Department of Internal Audit and Compliance

Strategic Planning - Mergers and Acquisitions

Reliability of financial reporting 

A. Authorized expenditures are recorded in purchase accounting for the proper period.

  1. Does the accounting department receive copies of documents authorizing the transaction before entering purchase accounting data into the system?
  2. Does senior management review and approve purchase accounting entries and confirm that supporting documentation is sufficient?
  3. Does personnel preparing purchase accounting entries receive from the executive managing the deal a list of deal expenditures and record all expenditures properly, either as part of purchase price or period expense?
  4. Does management at an appropriate level approve late invoices (those received after the transaction closes) for inclusion in purchase accounting?

B. Tangible and intangible assets receive proper valuation.

  1. Are persons with appropriate valuation skills and credentials employed to identify and valuate intangible and net assets? For complex and significant transactions, is an independent third party employed?
  2. Are the significant assumption and the results of the valuations reviewed and approved by senior management?

C. Purchase accounting is applied properly.

  1. Does the accounting department obtain assistance from legal counsel to confirm that the transaction terms properly apply purchase accounting, and does the department obtain senior management approval?
  2. Is a critical review of the items capitalized in the purchase price performed to ensure conformity with GAAP?

D. Financial results of the universities are combined accurately.

  1. Do persons with appropriate expertise in the financial statements of the target perform a due diligence review?
  2. For immaterial acquisition transactions without the services of external auditors, does the acquiring university perform a complete review of financial statements to identify any inaccuracies or omissions?
  3. Are all adjustments approved by the appropriate level of management and is the supporting documentation adequate?
  4. Do due diligence and closing balance sheet reviews identify differences between the target and the acquiring university's accounting policies?
  5. Does senior management at the acquiring university review differences in accounting policies and approves or changes differing policies?

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Last Updated: 1/3/23