It can send a shiver down your spine. The prospect of a regulatory audit can create a nightmare situation if your team is not prepared — and with good reason. In late 2024, the SEC reported that it brought in a record US$8.2 billion in fines in its previous fiscal year.

This is where mock audits are smart: they help you spot weaknesses, tighten up your documentation, and build the confidence you need to handle an unplanned audit.

Follow the steps outlined below to ensure your team is audit-ready no matter the situation.

Step 1: define the scope and audit type

Start by clearly outlining the parameters of your mock audit to ensure it is focused and actionable. The first order of business is to identify the type of audit you are simulating. Is this a review based on SEC, FINRA, or state-level standards? Each has its specific requirements.

Then, define the scope. Will you assess the entire firm, or zero in on areas like fee billing, client communications, or advertising compliance? Finally, define the audit period (i.e., a review of activity from the past 12 months).

Step 2: assign internal roles

Give your team clear responsibilities to keep the process organised and efficient. For instance, the team lead will simulate the role of an external auditor. The documentation coordinator will be charged with collecting and organising the necessary documentation. Department heads should communicate specific deadlines and tasks. Mock interview representatives should be prepared to rehearse answers to audit-related questions.

Step 3: prepare key documents

Gather and organise all the critical documents related to an audit. It helps to review your firm’s document retention policy to ensure compliance. Collect essential records:

• Client agreements, including digital signatures (independent broker/dealer LPL Financial received a US$3 million fine after a number of brokers were found to have falsified signatures)
• ADV Part 2 and CRS
• Marketing and social media materials
• Fee schedules, billing records, and trade confirmations
• Compliance manuals and Form U4
• Client communication logs (i.e., emails, call notes)

Store these securely in a shared location for easy access during the review. Also be strategic with naming the files to include name of client, account, year, etc.

Step 4: run compliance checks

Evaluate your processes and documentation against regulatory standards. Consider the following:

• Trade logs: check trade logs for best execution compliance.
• Delivery dates: review delivery dates for privacy notices and Form ADV.
• Advertising: ensure all promotional materials comply with content and disclosure requirements. On September 11, 2023, the SEC announced changes related to the Marketing Rule. JD Supra presents the key takeaways in a February 2024 article.
• Client disclosures: confirm disclosures are accurate, complete, and delivered on time.

Step 5: conduct mock interviews

Train your team to respond in a calm and cool manner. It is a good idea to do the following:

• Simulate audit scenarios: challenge team members to explore common audit scenarios like, “Walk me through your client onboarding process.”
• Evaluate responses: analyse clarity, consistency, and supporting documentation.
• Provide feedback: identify holes and give constructive guidance to resolve issues.

Step 6: review and document findings

Once your mock audit is complete, assess the results and characterise your observations.

• Identify gaps: note missing documentation, inconsistent processes, or outdated policies.
• Flag issues: document any late filings or minor compliance violations.
• Actionable insights: use your experiences to create an “audit response playbook” that your firm can refer to during a real audit.

Step 7: follow up and fix gaps

Address weaknesses and level up your compliance framework. For instance, you should focus on key areas like:

• Assigning tasks to resolve identified issues
• Updating written policies and procedures based on audit findings
• Conducting necessary staff training to fill knowledge gaps
• Documenting all changes made, ensuring alignment with compliance standards

Step 8: set a recurring schedule

Keep audits consistent to maintain and support your agility. Firms that do that prioritise the following:

• Annual calendar: schedule mock audits on an annual basis.
• Variation: rotate focus areas periodically to cover different aspects of compliance.
• Continuous improvement: build on lessons learned from each audit, ensuring ongoing improvement is baked into processes and documentation.

Docupace: your mock audit secret weapon

Mock audits are one of the most effective tools firms can use to prepare for regulatory scrutiny. But even the best checklists and internal procedures fall short without the right systems in place to support them. If your team is still juggling spreadsheets, disconnected software, or manually tracking documentation, the risk is real, and so is the time waste.

Docupace simplifies every step of your compliance and surveillance process. With a single, rule-driven platform designed specifically for wealth management, your team can automate document collection, normalise data, and stay ahead of regulatory changes with real-time alerts and audit-ready reports. From mock audits to actual examinations, Docupace helps you manage risk without managing chaos.

If you are ready to reduce human error, eliminate redundant work, and feel fully prepared for your next audit, Docupace is the partner that makes it possible. Experience a compliance platform built to protect your firm and empower your team to focus on what really matters.

Schedule a discovery call with Docupace today and see how effortless compliance can be.

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