CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Which statement(s) is (are) true?

I. Verification can be performed either by an independent third party or by the firm itself.
II. Firms may claim compliance without verification.
III. Firms may only claim verified compliance for those years that have actually been verified.
IV. Verification can be performed on specific composites.
Correct Answer: II only

I: Verification must be performed by an independent third party.
II is true. Firms self-regulate their claim of compliance.
IV: Verification is performed with respect to an entire firm.

User Contributed Comments 16

User Comment
kulla How can firms claim complaince without verification ? either the question is wrong , it should have been"which statement is false?" or the correct answer is III.
justin yes they can without verification, but they cannot say the compliance is a verified one.
bigzero Why III is not in the answer? Isn't it directly quoted from the standard?
kaliokale Cause GIPS is not mandatory. They can claim compliance without verification
mtcfa I think this question is flawed. To my understanding, verification must be informed to insure compliance. However, an independent 3rd party performing the verification, is not necessary. (I.e. the firm can verify its own compliance).
mtcfa Strike my last comment. Verification is nor a requirement of GIPS, but may become so after 2005.
Slothrop This answer is not fully correct. III can also be correct. 0.B.3 says "The verification disclosure language SHOULD read: '[Insert name of FIRM] has been verified for the periods [insert dates] by [name of verifier]. ...'
sunny III is false because of the word 'only'.
surob But it is saying "verified compliance". You can claim verified compliance only when you had third party company verify the compliance. Any comments?
Challs the answer is II...it takes care of III which then become unsubstantiated by "self"...mean of one's own accord; the firm.
Ioannis Wrt III,: "It is recommended though that firms have all years for which they are claiming compliance verified." recommended <> obliged, necessary
Readalert If II is correct, how can a firm possibly claim compliance if it cannot verify self? I must be therefore be correct.
bc9115a I think the standard says firm may claim compliance, but independently verified compliance ADDS credibility.

Am I right to say that?
geofin "Verification does not ensure the accuracy of any specific composite presentation. Verification tests:
1. Whether the investment firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis, and
2. Whether the firm?s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards."

CFA Institute. Level I Volume 1 Ethical and Professional Standards and Quantitative Methods, 7th Edition. Pearson Learning Solutions. Page 173.
johntan1979 I agree that III should be correct.

Note the difference between "VERIFIED compliance" and "compliance".

You may claim compliance without verification. But you can ONLY claim VERIFIED compliance WITH verification.
nathi_8 III is false because it is "recommended" they claim compliance for verified years
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