Read Full Answer >>
  3. Why is it important for an investor to understand business accounting?

    Investors use financial statements to obtain valuable information used in valuation and credit analysis of companies. Therefore, ... Read Full Answer >>
  4. What are the business consequences of using FIFO vs. LIFO accounting methods?

    If a company uses a first-in, first-out accounting method (FIFO), it's likely that its reported earnings will be higher than ... Read Full Answer >>
  5. How do you analyze inventory on the balance sheet?

    In accounting, inventory represents a company's raw materials, work in progress and finished products. Financial professionals ... Read Full Answer >>
  6. How are contingent liabilities reflected on a balance sheet

    Contingent liabilities need to pass two thresholds before they can be reported in the financial statements. First, it must ... Read Full Answer >>
Related Articles
  1. Investing Basics

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  2. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  3. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always What They Appear

    Survivorship bias erases substandard performers, distorting overall mutual fund returns.
  4. Professionals

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  5. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  6. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  7. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  8. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  9. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  10. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center