Verifying the numbers.
WHAT TO EXAMINE
Financial statements, several years Management accounts, recent Tax returns and filings Bank statements Sales records and invoices Purchase records Payroll records Debtors and creditors listings Stock records
WHY BANK STATEMENTS SPECIFICALLY
They are the hardest record to manipulate and they verify the rest.
WHAT TO RECONCILE
Reported revenue against bank receipts Reported profit against tax returns Stated debtors against actual ageing
WHY AGAINST TAX RETURNS
Profit reported to a buyer and profit reported for tax should match, and differences require explanation.
WHAT TO BE CAUTIOUS OF
Revenue not passing through the bank Records that are incomplete Explanations that require accepting undocumented income
WHY
Undocumented income cannot be verified, cannot be relied upon, and should not be paid for.
WHAT TO EXAMINE IN DEBTORS
Age of balances Concentration Whether they are collectible
WHY
Uncollectible debtors are not assets.
WHAT TO EXAMINE IN STOCK
Whether it exists, physically Whether it is saleable How it is valued
WHY
Obsolete stock is valued at cost and worth nothing.
WHAT TO COUNT
Stock, yourself, before completion.
WHAT TO EXAMINE IN COSTS
Whether any are understated or omitted Whether the owner's costs are included Whether necessary expenditure has been deferred
WHY DEFERRED EXPENDITURE MATTERS
Maintenance and replacement postponed before a sale inflates profit and becomes your cost.
WHAT TO ASSESS
Condition of equipment and premises.
WHAT TO ENGAGE
An accountant, for this work.
