Completion Accounts

1. Is every definition self-explanatory?  Is there any doubt about the meaning of words?  Do all parties use the same words to mean the same thing (eg do management accounts include a balance sheet or cash flow statement)?
2. Are there definitions elsewhere in the agreement apart from the definitions section?  Make sure all are considered.
3. Are all accounting terms clear?
4. Avoid terms like "generally accepted accounting principles" unless they are further defined.
5. Are completion accounts to be prepared in the same way as management accounts or as quasi-statutory accounts?

1. Is it clear who is to prepare completion accounts?
2. What are the completion accounts to comprise: balance sheet, profit and loss account, or both?
3. What format will the completion accounts take: management accounts, statutory accounts or some special format?
4. Will consolidated accounts be prepared, or will some form of combined accounts be required?
5. Are there any special procedures for matters such as property valuation, stock quantities, stock valuation, debtor provisions, accruals, balances with the vendor, dividends, off balance sheet items?
6. What accounting policies are to be applied?  Do they cover all material items?
7. Is the agreement clear on the difference between a policy (eg providing depreciation over the estimated useful life, providing for doubtful debts) and the application of that policy (eg plant has a lifetime of 8 years, doubtful debts are provided in full)?
8. Is consistency with prior periods required?  What if a new SSAP has come into force since the last statutory accounts but before the completion accounts?
9. Which takes precedence: consistency, prudence, purchaser's accounting policies, strict SSAPs?

1. What form of audit report is required?
2. If "true and fair" can that opinion be given without full disclosure?
3. If "accurate" how is materiality to be dealt with?
4. Remember that accountants can report or give opinions but often cannot certify.

Is the mechanism for auditing completion accounts clear?

1. Who are the auditors?
2. To whom do the auditors report?
3. Will the other party's accountants participate in the audit?  If so, as joint auditors or with the right to review the audit?
4. When do the auditors have to report?
5. Are the auditors bound to report?  Note that the contract cannot bind those who are not party to it.
6. What happens if the auditors fail to report?  If joint auditors cannot agree on the accounts, what is the basis for the resolution of the dispute (see below)?
7. Who pays the audit fees?  Who pays the review fees?

Are there any special audit procedures to be undertaken, for example on stocktake attendance or property valuation?

Are there any matters where auditors' opinion is agreed to be set aside in favour of valuation agreed between the parties?

1. Is there a mechanism for both parties' accountants to report on the completion accounts?  Should they prepare a joint report or separate reports?
2. What happens if one firm refuses to sign a report?  Is the dispute resolution procedure invoked?
3. Who can invoke the dispute resolution procedure and how?  Is your client clear of, and satisfied with, its rights?
4. Is there a timetable for reaching agreement, with failure to agree invoking the disputes procedure?
5. If an independent person is required to determine the dispute, should that person be acting as expert (less formal, procedures agreed between parties, decision almost impossible to challenge) or as arbitrator (quasi-litigation, procedures defined by law, can be appealed to courts)?
6. Should the independent person be an accountant, or are there circumstances in which another professional might be preferable?
7. Will the outcome of the expert's or arbitrator's determination be binding on all parties?

1. Are adjustments required to calculate the consideration from the accounts?
2. Are the adjustments clearly defined?
3. Who is responsible for calculating them?
4. Do the accountants have to report on them?  Consider dispute points above in relation to the consideration calculation.