Streamlining Cayman Liquidations: When an Audit Waiver Makes Sense
EisnerAmper Cayman recently assisted a client in successfully deregistering and dissolving their fund by utilising a less commonly applied mechanism available to voluntary liquidators, which enabled the fund to dispense with the requirement for a final audit.
While this option is not appropriate for every scenario, it can be a valuable tool when applied correctly, particularly when operational challenges make obtaining an audit difficult.
CIMA Deregistration and Audit Waivers
Under the Mutual Funds Act and Private Funds Act, regulated entities must file audited accounts with the Cayman Islands Monetary Authority (CIMA). However, in cases where a fund is undergoing voluntary liquidation, it’s possible to apply for an audit waiver, governed by CIMA’s Regulatory Policy on Exemption from Audit Requirements for a Regulated Mutual Fund.
This waiver provides an alternative solution for funds that, due to certain operational or logistical issues, are unable to complete a full audit but still need to deregister and wind up their affairs.
Relevant Exemption for Voluntary Liquidators
According to Section 5.4.6 of CIMA’s Regulatory Policy, an audit waiver may be granted when a fund is being voluntarily liquidated and a third-party liquidator has been appointed. The liquidator is responsible for conducting a comprehensive review of the fund’s financial activities since the last audited period. This review serves as a substitute for a full audit, ensuring key areas such as financial reconciliation, solvency, and shareholder activity are adequately addressed.
Case Study: Successful Audit Waiver for a Longstanding Fund
In a recent engagement, Timothy Womack and John Henry of EisnerAmper Cayman were appointed as the joint voluntary liquidators for a longstanding fund with multiple outstanding audits. The fund had been winding down its operations but encountered difficulties due to a lack of cooperation from service providers and insufficient documentation to support full audits. Several investors had been redeemed but remained unpaid, further complicating the situation.
The fund’s principals had attempted to secure an audit waiver but were unsuccessful. Facing statutory deadlines and limited cash reserves, the client engaged EisnerAmper Cayman to help manage the liquidation and pursue a fresh audit waiver application.
Upon appointment, we engaged with CIMA to discuss the fund’s situation. Our team conducted an in-depth review of the fund’s financial activities, reconciling its records and confirming that no inconsistencies existed that would prejudice stakeholders. Based on this review, we submitted a renewed audit waiver application and report to CIMA, which was successfully granted.
When Does an Audit Waiver Make Sense?
An audit waiver should only be considered in scenarios where it’s the most appropriate course of action. The aim is not to bypass the audit for convenience, or to avoid scrutiny, but to tailor the wind-down process to the realities of a fund’s situation. Common scenarios include where a fund has operational challenges that mean a full audit is not feasible, such as holding incomplete records, or where fiduciaries are uncontactable. Circumstances may also exist where there is little benefit to stakeholders for an audit to be undertaken, both in terms of time and cost; this can be taken into account as part of the waiver application.
In all cases, the voluntary liquidator must make sure that applying for the waiver is in the best interest of the fund and its stakeholders. The integrity of the liquidation must not be compromised, and no creditors or investors prejudiced. CIMA has ultimate discretion as to whether it will grant a waiver.
Key Considerations for Directors and Managers
If you are considering an audit waiver for your fund’s voluntary liquidation, it’s essential to take the following steps:
- Early involvement of voluntary liquidators makes sure that communication with CIMA is efficient, informed and the waiver application process meets its requirements.
- Maintaining sufficient records for the liquidator’s review to support the waiver application.
How EisnerAmper Cayman Can Assist
The team at EisnerAmper Cayman has extensive experience navigating the audit waiver process for funds in voluntary liquidation. Our approach makes sure that the waiver application meets CIMA’s requirements while protecting stakeholder interests.
- We fulfill the statutory role of third-party liquidators, overseeing the liquidation process and conducting the financial review in accordance with CIMA’s regulations.
- Our team’s review covers all financial aspects to maintain transparency and compliance.
- We work closely with CIMA to make sure that audit waiver applications are fully aligned with regulatory requirements.
An audit waiver, when used in the right circumstances, can streamline the liquidation and deregistration for regulated funds without compromising the integrity of the process. At EisnerAmper Cayman we have the knowledge to guide you through this while maintaining compliance with CIMA’s requirements and protecting stakeholder interests.
If your fund needs to be wound down, contact us today to discuss how we can assist.
Service Team
John Henry Partner D: +1 345-525-7134 E: jhenry@eisneramper.ky |
Tim Womack Partner D: +1 345-322-4255 E: twomack@eisneramper.ky |
Liam Hardie Senior Manager D: +1 345-924-5097 E: lhardie@eisneramper.ky |
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EisnerAmper Introduces Restructuring and Insolvency Services in the Cayman Islands

EisnerAmper, a leading global business advisory firm, is pleased to introduce Restructuring and Insolvency services to its Cayman Islands offering. EisnerAmper Cayman now provides expertise to clients who need to trace, protect and recover assets, restructure businesses, or liquidate entities for the benefit of stakeholders.
Private funds, businesses and the financial services community worldwide look to the Cayman Islands as an effective domicile to support their global strategies at each stage of the investment and business lifecycle. EisnerAmper Cayman offers a full suite of services which provide an efficiency minded, sensitive and experienced team working to maximize value for stakeholders. These services include:
- Official Liquidations – Experienced in executing court-appointed liquidations (and receiverships), and managing complex, litigious and multijurisdictional engagements.
- Voluntary Liquidations – Acting as voluntary liquidators to securely wind-up your activity, distribute remaining assets and dissolve the entity.
- Restructuring Services – Developing and executing plans to restore profitability and ensure the long-term sustainability of your entity.
- Forensic Investigations and Fiduciary Support – Investigating fraud, diagnosing mismanagement, reviewing historic financial activity, and navigating stakeholder disputes.
Tim Womack and John Henry will be the partners leading the new service lines for EisnerAmper Cayman. Both have significant offshore experience, having worked in the Cayman Islands for many years. Tim Womack commented, “John and I are excited to bring our combined offshore experience to EisnerAmper Cayman. As the EisnerAmper Global network grows, the range of services and expertise we can provide ensures our clients will be catered for at every step of the business lifecycle”.
“Investments continue to offer lucrative opportunities along with unique challenges to professionals, businesses, and investors throughout the Cayman Islands,” said Peter Cogan, Managing Partner, Financial Services Industry and Chair of EisnerAmper Global. “We’ve heard from our clients and are excited to offer this valuable suite of services to meet their ongoing needs. These highly in-demand services will help fortify our strategy and connect the dots for our clients who trade around the globe between the U.S., Singapore, and the Cayman Islands.”
“EisnerAmper has long been acknowledged as being at the forefront of international business,” added Ben Leung, Managing Partner of EisnerAmper Cayman Ltd. “With the addition of these needed services, we broaden our offering in one of world’s most prominent and important financial service centers.”
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EisnerAmper Cayman Affiliate EA Governance Offers Governance Services
The Cayman Islands recently enacted legislative changes (which EisnerAmper previously reported on) to enhance the oversight of smaller open-ended mutual funds (previously exempted due to having less than 15 investors) as well as closed-ended funds (private equity funds) to boost best practices and strengthen investor confidence. EisnerAmper Cayman affiliate EisnerAmper Governance Services Ltd. (EA Governance) can be instrumental in providing governance services that clients might require for an offshore entity allowing clients to focus on investment management.
Given the conflict of interest between governance and audit, solely non-attest clients would be able to take advantage of EA Governance, which is regulated under the Cayman Islands Monetary Authority.
Some of EA Governance offerings include:
- Providing clients with Independent Board Directors, Managing Members, Independent Fund Representatives, and Members for Investment Advisory, Limited Partnership Advisory and Conflict Advisory Committees.
- Company management consisting of registered office services, board secretarial services, along with general advisory and consulting services; and also providing adequate office space for a client’s Cayman entity, along with qualified full-time employees and professional directors to manage the Cayman entity.
- International tax compliance services such as helping clients determine the best way to meet their requirements of tax regimes and make the required filings under FATCA/CRS.
- Cayman Anti-Money Laundering (AML) Compliance, providing dedicated professionals to help clients meet their compliance needs and regulatory requirements.
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Cayman Islands Law Requires Registration
On February 7, the Cayman Islands Government passed sweeping legislation to enhance oversight of investment funds to boost best practices and strengthen investor confidence. The Private Funds Law, 2020 requires private funds formed in Cayman to register with the Cayman Islands Monetary Authority (CIMA) within the next six months. The Mutual Funds Law, 2020 removed the small fund exemption (those with fewer than 15 investors) thereby subjecting substantially all private open ended and closed ended funds formed in Cayman to register with CIMA. (For more insight, please see EisnerAmper’s previous report on the Cayman Islands’ enactment of legislative changes to enhance oversight of investment funds to boost best practices and strengthen investor confidence.)
Under the new laws:
- All impacted funds will be required to register by August 7, 2020;
- Any new funds launched from the effective date will require immediate registration.
- The registration fee for the initial registration of affected funds during the transition period will be waived; and
- The first audited accounts for registered funds will not be required to be filed with CIMA until six months following the first full financial year after registration. Unlike other offshore jurisdictions that do not require local auditors, these audited financial statements must be submitted by a CIMA approved local auditor.
As always, for further instruction, please speak to your legal advisors.
By Elana Margulies-Snyderman
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Cayman Islands Enacts Legislative Changes to Enhance the Oversight of Investment Funds
The Cayman Islands Government has drafted two bills to enhance regulation for all Cayman-domiciled hedge funds and also impact private equity funds for the first time, in an effort to boost best practices, strengthen investor confidence and ensure the Islands remains the preeminent jurisdiction for investment funds formation.
Mutual Funds (Amendment) Bill, 2020 and the Private Funds Bill, 2020 would require both hedge funds and private equity funds to have annual audits issued or undertaken by a Cayman Islands Monetary Authority (CIMA)-approved local auditor.
Under the new Mutual Funds Bill, funds with fewer than 15 investors would now be required to register with CIMA, comply with annual return requirements, retain accessible records and have annual audits done by a CIMA-approved local auditor.
According to the Private Funds Bill, all private funds would have to comply with above. In addition, they would have requirements for valuation, safekeeping, title verification and cash monitoring. The bill also allows private funds the flexibility to choose the service provider(s) who would provide any required valuation, safekeeping, title verification and cash monitoring services; provided that any administrator, custodian or other independent third party appointed is independent from the fund’s manager or operator or, where any of the manager or operator or their affiliates is appointed, they identify and disclose any conflicts of interest.
The Government is planning a series of briefings and releases in the coming months with the first briefing to be held January 10.
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EisnerAmper Global welcomes Singapore member
EisnerAmper Cayman is delighted to welcome EisnerAmper Singapore to the EisnerAmper Global network. EisnerAmper Global is a specialist network of independent member firms operating in key financial services and international trading hubs. EisnerAmper Global member firms provide clients with access to the expertise of 200 partners and 2,000 professionals globally, with office locations including New York, Miami, San Francisco, Cayman, Dublin and Singapore.
EisnerAmper Singapore, formerly Saw Meng Tee & Partners PAC, provides specialist accounting, advisory, outsourcing,and risk & regulatory services to international and domestic clients operating in Singapore and across Asia. At EisnerAmper Singapore’s launch, Managing Partner Saw Meng Tee noted that EisnerAmper Singapore’s vision is to be “recognised as one of Singapore’s leading professional services firms in the specialist areas of financial services, corporate solutions and advisory”. EisnerAmper Ireland and Saw Meng Tee & Partners PAC have been working closely together over the past 18 months to further develop existing ties between Ireland and Singapore.
For enquiries, please contact Saw Meng Tee, Managing Partner, EisnerAmper Singapore or visit the EisnerAmper Singapore website.
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Business in Brief: EisnerAmper Celebrates 10 Years in Cayman
Accounting, auditing and advisory firm EisnerAmper Cayman celebrated its 10th anniversary in the Cayman Islands at The Westin Grand Cayman last week.
EisnerAmper flew in Adam Cheyer, a co-founder of Siri, the digital assistant in Apple’s iPhone, as a key note speaker.
Mr. Cheyer, who also co-founded Viv, the digital assistant which Samsung branded as Bixby for the Galaxy S8, gave two presentations to local high school students and the business community, last Thursday.
Ben Leung, EisnerAmper’s managing partner, said: “We wanted the pupils at all the local schools to have the opportunity to listen to and meet someone who is a high achiever in the technology field. Moreover the area of mobile technology in particular is relevant now and will become more so in the future.”
The evening session was devoted to the future of artificial intelligence. Given that automation has famously reduced the number of blue collar jobs and is anticipated to reduce the number of white collar jobs as well, the presentation addressed how artificial intelligence is likely to affect businesses going forward.
Mr. Cheyer outlined the future of digital assistants which, although ubiquitous on all computer and smartphone operating systems, are not that widely used.
Mr. Cheyer said it will need four things to elevate assistants from a utility “that is nice to have to a paradigm” that every business will need to use.
This would require one assistant that can be accessed from any device for any type of service in a way that can be personalized, he said.
EisnerAmper Cayman started in 2007 as one of the smallest firms in Cayman and has quickly grown its staff and offices, now located at Cricket Square. “The world financial crisis commenced shortly after we launched so arguably it was not the best timing,” Mr. Leung said. “However, there is always a demand for quality, and we positioned ourselves in the market as a firm where senior management were heavily involved in engagements.”
The firm has undertaken many pro-bono audits such as the CI Red Cross, NCVO, CI Chamber of Commerce and Cayman Finance.
James Lewis, partner, said: “We also try and take every opportunity to participate in events supporting charities. Every year we are out at the supermarkets for Veterans Day. We have dress-down days for local charities like Rock Your Socks (Downs Syndrome) and participate in the events such as the 5Ks for the CI Red Cross and Cayman Crisis Centre, also a sponsor for both.”
A copy of the article published on the Cayman Compass can be downloaded from the following link: Business in brief – EisnerAmper celebrates 10 years in Cayman – Cayman Compass
Other articles written during Adam Cheyer’s visit are on the following link:
SIRI co-founder: AI still too narrow to be feared – The Journal
Siri founder shares secrets to success – Cayman Compass
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Accounting Standards Update (ASU) 2015-09, Disclosures about Short Duration Contracts
ASU No. 2015-09 focuses on improving existing disclosure requirements to all insurance entities that issue short-duration contracts. The main improvements provide increased transparency of significant estimates in measuring the liabilities for unpaid claims and claims expenses and provides additional information to analyse the amount, timing and uncertainty of cash flows from insurance contracts and development of claims estimates. An in-depth discussion of these improvements can be found at our website: ASU 2015-09
Amendments
Required disclosures (RD) to be included in the notes to the financial statements:
- Incurred and paid claims development tables by accident year for the most recent reporting period.
- A reconciliation of incurred and paid claims development information to the aggregate carrying amount of the liability with separate disclosure of reinsurance recoverable.
- For each accident year presented, total of incurred but not reported (IBNR) liabilities plus expected development on reported claims accompanied by description of reserving methodologies (and any changes thereto).
- For each accident year presented, quantitative information about claim frequency accompanied by a qualitative description of methodologies used for determining claim frequency information (and any changes thereto).
Required supplementary information (RSI) disclosure to be included either in the notes to the financial statements or as a separate schedule:
- Incurred and paid claims development tables by accident year for all years except for the most recent reporting period.
- For all claims except health insurance claims, the average annual percentage payout of incurred claims by age.
RD’s plus RSI’s and their audit considerations:
Required disclosures
In forming an opinion, amongst other considerations the auditing standards require the auditor to consider the compliance of the financial statements with accounting principles generally accepted in the United States (US GAAP). If financial statements do not fully comply with US GAAP (including, but not limited to, omissions or errors) the auditor will need to assess the significance of the matter in forming an opinion. Depending on the significance of the matter the auditor may consider modifying the opinion. The auditor will need to assess each scenario individually based on facts and circumstances.
Required supplementary information
The RSI is not part of the basic financial statements, however, the information is considered to be an essential part of financial reporting by the relevant standard setters. In general, standard setters do not expect the auditor’s opinion on the fair presentation of such financial statements in accordance with the applicable financial reporting framework to be affected by the presentation by the entity of the RSI or the failure to present some or all of such RSI.
The audit standards require that the auditor perform some limited procedures on RSI which includes but is not limited to:
- Inquire of management;
- Compare the information for consistency with (i) management’s responses to the foregoing inquiries, (ii) the basic financial statements, and (iii) other knowledge obtained during the audit of the basic financial statements; and,
- Obtain certain written representations from management.
Audit report considerations:
- If all or some of the RSI is presented, the audit report will include additional communications in an “Other Matter” paragraph that is not considered a modification to the audit opinion as follows:
- A statement that the RSI is required under US GAAP to supplement the basic financial statements.
- A statement that the RSI, although not part of the basic financial statements, is required by the Financial Accounting Standards Board (FASB), who considers it an essential part of financial reporting.
- If we are able to complete the procedures required by auditing standards:
- A statement that we have applied certain limited procedures to the RSI, including a summary of the basic procedures;
- A statement that we do not express an opinion or provide any assurance on the RSI.
- If we are unable to complete the procedures required by auditing standards:
- A statement that we are unable to apply certain limited procedures to the RSI and the reason;
- A statement that we do not express an opinion or provide any assurance on the RSI.
- If some of the RSI is omitted, we will include in the “Other Matter” paragraph the following:
- A statement that management has omitted the missing RSI required by US GAAP;
- A statement that such missing RSI, although not part of the basic financial statements, is required by FASB, who considers it an essential part of financial reporting;
- A statement that our opinion on the basic financial statements is not affected by the missing RSI.
- If the measurement or presentation of the RSI departs materially from US GAAP, a statement that although the auditor’s opinion on the basic financial statements is not affected, material departures from prescribed guidelines exist, including a description of the departure.
- If the auditor has unresolved doubts about whether the RSI is measured or presented in accordance with prescribed guidelines, a statement that although our opinion on the basic financial statements is not affected, the results of the limited procedures have raised doubts about whether material modifications should be made to the RSI for it to be presented in accordance with guidelines.
- If all of the RSI is omitted, the “Other Matter” paragraph should include (e) above.
The auditing standards generally accepted in the United States of America, AU-C Section 730: Required Supplementary Information, contains illustrative examples of Other Matters paragraphs addressing the scenarios discussed above.
AU-C Section 730 par. A3: Illustration 1- The Required Supplementary Information Is Included, the Auditor Has Applied the Specified Procedures, and No Material Departures Have Been Identified
US GAAP requires that the required supplementary information on page XX be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
AU-C Section 730 par. A3: Illustration 2 – All Required Supplementary Information Omitted
Management has omitted the required supplementary information that US GAAP requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
AU-C Section 730 par. A3: Illustration 3 – Some Required Supplementary Information Is Omitted and Some Is Presented in Accordance With the Prescribed Guidelines
US GAAP requires that the included supplementary information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide any assurance. Management has omitted [the missing required supplementary information] that US GAAP requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
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