The third party assurance reports on controls at registered fund administrators in Malta : an evaluation

Abstract

Purpose: Malta's reputation as a hedge fund domicile has been growing from a very low base. Notwithstanding this, Third Party Assurance (TPA) Reporting is still a novel idea in Malta which still needs to be explored. This study aims at establishing the nature and scope of the TPA Report on controls within the Maltese Fund Administration Industry and evaluate the implications of completing such a report. Design: In reaching the objectives of this study, personal semi-structured interviews were conducted with Fund Administrators (FA) registered in Malta, user auditors from the Big Four audit firms, and service auditors. Findings: SAS 70 has been the global standard in this area for some time now, but with the introduction of the two new standards ISAE 3402 and SSAE 16, FA prefer using the international to the US version. This indicates a movement towards a more international perspective that helps eliminate inconsistencies and confusion in the marketplace. This study also reveals that FA that issued this report have a different perception than those who do not, which indicates lack of knowledge about TPA Reporting. ii Conclusions: TPA is not a solution but an alternative approach in the audit process. Even though the benefits of this type of assurance are clear to all, there are few FA who have actually opted for this type of audit. There seems to be some form of resistance to this alternative approach. Value: The study reveals that demand for this type of audit will grow in importance. This study includes a number of recommendations with the aim of encouraging this type of assurance among FA.