The crux of Rule 206(4)-2 under the Investment Advisers Act of 1940 (Advisers Act), commonly referred to as the “custody rule,” is the protection of client and investor assets. There are several areas, however, where an adviser can run afoul of the custody rule. In this second installment of a two-part series, we review the auditor-independence requirement and discuss two additional hazards that may result in non-compliance with the custody rule: failing to realize when the adviser has custody and liquidation audits. The first article detailed options for fund managers to comply with the rule; discussed the frequency with which custody is reviewed during SEC examinations; and identified common weaknesses relating to inadvertent custody, as well as preparation and delivery of audited financial statements. For a discussion of SEC enforcement actions and corresponding penalties involving violations of the custody rule, see “Failure by Investment Advisers to Ensure Accurate Client Billing May Lead to SEC Enforcement Action and Penalties” (Feb. 2, 2017); “Repeat Custody Rule Offenders Face Severe SEC Sanctions” (Dec. 10, 2015); and “SEC Sanctions Two Private Fund Managers for Custody Rule Violations, Including Imposing Statutory Bars on Their Chief Compliance Officers” (Nov. 8, 2013).