PPM Audits for AIFs: How to Get It Right

Due Date: 30th September 2025

At AIF Services, we work with managers across the AIF landscape. A pattern we see repeatedly is the gap between perceived audit readiness and actual preparedness. The Private Placement Memorandum is the anchor of an AIF’s compliance and governance framework, and the annual audit is one of the most critical checkpoints in the regulatory cycle.

When well-prepared, the process is efficient, reinforces the fund’s governance credentials, and strengthens investor communication. Without adequate preparation, it can create avoidable delays, higher execution costs, and regulatory exposure.

Why the PPM Audit Matters

The PPM sets out the fund’s investment strategy, governance principles, valuation methodology, fee structure, and risk parameters. It is the document against which SEBI and investors measure operational discipline and adherence to commitments.

SEBI requires annual PPM audits for Category I and II AIFs, subject to limited exemptions. For Category III AIFs, where the mandate is less prescriptive, the integrity and accuracy of the PPM remain fundamental to investor trust. A thorough audit validates compliance and ensures the fund’s stated framework aligns with actual execution.

What the Audit Covers

A comprehensive PPM audit will assess:

• Accuracy and completeness of all disclosures

• Incorporation of the latest SEBI circulars and amendments

• Alignment between the PPM, trust deed, contribution agreements, and operations

• Consistency of investor reporting with PPM commitments

• Adequacy of risk disclosures in light of current market dynamics

The process typically moves through the following stages:

1. Scoping - Defining the scope, timelines, and deliverables

2. Document Collection - Gathering the PPM, governing agreements, investor communications, and operational records

3. Detailed Review - Testing disclosures and processes for accuracy, compliance, and alignment

4. Findings - Identifying inconsistencies, omissions, or structural gaps

5. Recommendations – Providing actionable corrective measures

6. Final Report - Delivering a documented outcome for SEBI compliance and investor reference

This is the SEBI’s standard format for the PPM Audit - click here to download

Practices That Drive Efficient Audits

Drawing on years of coordinating PPM audits for AIFs, we see consistent benefits from:

• Planning audit timelines well in advance

• Treating the PPM as a live document, updated as strategies or structures evolve

• Maintaining comprehensive, easily retrievable documentation

• Engaging audit professionals with direct AIF regulatory expertise

• Incorporating material changes into disclosures promptly rather than deferring updates

Common Gaps Identified in Audits

• Outdated strategy, performance data, or regulatory references

• Divergence between actual investment practices and stated PPM commitments

• Insufficient coverage of emerging or market-specific risks

• Weak documentation trails that slow the verification process

How AIF Services Adds Value

PPM audits demand structured coordination, deep familiarity with SEBI’s evolving framework, and an understanding of investor expectations. At AIF Services, we oversee the process end-to-end, drawing on our network of seasoned professionals who work exclusively in the AIF domain.

Our approach ensures deadlines are met, findings are addressed with precision, and the audit outcome reinforces the fund’s governance standing. The objective is an audit that is both compliant and credible, delivered with minimal disruption to investment operations.

Email us at hello@aifservices.in to get started.