Accounting Due Diligence Playbook
Don’t know where to start? You’re in the right place. We’ve put together this accounting due diligence template to help you tackle one of the most daunting aspects of the deal. Book a playbook demo to explore — schedule a call with us and we will reach out to help you get started.
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Accounting Due Diligence Checklist
Whether an organization is for profit or nonprofit; employs 1 person or 100,000 people; is headquartered down the street or on the other side of the world, they all probably heavily depend on the same element: cash flow. Cash flow is a major signifier of the health of a business or organization. Because of this, performing proper accounting due diligence is a crucial preemptive measure to closing any investment deal, merger, or acquisition.
One of the most intimidating aspects of accounting due diligence is knowing where to begin. Fortunately, DealRoom’s team of seasoned professionals crafted an Accounting Due Diligence Checklist that is applicable to virtually any company’s cash flow system.
- Tailored for auditing a target’s cash flows and accounting practices
- Requests are prioritized to focus on areas of due diligence to uncover potential financial issues and malpractices
- Checklists are customizable to meet the specific circumstances of your deal
What Tasks does the
Accounting Due Diligence Playbook
Include
General Information
- Corporate name
- Address
- Accountant's name
- Attorney's name
- Fiscal year
- Capitalization
- Bank references
- Location of company records
- Employee contacts
- Tax audit records
- Tax audit actions against company and terms
Sales and Earnings
- Description of market
- Gross and net sales for past year and past five years
- Sales backlog and accounts receivable activity
- Advertising and sales promotion cost
- Earnings record and budget for past five years
- Earning comparison with industry for past five years
- Dividend and earnings record for past five years
- Analysis of selling and general administration expenses
- Sales comparison to industry
- Sales compensation plan
- Comparison of sales team to total revenue
- Earning margin
- Return on investment
- Return on equity
Plant and Real Estate
- Location
- Real estate holdings
- Real estate valuations and appraisals
- Tax assessor real estate valuation
- Acreage
- Cost at purchase
- Real estate fair market value
- Building age and condition
- Building depreciation methods rates and policies
- Fire insurance
- Title insurance to realty and policy
- Equipment description
- Equipment cost age condition efficiency and insurance coverage
- Equipment reserves deprecation methods age rates and policies
- Projected plant and equipment for next five years
- Capital expenditure and repairs expense for past five years
- Maintenance cost for all real estate
- Sub leasing agreements with other contractors or tenants
- Major maintenance issues in past five years
- Major plant and equipment purchases in past five years
Assets
- Ratio of cash to current liabilities
- Age and number of accounts receivable
- Provision for bad debts
- Complete inventory
- Inventory location
- Inventory of finished goods by product
- Work in progress by product
- Raw materials by product
- Pricing methods
- Accounting methods and procedures
- Analysis of notes receivable
- Analysis of investments
- Patents trademarks and copyrights
- Current ratioInventory turnover ratio
- Asset turnover ratio
Liabilities
- Current state and federal tax status and payments
- State and federal tax status and payments for past five years
- Commitments for new building equipment and inventory
- Long term loans outstanding
- Long term loan terms
- Short term loans outstanding
- Short term loan terms
- Debentures outstanding and terms
- Pensions
- Dividend and interest arrearages
- Contingent liabilities
- Warranties
- Patent infringements
- Compensation for services
- Written off losses for past five years
- Debt equity ratio
- Interest coverage ratio
- Fixed interest cover
Financial Data
- Annual statements for past five years
- Audit reports for past five years
- Tax returns for past five years
- Disposition of funds for past five years
- Reports to SEC
- Chart of accounts
- Book, net, quick, liquidating and market value for past five years
- Working capital for past five years and normal trade practices for industry
- Inventory turnover for past five years
- Interest charges for past five years
- Exchange on which stock is traded and price chart for past five years
- Price to earning ratio
- Sales to accounts receivable ratio
- Sales to inventory ratio
- Sales to fixed asset ratio
- Earnings to book value ratio
- Debt service coverage ratio
- Fixed interest coverage ratio
- Debt to equity ratio
- Operating leverage ratio
- Financial leverage ratio
Terms and Projected Financials
- Reason for sale
- Price to be paid
- Terms of payment
- Financing Brokerage fees
- Tax considerations
- Current or past company sales agreements
- Pro forma balance sheet
- Projected earnings forecast
- Projected Income statements
- Projected income statements dated for the past five years
- Projected cash flow statements
- Projected cash flow statements dated for the past five years
- Capital turnover ratio
- Receivable turnover ratio
FAQ
What Is Due Diligence?
Due diligence is a critical aspect of any deal that begins very early in the process and can continue right up until closing. During due diligence, the potential buyer asks questions and requests documentation from the seller that helps the buyer understand the target company and its business. These requests are usually general to start and become more specific as the buyer develops a greater understanding of the target. Buyers use the information provided by the seller to evaluate the opportunities and risks associated with the potential transaction. It is important for sellers to stay organized throughout the process. Buyers often submit thorough, detailed request lists that require input from numerous members of the seller’s deal team.
What is a due diligence checklist?
As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.
What Questions Does the Master Due Diligence Questionnaire Include?
As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.
Key considerations when using our m&a due diligence template
Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.
Are the requests in the template comprehensive?
No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.
How to use the template with Dealroom
- Start 14-day Free Trial of DealRoom and sign-up
- Select a Master Due Diligence Template while creating a new room
- Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.
Can I change requests in this checklist or add new?
Every M&A process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.
Does this questionnaire provide all the necessary integration information?
This checklist was created by and for M&A professionals. It includes a comprehensive starting point for the integration process. However, every deal is different and may require additional requirements and tasks.
How to use this template with DealRoom?
- Start 14-day Free Trial of DealRoom and sign-up
- Select an Integration Template while creating a new workspace
- Start planning, assigning, adding to, and completing integration tasks. The Requests tab is automatically populated with the tasks from the integration template.
Key considerations when using our m&a due diligence template
Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.
Are the requests in the template comprehensive?
No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.
How to use the template with Dealroom
- Start 14-day Free Trial of DealRoom and sign-up
- Select a Master Due Diligence Template while creating a new room
- Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.
Accounting Due Diligence Playbook
Don’t know where to start? You’re in the right place. We’ve put together this accounting due diligence template to help you tackle one of the most daunting aspects of the deal. Book a playbook demo to explore — schedule a call with us and we will reach out to help you get started.
Accounting Due Diligence Playbook
Don’t know where to start? You’re in the right place. We’ve put together this accounting due diligence template to help you tackle one of the most daunting aspects of the deal. Book a playbook demo to explore — schedule a call with us and we will reach out to help you get started.
Utilizing a checklist is just step one. In order to have a seamless process, M&A checklists need to be utilized with the proper deal workflow tool.
Request a demo to learn how you can turn a checklist into an automated process and workflow with the DealRoom platform. With DealRoom, you can tackle any type of due diligence.
- Corporate name
- Address
- Accountant's name
- Attorney's name
- Fiscal year
- Capitalization
- Bank references
- Location of company records
- Employee contacts
- Tax audit records
- Tax audit actions against company and terms
- Description of market
- Gross and net sales for past year and past five years
- Sales backlog and accounts receivable activity
- Advertising and sales promotion cost
- Earnings record and budget for past five years
- Earning comparison with industry for past five years
- Dividend and earnings record for past five years
- Analysis of selling and general administration expenses
- Sales comparison to industry
- Sales compensation plan
- Comparison of sales team to total revenue
- Earning margin
- Return on investment
- Return on equity
- Location
- Real estate holdings
- Real estate valuations and appraisals
- Tax assessor real estate valuation
- Acreage
- Cost at purchase
- Real estate fair market value
- Building age and condition
- Building depreciation methods rates and policies
- Fire insurance
- Title insurance to realty and policy
- Equipment description
- Equipment cost age condition efficiency and insurance coverage
- Equipment reserves deprecation methods age rates and policies
- Projected plant and equipment for next five years
- Capital expenditure and repairs expense for past five years
- Maintenance cost for all real estate
- Sub leasing agreements with other contractors or tenants
- Major maintenance issues in past five years
- Major plant and equipment purchases in past five years
- Ratio of cash to current liabilities
- Age and number of accounts receivable
- Provision for bad debts
- Complete inventory
- Inventory location
- Inventory of finished goods by product
- Work in progress by product
- Raw materials by product
- Pricing methods
- Accounting methods and procedures
- Analysis of notes receivable
- Analysis of investments
- Patents trademarks and copyrights
- Current ratioInventory turnover ratio
- Asset turnover ratio
- Current state and federal tax status and payments
- State and federal tax status and payments for past five years
- Commitments for new building equipment and inventory
- Long term loans outstanding
- Long term loan terms
- Short term loans outstanding
- Short term loan terms
- Debentures outstanding and terms
- Pensions
- Dividend and interest arrearages
- Contingent liabilities
- Warranties
- Patent infringements
- Compensation for services
- Written off losses for past five years
- Debt equity ratio
- Interest coverage ratio
- Fixed interest cover
- Annual statements for past five years
- Audit reports for past five years
- Tax returns for past five years
- Disposition of funds for past five years
- Reports to SEC
- Chart of accounts
- Book, net, quick, liquidating and market value for past five years
- Working capital for past five years and normal trade practices for industry
- Inventory turnover for past five years
- Interest charges for past five years
- Exchange on which stock is traded and price chart for past five years
- Price to earning ratio
- Sales to accounts receivable ratio
- Sales to inventory ratio
- Sales to fixed asset ratio
- Earnings to book value ratio
- Debt service coverage ratio
- Fixed interest coverage ratio
- Debt to equity ratio
- Operating leverage ratio
- Financial leverage ratio
- Reason for sale
- Price to be paid
- Terms of payment
- Financing Brokerage fees
- Tax considerations
- Current or past company sales agreements
- Pro forma balance sheet
- Projected earnings forecast
- Projected Income statements
- Projected income statements dated for the past five years
- Projected cash flow statements
- Projected cash flow statements dated for the past five years
- Capital turnover ratio
- Receivable turnover ratio
Prepare for your due diligence
DealRoom’s accounting due diligence template is designed to help teams have an efficient due diligence process from the beginning. By providing your team with a pre-made professional diligence checklist, you can get a jump start on fulfilling diligence requests.
The template can act as a guide for common diligence requests categories such as legal, financial, HR, IT, commercial and more. And when you use a diligence tracker inside DealRoom, everything will be in one centralized space.
General Information
- Corporate name
- Address
- Accountant's name
- Attorney's name
- Fiscal year
- Capitalization
- Bank references
- Location of company records
- Employee contacts
- Tax audit records
- Tax audit actions against company and terms
Sales and Earnings
- Description of market
- Gross and net sales for past year and past five years
- Sales backlog and accounts receivable activity
- Advertising and sales promotion cost
- Earnings record and budget for past five years
- Earning comparison with industry for past five years
- Dividend and earnings record for past five years
- Analysis of selling and general administration expenses
- Sales comparison to industry
- Sales compensation plan
- Comparison of sales team to total revenue
- Earning margin
- Return on investment
- Return on equity
Plant and Real Estate
- Location
- Real estate holdings
- Real estate valuations and appraisals
- Tax assessor real estate valuation
- Acreage
- Cost at purchase
- Real estate fair market value
- Building age and condition
- Building depreciation methods rates and policies
- Fire insurance
- Title insurance to realty and policy
- Equipment description
- Equipment cost age condition efficiency and insurance coverage
- Equipment reserves deprecation methods age rates and policies
- Projected plant and equipment for next five years
- Capital expenditure and repairs expense for past five years
- Maintenance cost for all real estate
- Sub leasing agreements with other contractors or tenants
- Major maintenance issues in past five years
- Major plant and equipment purchases in past five years
Assets
- Ratio of cash to current liabilities
- Age and number of accounts receivable
- Provision for bad debts
- Complete inventory
- Inventory location
- Inventory of finished goods by product
- Work in progress by product
- Raw materials by product
- Pricing methods
- Accounting methods and procedures
- Analysis of notes receivable
- Analysis of investments
- Patents trademarks and copyrights
- Current ratioInventory turnover ratio
- Asset turnover ratio
Liabilities
- Current state and federal tax status and payments
- State and federal tax status and payments for past five years
- Commitments for new building equipment and inventory
- Long term loans outstanding
- Long term loan terms
- Short term loans outstanding
- Short term loan terms
- Debentures outstanding and terms
- Pensions
- Dividend and interest arrearages
- Contingent liabilities
- Warranties
- Patent infringements
- Compensation for services
- Written off losses for past five years
- Debt equity ratio
- Interest coverage ratio
- Fixed interest cover
Financial Data
- Annual statements for past five years
- Audit reports for past five years
- Tax returns for past five years
- Disposition of funds for past five years
- Reports to SEC
- Chart of accounts
- Book, net, quick, liquidating and market value for past five years
- Working capital for past five years and normal trade practices for industry
- Inventory turnover for past five years
- Interest charges for past five years
- Exchange on which stock is traded and price chart for past five years
- Price to earning ratio
- Sales to accounts receivable ratio
- Sales to inventory ratio
- Sales to fixed asset ratio
- Earnings to book value ratio
- Debt service coverage ratio
- Fixed interest coverage ratio
- Debt to equity ratio
- Operating leverage ratio
- Financial leverage ratio
Terms and Projected Financials
- Reason for sale
- Price to be paid
- Terms of payment
- Financing Brokerage fees
- Tax considerations
- Current or past company sales agreements
- Pro forma balance sheet
- Projected earnings forecast
- Projected Income statements
- Projected income statements dated for the past five years
- Projected cash flow statements
- Projected cash flow statements dated for the past five years
- Capital turnover ratio
- Receivable turnover ratio
How DealRoom can help you execute due diligence
By using our master due diligence template, alongside DealRoom’s M&A lifecycle management software, you can create a smooth diligence process.
How DealRoom can help you execute integration
By using our integration template, alongside DealRoom's M&A lifecycle management software, you can create a smooth integration process
With this solution you’ll receive:
Professional template
A built-in data room
Project management capabilities
Collaboration tools
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