This section deals with the entity’s financial operations. Analysis of recent financial results are discussed in
Sections 21 through 29. Discussion of financial projections are included in Sections 30 through 32.
As noted previously, the arrangement of the subject matter in this document may not precisely fit the entity’s
organization chart. For example:
The purchasing function is discussed in Section 12.
The information systems function is discussed in Section 15.
Consequently, please refer to the indicated sections if these latter activities are an integral part of the
Organization, Resumes And Compensation Levels - Forms 16-01 Through 16-03
Accounting Policies And Procedures - Form 16-04
Although infrequent, there are times when the nature of an entity’s business is such that deviations from gen-
erally accepted accounting practices (i.e.: GAAP) are appropriate.
WHAT TO LOOK FOR
Are the deviations from generally accepted accounting practices (i.e., GAAP) consistent with
the entity’s industry, or do the entity’s deviations vary from industry practice?
Has the entity made any significant changes to its accounting policies or practices in the last
WHAT TO LOOK FOR
Is there a good mix of senior financial executives, experienced middle managers and relatively
Do the resumes indicate a high degree of experience and professionalism?
Is the entity sufficiently large to support divisional financial executives (e.g., division con-
trollers)? If so, to whom do they report on a “solid line” basis and to whom on a “dashed
Are the compensation levels competitive considering the size and scope of the individual
In a potential acquisition situation - what problems are anticipated in merging the two
DUE DILIGENCE HANDBOOK 16-01