Readying an action before combat

Suppose the party suspects that combat is imminent, and some of the PCs ready actions (attack nearest hostile creature, attack first thing that moves). Then combat erupts. Some of the PCs are considered Surprised (for instance, because the attack came from enemies they weren’t expecting).

When do the readied actions take place?

  • Before or after initiative is rolled and gaining any Warlord initiative bonus such as shifting?
  • During surprise round turns? If so at the PC’s initiative or at the mob’s initiative?
  • Or do they wait to trigger until the PC is no longer Surprised?

Is it possible to be Surprised while you have a readied action?

Also, what’s the PC’s initiative order after this? Can the PC wind up at a higher position than was rolled?