Department
Corporate Checklist
The full set of questions to ask when reviewing the accounts of a corporate client — from solvency and reserves through to related-party transactions.
Nature of the Business
What does it do? Is it providing goods or services?
What are the key assets?
Fixed (tangible, intangible and financial) and Current (assets that can be turned into money within a year).
Ownership structure
Who is the ultimate controlling party?
What should I expect to find?
Think about what you expect to find in a business. Buildings? Employees? Sales? Goodwill? Debts? Profits?
Debts
What are the debts? How much are they? When are they due?
Solvency
Is the company solvent? Are assets greater than liabilities?
Profitability
Is the company profitable? How has it changed from last year? Accumulatively profitable? Accumulated realised gains (i.e. for distributable reserves)?
Red Flags
Any questionable changes to the accounting policies, write backs, aggressive revenue growth (with a dramatic increase in bad debt provisions), auditors resigning (and particularly with immediate effect).
Post Balance Sheet Events
What happened that brings such a question about how one looks back on these accounts? Also, why didn't the company see it coming?
Inventory
How realisable is it? Is any obsolete or slow-moving?
Going concern assumption
Examine the basis of the going concern. What is the evidence of this and how reliable is it? Are there inter-company loans etc?
Accounts Payable
Are the bills being paid? Why or why not?
Cash
How much cash does the company have? How has it changed and what does the cash flow statement suggest to back that up?
Credit Review of Customers
Who reviews the credit risk of customers?
Pensions
Are pensions commensurate for the employee number and change?
Loans
How is the company financed? Are the covenants involved? Have the directors given personal guarantees? Are there loans between different parts of the business?
Director Loans and Inter-Company Transactions
What directors loans are outstanding? Are there related party transactions? Did they take the inter-company exemption?
Share capital redemption / corporate activities
Has capital been returned to shareholders? Has the company merged with another? Has the company bought another? Are they up for sale?
Property
Does it own property? Are there freehold and/or leasehold agreements?
Reliance
Is the company reliant on a parent? On a particular customer, transaction or group?
Distribution of reserves – positive/negative
What are the key legal considerations governing the distribution of reserves by a company, and how do the rules differ when dealing with positive versus negative reserves?
Restructuring — recent transactions
Any significant recent restructuring transactions, highlighting key deals, trends, and legal or financial issues involved?
Cash levels
What are the current cash levels, and how do they impact liquidity and financial flexibility?
Creditors / Debtors
How do the levels of creditors and debtors compare, and what does this indicate about cashflow management and working-capital efficiency?
Recently paid dividends
Have any dividends been paid recently, and from which reserves were these distributions made?
Number of employees
How does the current headcount reflect the organisation's operational scale and growth strategy?
Related party transactions
How do recent related party transactions impact the company's financial position and governance risk?
Pension — DC or DB scheme
Is the company running a defined contribution or defined benefit scheme, and what are the implications?
Goodwill
What is the intangible asset that arises when one company acquires another and pays more than the fair value of its net identifiable assets?