"Audited" returns

We are often asked to review a firm's performance measurement system,

• to ensure that the formulas are correct
• to possibly opine in writing on its value
• to identify opportunities for improvement.

We do this for software vendors, custodians, asset managers, and other service providers. And of late we've noted how some firms will refer to their returns as "audited." I have commented about the concept of "audited returns" from a GIPS(R) (Global Investment Performance Standards) perspective a couple times recently, but here I'm speaking simply of the returns which might be given to a client. Often service providers will provide their clients with daily or monthly returns, and will distinguish between "audited" and "unaudited."

It has occurred to me, as a result of the comments shared by CPA colleagues of mine and documented in the recent posts, that these terms are clearly inappropriate. Unless the provider brings in a CPA firm or some other outside body to "audit" their returns, they're technically always "unaudited." And, in fact, given the specific definition of what the term refers to, the numbers would never actually be "audited."

The appropriate word, I believe, is "reconciled." Is this not the case? A provider can, at best, reconcile the data that is used to produce their returns vis-a-vis the "official books and records." Perhaps "reconciled" doesn't carry the same perceived value as "audited," but it's more accurate, yes?

If a firm uses the term "audited," they should be prepared to explain what the term means. For example, "'Audited returns' means that we have reconciled the underlying data with the account's custodian, the source of the 'official books and records,' and have ensured that all securities are properly priced and ..." Do  you agree?