Do you intend to sell or acquire a company? Do you want to evaluate its business? This calls for a previous accounting or tax Due Diligence, to prevent you from being misled.

Our work is focused on the contents of the financial statements, but not as profoundly as to produce a Legal Accounts Certification Report. In this scope the we analyse the grounding criteria, having in mind the applicable accounting principles, which includes analysis of the classification, presentation, integrity (omission), validity of registrations and  periodicity of the facts, but the level of sampling and the depth of the tests is smaller than that of a complete financial audit.

After we analyse the business, its main performers and understand the functioning circuits, we will make substantive tests of Due Diligence. These tests can be limited to certain accounts of the financial statements.
For each particular case, we will previously agree on the course of action.

I - The main procedure for the accounting Due Diligence by area is as follows:

a - Fixed and Intangible Assets

We will analyse the ownership, policy of depreciation and the existence of mortgages, or any other impending obligations.

b - Inventories

We will tally the items by physical count (for sampling) – if applicable to the entity - and we will analyse its valuation, rotation and the necessity of provisions for depreciation.

c - Trade Accounts Receivable

We will test by sampling the validity and the possibility of collecting the values due by clients and we will give out an opinion on whether or not is necessary a provision for bad debtors.

d - Cash and Banks

We will confirm the balances, the existence of loans and its plan of reimbursement, guarantee given and eventual assumed responsibilities that do not appear in the balance sheet.

e - Equity

We will analyse the ownership and registration of the shares, the legal act that supports the transactions occurred in the past two years and the correct application of the legislation in what concerns legal reserves.

f - Current Liabilities

We will test by sampling the reliability of current liabilities and fixed and intangible assets, as well as of accrued expenses.

g - Human resources

We will analyse the salary processing and the integrity of the tax statements.

h - State and Public Entities

We will verify the eventual existence of fiscal debts and its plan of regularization.

i - Statement of Income

Analysis of the main contents of assets and liabilities, taking in account its validity and materiality.

II – The main procedures for the tax auditing will go beyond the traditional means of analysis of tax statements. Our approach encloses the most modern procedures world-wide and, at the same time, analyses the integrity of measures and its relation with the systems of internal control and manner of accounting.

Among the main aspects of our analysis, we can underline the following:

  • * Investigation of situations that must be object of taxation and that may be in a potential contingency situation in terms of VAT, IRC, IRS, Social Security, IS, IMI, Special Taxes (tobacco, oil products, alcohol) and that the company is not processing or considering as taxable;
  • * Investigation of errors that may occur in the transposition of the processing to the statements;
  • * Stage of existing tax planning, in what concerns the level of exploitation of all possible benefits, for each applicable tax;
  • * Adding value to the audited company by recommending procedures to minimize the strategic tax related risks;
  • * Adjustment of the structure to the tax plan that, at that point in time, mostly benefits the company;
  • * Internationalization and Trading Prices (from the constitution of the file for future purposes, to the full audit of what is happening in that particular area).

If you do need assistance in any of these issues, please contact us. We Share Our Knowledge.