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Merging with another company is a process that should begin with audited financial statements reflecting the results and financial position of the combined entity. Preparing these statements requires close communication between in-house accounting personnel and an external audit team for both companies. Connection between entities and auditors is key to a smooth transition.
Time to assemble a team
Long before the merge, you should notify your audit team of M&A plans. This includes plans that are not final and could fall through. The audit team needs time to find specialists who can help build timely accurate post-acquisition financial statements.
For example, you will need someone on your team who has experience applying business combination rules under the U.S. Generally Accepted Accounting Principles (GAAP), and tax experts familiar with the rules of reporting different types of deal structures under current tax rules. It is also important to prepare for the possibility that the company being acquired uses different accounting systems, as you will need someone who is familiar with their systems and software.
Audit team needs
No matter how prepared you have been in assembling an audit team, after a merge fieldwork is likely to take longer than usual. The auditors will need to review documents associated with the merger such as legal documents and due diligence workpapers. Auditors will also review the acquired company’s prior financial statements. They may also include minutes from meetings with the board discussing the acquisition, and from meetings for the team responsible for the integration of the new entity.
Once documents have been reviewed the audit team will also interview members of the due diligence team and accounting personnel. Streamlining this process includes designating an audit liaison to be the primary point of contact in gathering auditors requests for information and access to company personnel.
M&A’s can greatly enhance the value of a company, but gauging this enhancement requires financial statements that are timely and reliable. Our auditors are ready to aid in preparing financial statements for mergers. Contact us at 818-334-8623 or click here, and we will contact you.