Start in Q4, before the auditor's request list arrives. Sort every position by how long ago it last raised a priced round. For anything older than about a year, gather the evidence behind the mark now: board decks, investor updates, cash and runway, and a short calibration memo. Then ask founders only for what's missing.
I hear about audit season on a lot of calls with fund finance and ops people, and the story barely changes. The request list lands in January. Somebody spends six weeks digging through partner inboxes for a board deck from March. Then a company that last raised in 2023 turns into a week of back-and-forth with the auditor. Nobody remembers what evidence they used for it last year (it was in someone's downloads folder).
Most of those weeks go to finding documents. So most of the fix happens before the audit starts.
Why stale marks are the hard part this year
A fresh priced round is easy evidence. The auditor sees a new investor paid a price, and the mark follows. The trouble is the long tail of companies that haven't raised in a while, and in venture that tail is most of the book. One recent analysis found that only about 4% of seed-stage startups raise a Series A in any given quarter. Many positions go years without a new price.
The guidance has also moved. The 2025 edition of the IPEV Valuation Guidelines says plainly that the price of a recent investment "is not a default." It applies to quarterly reporting periods starting on or after April 1, 2026. So the December 31 marks your auditor tests this winter fall under it, and for most funds with a December year-end, this is the first year-end audit that does. The guidelines expect you to calibrate at every measurement date, which means you show a clear bridge from the last transaction price to today's fair value. The AICPA's guide for venture and private equity funds says the same thing in US GAAP terms.
In practice, "we held it at cost" isn't enough of an answer for a company that last raised two years ago. You need a reason, and the reason needs documents behind it.
Step 1: Sort the portfolio by staleness
Pull every position into one list. For each one, record the date of its last priced round and the date of the last financials you hold. Then bucket them:
| Last priced round | What the auditor will likely want |
|---|---|
| Under 12 months | Executed closing documents. Usually little else. |
| 12 to 18 months | The closing documents, plus recent financials that show nothing has broken. |
| Over 18 months | A calibration memo, current financials, cash and runway, and a reason for the mark. |
| No recent data | Everything above, and a plan to get it. These are the ones that blow up the timeline. |
The last row is your real to-do list. A fund with 40 positions often finds that a handful of them create most of the audit work.
Step 2: Build an evidence file for each position
For each company in the top three rows, collect the documents that support the mark. Not every document carries the same weight:
| Evidence | Weight with auditors |
|---|---|
| Executed closing documents and cap table | High, if you have the signed versions. |
| Board decks and board-approved financials | High |
| Investor updates with financials | Medium to high |
| Bank statements or cash confirmations | High for cash and runway |
| Your own notes from founder calls | Low on their own, useful for context |
| Press, LinkedIn posts, hiring signals | Low. Supporting color only. |
Most of this already exists. It's sitting in partner inboxes, shared drives and old email threads. The work is finding it and linking each number to the file it came from.
If your firm is becoming a registered adviser, be stricter. Examiners want the final signed documents, and they want to be able to trace a number in an LP report back to its source.
Step 3: Write a short calibration memo for the stale marks
For every position over 18 months, write a one-page memo. It doesn't need to be elegant. It needs to show your reasoning:
- The anchor. The last round: date, price per share, and who led it.
- What has changed since. Revenue, burn, cash and runway, headcount, and any big customer or product news.
- What the market did. Movement in public comparables or recent private rounds in the same sector.
- The conclusion. Hold, mark up or mark down, and by how much.
Track the share count and the price per share for every position. Ownership percentages break silently every time an option pool grows or a SAFE converts. If your fund uses an outside valuation provider, this memo is still useful. It's the input they'll ask you for anyway.
Step 4: Find the gaps, then ask only for those
Once the evidence files exist, the gaps are obvious. Maybe you have Q3 numbers but no year-end cash. Maybe you have a term sheet but not the executed documents.
Ask the founder for exactly that, from your own inbox, in plain text. Skip the form and the portal login. Tell them what you already have, so they know you did the work:
Hi Maya, we're getting ready for our year-end audit. I have your Q3 board deck and the Series A closing set. The one thing I'm missing is your cash balance as of December 31. Could you reply with that number, or forward a bank statement? Thanks.
A founder can answer that email in two minutes. A 30-field template gets put off until February.
Step 5: Save this year's file for next year
Next year's audit will ask about the same companies. Keep the evidence file, the calibration memo and the auditor's questions together for each position. Next November, you start from last year's memo and update it.
This is where most small teams lose time. The knowledge of "what we showed the auditor last year" lives in one person's head, and when that person leaves, it leaves too.
Where AI helps, and where it doesn't
AI is good at the digging. It can find the board deck in the inbox, pull out the cash number and link it to the page it came from, and draft the gap list. That's the workflow we're building toward at Cura: forward the auditor's request list, get back a link to the source for each item, and see a list of what's missing.
AI should not decide the mark. A model that drafts a valuation with no source behind each input gives you a confident number you can't defend. Every number in the audit file needs to trace back to a document, and a human needs to sign off on the conclusion.
When does a VC valuation mark count as stale?
There's no fixed cutoff, but auditors start asking harder questions once a mark rests on a round more than 12 to 18 months old. The 2025 IPEV Valuation Guidelines say the price of a recent investment is not a default. You have to show, at every measurement date, why the price still holds or how you adjusted it.
The auditor wants a reason with documents behind it. A company that raised 20 months ago and has grown revenue on plan is easy to support. A company that raised eight months ago and has since lost its biggest customer might need a markdown.
What evidence do auditors accept for a private company valuation?
Auditors give the most weight to documents the company or the fund produced for a formal purpose: executed closing documents, board decks, investor updates with financials, and cap tables. Public signals like press or LinkedIn posts can support a story, but they rarely carry a mark on their own.
When you send evidence, label each file by company, round and date. Auditors still like folders, and a clean folder structure saves a round of questions.
Do exempt reporting advisers need an annual fund audit?
The SEC custody rule's audit provision applies to registered advisers, so exempt reporting advisers aren't bound by it. Many still get audits, because their limited partnership agreements or their LPs require one. Check the LPA. It usually sets the deadline too.
The SEC did adopt a rule in 2023 that would have required an audit for every private fund a registered adviser manages. The Fifth Circuit vacated it in June 2024, so the custody rule is still the one that matters.
For registered advisers that rely on the audit provision, the deadline is firm. Audited financial statements prepared under GAAP have to reach investors within 120 days of the fiscal year-end, and a PCAOB-registered firm has to perform the audit. For a December year-end, that's the end of April, so the evidence work should be done by January.
Sources
- International Private Equity and Venture Capital Valuation Guidelines, 2025 edition: Q&A on the update, Lincoln International
- AICPA Valuation of Portfolio Company Investments guide, Marcum
- 17 CFR 275.206(4)-2, the SEC custody rule, Cornell Legal Information Institute
- Fifth Circuit vacates SEC private fund adviser rules, Morrison Foerster
- Resetting valuations, Data Driven VC, on Nnamdi Iregbulem's seed valuation analysis