The Second Camera Angle Auditors Don’t Have
When a referee makes a call on the field, the booth doesn’t just take his word for it. It pulls an independent camera angle and checks the call against it. Ask an auditor to review a fund’s fair-value mark on a private Series C holding, and there may be no quoted market price to pull. The evidence often begins with management’s valuation model and the limited market data available for the portfolio company. For auditors testing a Level 3 mark, that lack of observable pricing can make fair value one of the most judgment-intensive areas of the audit.
When Fair Value Dominates Audit
Accounting estimates are already, in the PCAOB’s own words, “some of the areas of greatest risk in an audit,” and fair value measurements sit at the center of that risk. For venture and growth funds with concentrated private-company holdings, Level 3 investments can represent a significant share of portfolio assets, meaning the audit can turn on a relatively small number of highly judgmental marks. For engagements performed under PCAOB standards, AS 2501 expressly allows auditors to develop an independent expectation of the estimate and compare it with management’s number. U.S. GAAS provides a similar framework under AU-C 540. The hard part has always been finding an independent data set to build that expectation from.
Built From Documents Most Auditors Never See
The Prime Unicorn Index family is a group of rules-based, modified market cap price return indexes tracking U.S. venture-backed companies valued at $1 billion or more: the Prime Unicorn™ Composite Index, with 234 components, and the Prime Unicorn™ 30 Index, home to names like SpaceX, Anthropic, OpenAI, Databricks, and Anduril. Price inputs are derived from publicly available, independently verifiable sources, including federal and state filings and company disclosures, along with eligible secondary-market transactions sourced through our partner, Caplight. Index values are calculated daily and distributed weekly, with both indexes reviewed and reconstituted quarterly. Solactive AG serves as the independent index calculation agent. Rather than relying on a portfolio company’s mark alone, the methodology incorporates multiple sources of observable private-market information.
A Building Block for an Independent Expectation
This is where the Index earns its place in the audit file. The Prime Unicorn Index can provide an engagement team with an independently sourced market data point that may be used in developing or corroborating an independent expectation under AS 2501, subject to the auditor’s evaluation of the relevance and reliability of the underlying data. Fund managers hear a version of this from the other side of the table too. As Baker Tilly advises private equity clients, a conclusion of value from an independent, reputable third-party provider is one of the best ways to give an auditor comfort over fair value, since the auditor can place more reliance on it and raise fewer questions in the file. The Prime Unicorn Index is built to be that reference point before a valuation ever lands on a reviewing partner’s desk.
A booth review doesn’t ask the referee to explain his call again, slower. It checks the call against an independent feed. A Level 3 mark deserves the same treatment, not another look at the same model from the same company. For auditors, the Prime Unicorn Index is the second camera angle: independent, timestamped, and built from a feed no company gets to control.
Want more data on Unicorn companies, including funding and valuation history, secondary transactions, and more? Email Contact@PrimeUnicornIndex.com or Call 646-290-9254.