{"id":35772,"date":"2023-11-27T18:36:36","date_gmt":"2023-11-27T18:36:36","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=35772"},"modified":"2026-08-27T08:06:49","modified_gmt":"2026-08-27T08:06:49","slug":"verification","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/verification\/","title":{"rendered":"Verification"},"content":{"rendered":"<p><script type=\"application\/ld+json\">\n[\n  {\n    \"@context\": \"https:\/\/schema.org\",\n    \"@type\": \"QAPage\",\n    \"mainEntity\": {\n      \"@type\": \"Question\",\n      \"name\": \"Detailed Performance Examination and GIPS Compliance\",\n      \"text\": \"When a firm requests a detailed performance examination, which of the following statements is most accurate?\\n\\nA. The firm may state that the composite or portfolio has been examined in such a way, only if a performance examination report is released for those accounts. The firm must also still claim firmwide compliance.\\nB. The firm may state that the composite or portfolio has been examined in such a way, only if a performance examination report is released for those accounts.\\nC. The firm may state that the composite or portfolio has been examined in such a way, for those accounts.\",\n      \"answerCount\": 3,\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The firm may state that the composite or portfolio has been examined in such a way, only if a performance examination report is released for those accounts. The firm must also still claim firmwide compliance.\",\n        \"upvoteCount\": 0,\n        \"commentCount\": 0\n      },\n      \"suggestedAnswer\": [\n        {\n          \"@type\": \"Answer\",\n          \"text\": \"The firm may state that the composite or portfolio has been examined in such a way, only if a performance examination report is released for those accounts.\",\n          \"upvoteCount\": 0,\n          \"commentCount\": 0\n        },\n        {\n          \"@type\": \"Answer\",\n          \"text\": \"The firm may state that the composite or portfolio has been examined in such a way, for those accounts.\",\n          \"upvoteCount\": 0,\n          \"commentCount\": 0\n        }\n      ]\n    }\n  }\n]\n<\/script><\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/xi50fnnyJXg\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Verification involves an independent third party reviewing a firm&#8217;s GIPS<sup>\u00ae<\/sup> procedures and confirming compliance. It doesn&#8217;t verify underlying calculations but checks if the firm follows GIPS<sup>\u00ae<\/sup> guidelines.<\/p>\n<p>Independent verification enhances a firm&#8217;s reputation for honesty and ethical standards.<\/p>\n<h2>Selecting a Verification Firm<\/h2>\n<p>Choosing a verification firm should match your asset management firm&#8217;s unique needs. Large global firms require firms with the right scale and resources for accurate verification.<\/p>\n<p>To ensure a proper match, get quotes from different verification firms, clearly communicate your verification needs, and use an internal request for proposal (RFP) template to standardize the process. This prevents important details from being overlooked when contacting multiple verifiers.<\/p>\n<div style=\"text-align: center; margin: 28px 0;\"><a style=\"display: inline-block; padding: 14px 28px; border-radius: 9999px; background: #1a73e8; color: #ffffff; font-size: 16px; font-weight: 500; line-height: 1.2; text-decoration: none;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"> Practice CFA verification concepts with our Free Trial. <\/a><\/div>\n<h2>Scope of Verification<\/h2>\n<p>Firms can&#8217;t claim partial compliance; it&#8217;s all or nothing, applying firm-wide.<\/p>\n<p>While it&#8217;s okay to have a detailed performance examination for a single composite or account, this must be in addition to the full firm-wide verification. The firm can only state that a specific composite or portfolio has been examined separately if there&#8217;s a performance examination report for that part of the firm&#8217;s operations.<\/p>\n<h2>Verification Process<\/h2>\n<p>Verifiers follow their own GIPS Standards, detailing how to conduct a thorough verification.<\/p>\n<p>The verifier must gain a deep understanding of the entire firm, from its structure to its operations. They check if the firm has written GIPS-related policies and procedures and study them closely.<\/p>\n<p>Every aspect of the GIPS Standards is examined during independent third-party verification. While not every single portfolio is checked, verifiers can use spot checks or sampling to ensure compliance, selecting composites or portfolios randomly for review.<\/p>\n<h2>Preparing for Verification<\/h2>\n<p>Before the verification process begins, gather the following information to share with prospective verifiers. This helps them estimate fees and plan the verification:<\/p>\n<ul>\n<li>Firm details, including its structure and the types of investment products it manages.<\/li>\n<li>Sample GIPS Reports and marketing materials.<\/li>\n<li>All policies and procedures used for GIPS compliance, such as discretion definition, asset valuation methods, return calculation methodology, external cash flow handling, error correction, etc.<\/li>\n<li>Composite and limited distribution pooled fund descriptions, and a list of broad distribution pooled funds (descriptions not required for these).<\/li>\n<li>Composite definitions, benchmarks, and inclusion criteria.<\/li>\n<li>A list of all managed portfolios with their values.<\/li>\n<li>A record of portfolios within each composite during the verification period, including dates and supporting documentation for changes.<\/li>\n<li>A list of portfolios excluded from all composites.<\/li>\n<li>Investment management agreements and policy statements.<\/li>\n<\/ul>\n<blockquote>\n<h2>Question<\/h2>\n<p>When a firm requests a detailed performance examination?<\/p>\n<ol type=\"A\">\n<li>The firm may state that the composite or portfolio has been examined in such a way, only if a performance examination report is released for those accounts. The firm must also still claim firmwide compliance.<\/li>\n<li>The firm may state that the composite or portfolio has been examined in such a way, only if a performance examination report is released for those accounts.<\/li>\n<li>The firm may state that the composite or portfolio has been examined in such a way, for those accounts.<\/li>\n<\/ol>\n<p><strong>Solution:<\/strong><\/p>\n<p><strong>The correct answer is A.<\/strong><\/p>\n<p>Both answer choices B and C are correct. However, answer A provides a more complete and accurate response by including two crucial points:<\/p>\n<ul>\n<li>Firms must claim compliance on a firm-wide basis, regardless of the presence or absence of a detailed performance examination.<\/li>\n<li>A performance report for those accounts must be generated.<\/li>\n<\/ul>\n<\/blockquote>\n<p>Reading 33: Global Investment Performance Standards<\/p>\n<p>Los 33 (j) Discuss the purpose, scope, and process of verification<\/p>\n<div style=\"text-align: center; margin: 32px 0;\"><a style=\"display: inline-block; padding: 14px 26px; border-radius: 9999px; background: #1a73e8; color: #ffffff; font-size: 16px; font-weight: 600; line-height: 1.2; text-decoration: none;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"> Start Free Trial \u2192 <\/a><\/p>\n<p style=\"max-width: 720px; margin: 28px auto 0; font-size: 16px; line-height: 1.6; text-align: center;\">Strengthen your understanding of GIPS verification, verification scope, independent third-party reviews, compliance requirements, performance examinations, and CFA Level III performance measurement concepts with study notes, practice questions, mock exams, and video lessons.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Verification involves an independent third party reviewing a firm&#8217;s GIPS\u00ae procedures and confirming compliance. It doesn&#8217;t verify underlying calculations but checks if the firm follows GIPS\u00ae guidelines. Independent verification enhances a firm&#8217;s reputation for honesty and ethical standards. Selecting a&#8230;<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[571],"tags":[],"class_list":["post-35772","post","type-post","status-publish","format-standard","hentry","category-cfa-level-iii","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Verification - CFA, FRM, and Actuarial Exams Study Notes<\/title>\n<meta name=\"description\" content=\"Verification involves an independent third party reviewing a firm&#039;s GIPS\u00ae procedures and confirming compliance.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/verification\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Verification - 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