Ashfords Audit and Assurance provides high quality and independent audit services, tailored to your organizational needs. To provide assurance that management have provided financial statements that truly reflect the organizations financial performance and position. Our team of experienced audit professionals have the skill sets to identify and address areas of risk, to enhance the creditability of financial statements. Our proven methodology enables us to work closely with clients to meet their statutory obligations, to provide comprehensive efficient audits and maintain our professional integrity.

We will form an opinion on information contained in financial statements, and add value by identifying efficiencies and improvements in controls or processes. Our independent approach allows us to directly correspond with management, to add understanding and provide insight within the changing business environment that may affect and influence financial statements.

At Ashfords, we adapt. We want to understand how your organization works, to ask pertinent questions of management, and to provide reasonable assurance that statements are true and fair. Our audit services builds trust and confidence in reports, procedures and controls. Our breadth of knowledge covers many industries, with a broad and diverse audit team, we are easily able to understand your business environmental needs.

AGREED UPON PROCEDURES

What are agreed upon procedures?

Agreed upon procedures are procedures agreed between an business entity and a third party to produce a report of factual findings about financial information or operational processes.

A significant yet under-utilised element of agreed upon procedures relates to the use of data mining techniques upon financial information as a means of ensuring internal controls and policies are being adhered to.

Data mining

Data mining is the process of discovering patterns in data. We are able to review the underlying financial system to find trends and patterns within the data that provide us with meaningful information to use within the business.

Data mining could be used as a method to identify weaknesses within the internal control environment and offer both directors and business owners certainty that the controls put in place are working as they have been designed.

Fraud detection

Data mining could also be used as a method to identify fraud, misconduct and error within the accounting and financial system being reviewed. The use of data mining techniques and tools can assist with the identification of;

  • suspicious or unusual transactions;
  • identification of unusual relationships;
  • assessing the effectiveness of internal controls;
  • identification of irregular trends over periods of time;
  • an ability to analyse large volumes of transactions over periods of time rather than relying on sampling techniques.

Fraud management is a knowledge-intensive activity. One of the techniques used for fraud management include data mining to classify, cluster, and segment the data and find associations and rules in the data that may signify interesting patterns, including those related to fraud.

The classification most used is the one where two types of fraud are distinguished: financial statement balance fraud and asset-theft fraud.

What is financial due diligence?

Financial due diligence is a business process designed to uncover potential issues, risks or weaknesses within a business prior to entering into a formal sale and purchase agreement.

The scope of each financial due diligence will be unique and depend upon the nature of the transaction and the size of the company or business operations being acquired. The areas that would typically involve a financial due diligence includes a review of; historical financial information; current financial information; forecast financial results; working capital requirements; employee entitlements provisions; valuation implications; risks and opportunities; and taxation implications.

When should a financial due diligence be conducted?

Financial due diligence should be undertaken whenever a company is considering acquiring a new business whether it be by acquiring share capital of an existing company or purchasing the business operations and assets only. It can also be conducted prior to making the decision to sell.

The benefits of financial due diligence are not limited to merger and acquisition decisions. They can also be useful in assessing the merits of disposing of certain existing business divisions within an organisation. A financial due diligence is also an essential component of assessing investment requirements for venture capital arrangements.

Who can I instruct?

A financial due diligence can be conducted either internally, by the acquirers’ own accounting and finance team, or by external independent due diligence experts. The benefit of using external advisers is that the review is based on an independent viewpoint from a party who has no direct interest in the outcome of the proposed transaction.

Further, by outsourcing the financial due diligence, internal resource time can be dedicated to consideration of operation due diligence procedures such as the logistics of merging the policies and procedures of both the acquirer and target in an efficient and effective manner.

When should I engage?

The financial due diligence process should start as soon as practical when negotiating the acquisition of a company or business. Ideally, as soon as a heads of agreement has been drafted setting out the structure for the deal, financial due diligence should begin. Sufficient time should be allocated to the process as the outcome may provide valuable information to ensure a fair purchase price is agreed upon.

While a heads of agreement sets out the key elements of the sale and purchase agreement, these elements are generally subject to the acquirer conducting a formal review of the business. Generally it is not until the completion of the due diligence process that the acquirer is prepared to make a final offer or enter into a legally binding sale and purchase Agreement.

Typically Due Diligence would comprise a review of both legal and accounting matters including;

  • Accuracy of information provided;
  • Group legal structure;
  • Historical trading results;
  • Forecast and projected trading results;
  • Working capital;
  • Customers and suppliers;
  • Management and organisation;
  • Sector and markets;
  • Tax risks;
  • Real property;
  • Intellectual property;
  • Compliance with law & absence of litigation;
  • Insurance &claims.

Upon finalisation of the due diligence the final price and terms to be included in the Sale and Purchase Agreement are negotiated.

Failure to understand what a Purchaser will review as part of their Due Diligence can not only have a damaging impact on the value a Purchaser may be prepared to pay but also cause significant disruption to your business as key terms or clauses are renegotiated in the Heads of Agreement late in the sale process. A Purchaser could simply walk away from the transaction if their Due Diligence highlights significant errors in the information provided or matters not previously disclosed.

Prior to undertaking a financial due diligence or business sale process, a Vendor review or Due Diligence of your business will assist in maximising the price you are paid for your business as well as ensuring the exit is clean. This process will assist in determining whether your business is ready for sale as well as identifying key areas of focus to work on prior to a sale and areas of vulnerability which can impact value. Identifying these key areas or vulnerabilities at this early stage will allow solutions to be developed and implemented prior to the sale.

If you would like to understand more about the Due Diligence process, the management of a Purchaser Due Diligence review or how Vendor Due Diligence prior to entering into a sale process could assist your business contact your usual Ashfords advisor or leave a comment on this article below

If you run a Self-Managed Superfund (SMSF) you must appoint an auditor and ensure that your SMSF is audited annually by an ASIC approved auditor.  Ashford’s has a dedicated team of independent SMSF auditors who perform SMSF audits in accordance with Australian Auditing Standards and the Superannuation Industry Supervision Act 1993.  Our internally developed process ensures that audits are completed in an efficient and effective manner.

In addition to Statutory audit requirements we provide the following audit and assurance services.

  • Report on internal controls
  • Grant acquittal’s
  • Agreed-upon procedures engagements
  • Outgoing audits under the Retail Shop Leases Act
  • Australian Financial Service Licences (AFSL Licence)
  • Trust audits for solicitors, real estate and commercial agents