Page 237 - AAA Integrated Workbook STUDENT S18-J19

Due diligence

Procedures

Due diligence procedures will involve:

 Analytical review of past financial statements to assess the recent financial
performance of the target company

 Review of forecasts including an assessment of the reasonableness of
assumptions used in the forecast

 Review of existing contracts to identify when the contracts expire and whether
the contracts will be affected by a change of owner

 Review of terms and conditions of related party transactions which may have
affected the performance of the target company

 Inspection of asset registers and ledgers to identify possible overstatement
which would affect the price paid

 Review of board minutes to identify significant issues affecting the target
company which may affect its value

 Correspondence between the company and its lawyers regarding any
outstanding legal issues

 Correspondence from the tax authority regarding any tax investigations or
issues

 Review of industry data to assess the status of the industry and industry specific
risks

233