Hedge Fund Returns: Auditing and Accuracy

30 Pages Posted: 9 Mar 2007

See all articles by Bing Liang

Bing Liang

University of Massachusetts Amherst - Department of Finance

Multiple version iconThere are 2 versions of this paper

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

Liang, Bing, Hedge Fund Returns: Auditing and Accuracy. Available at SSRN: https://ssrn.com/abstract=968717 or http://dx.doi.org/10.2139/ssrn.968717

Bing Liang (Contact Author)

University of Massachusetts Amherst - Department of Finance ( email )

Amherst, MA 01003
United States

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