Who checks what · Before you buy
What should a buyer’s accountant check before a business purchase?
Published · Reviewed by The Diligence Standard Team · Updated
The work depends on the engagement. A buyer may request earnings normalization, source-record reconciliation, working-capital analysis, tax review and cash-flow testing. An accountant who only reviews tax treatment is not automatically testing the purchase case.
A realistic transaction story
Owen sent three years of tax returns to his accountant for a plumbing acquisition. The accountant explained the likely asset allocation and tax consequences. Owen later learned that nobody had reconciled the seller’s add-backs or quantified the payroll needed to replace the owner’s estimating work.
What the evidence changed
Tax advice answered an important question but did not establish dependable post-close earnings.
What to check
- Write down the exact claim and who supplied it.
- Ask what was independently tested, by whom and under what scope.
- Put earnings quality, add-backs, owner labor, working capital and cash conversion explicitly into the engagement scope.
- Translate any unresolved gap into cash, price, terms, timing or a decision not to proceed.