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Investment Audit

Note: This checklist is a partial example intended for use in gathering supplementary information about the condition of the target company. This would be used after the business decision has been made to seriously explore the investment into a target company, as an aid in making the final decision and in preparing legal documentation. A more general "investment business investigation checklist"- covering products, markets, strengths, weaknesses and future potential-should be used in making the initial decision to seriously explore an investment. This checklist also is not a legal checklist - it does not cover the many legal considerations involved in structuring and completing an investment. The checklist can be shortened considerably and should be adapted to the facts of the particular investment in any event. The checklist should also be adapted to the warranties in the investment agreement.

Please provide the information checked below.

General

  • Company name

  • Address

  • Telephone number, fax, e-mail and web site of principal office

  • People interviewed

  • General description of business (product lines and services rendered)

  • Name, address and telephone number of attorneys

  • Name, address and telephone number of accountants

Corporate Information

  • Corporate Status:

  • State of Incorporation:

  • Date of Incorporation:

  • Articles of Incorporation and Amendments

  • Bylaws

  • Registered address

  • Term of existence

  • States in which qualified

  • Date of Qualification

  • Subsidiaries

  • Other related business entities

  • Dividends declared and unpaid Dividend history

  • Directors & Officers

  • Number of directors authorized, Incumbent directors

Management and Personnel

  • Number and location of Salaried and Hourly

  • Organizational chart with duties

  • List of top management with resumes

  • Length of time with the company

  • Vacation and holiday policy

  • Group health & accident plan

  • Profit Sharing, bonus or incentive compensation plans

  • Personnel policies

  • Salaries of all salaried employees

  • Remuneration of directors and highest paid officers (including estimated annual benefits upon retirement)

Financial

  • Financial Statement

  • Cash Flow Statement

  • Balance Sheet

  • Fiscal year end

  • Cash or accrual accounting

  • Taxes

  • Other reports

  • Certification of financial reports

  • Most recent period audited by IRS

  • Institutional loans and lines of credit

  • Institution

  • Date of loan or line of credit

  • Amount authorized

  • Unpaid principal balance

  • Interest rate

  • Restrictions and or obligations related to operations

  • Asset list

  • Depreciation

  • Accounting method used to recognize sales (percentage of completion, completed contract, etc.)

  • Inventory valuation

  • Receivables analysis

  • Sales backlog

  • Forecasts and budgets

  • Financial performance ratios - CPA review

  • Any SEC reports

Purchasing

  • Purchase contracts (involving $5,000 or more or one year or more)

  • Vendors accounting for 5% or more of the company's purchases

  • Company's total purchases in last fiscal year

Marketing/Sales

  • Description of marketing method employed (direct sales, agents, distributors, etc.)

  • Sales contracts (involving $5,000 or more, or one year or more)

  • Significant customer list

  • Products or services

  • Sales literature

  • Price list

  • Advertising copy

Legal

  • Pending litigation (including workmen's comp claims)

  • Insurance coverage

  • Potential Claims and Other Contingent Liabilities

  • Actual or Threatened Litigation During the Past Five Years

  • Regulatory Investigations Pending

  • Activities prohibited or required

Intellectual Property

  • Patents, Trademarks, Copyrights & Licenses

  • Patents owned

  • Patent applications pending

  • Trademarks, tradenames and copyrights

  • Adverse conditions affecting markets, products, facilities, supplies or personnel requirements

This is a VERY abbreviated list, and is meant to provide you with an overview of the amount of work involved when performing due diligence. For a complete due diligence review, please contact us.


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