Financial Due Diligence For Business
- Prevent Theft / Detect Fraud
Due Diligence for business includes using data analytics and financial ratios to detect fraud. While everything is not fraud, business owners need to be aware of the red flags and warning signs of suspicious or fraudulent activity. In addition, Ipsen Management Services utilizes mathematical models to examine your accounting records and financial statements in order to confirm your suspicions or provide a piece of mind that all is fine.
I. - Site Inspection is usually a one day affair looking into existing weaknesses and is often viewed as a method of prevention. The following areas will be examined:
- Purchasing and Billing / Expense and Vendor Controls
- Payroll inspection looking for accuracy of reporting / Ghost Employees
- Bank Deposits and Reconciliation
- Cash register controls
- Physical / Computer Controls
- Travel Expense Reporting
Estimated time: 6 - 8 hrs
II. - Fraud Examination is used to pinpoint the origination of the fraud or when a terminated employee(s) is suspected. It is recommended that you contact your attorney prior to the start of the examination should you believe the incident will progress into a civil or criminal complaint.
Estimated time: 2 - 3+ days
III. - Fraud Risk Assessment is a prevention measure that is recommended when examining all areas or departments within your organization that are susceptible to fraud.
Estimated time: 4 - 6 hrs
IV. - Creating the Internal Controls (Policies & Procedures) necessary to reduce the opportunity for fraud, theft and embezzlement from occurring.
Estimated time: 2 - 3 days
* Financial Due Diligence for Commercial Real Estate Development
Discover Missed Revenue Opportunities
Unlike traditional "property due diligence," IMS conducts its due diligence on existing or redevelopment projects from a financial perspective. Our goal is two-fold:
- We look for opportunities that can potentially make more money for your project and two,
- Identify problems of fraud or areas in need of attention.
Examples of such may include seller misrepresentation and fraudulent billing by vendors.
IMS surveys the project and meets with both developers and borrowers looking for missed opportunities that could possibly lead to additional sources of revenue and the reduction of unwarranted expenses.
Our Due Diligence includes:
- Meeting with borrowers and developers
- Surveying the project for additional sources of revenue
- Examination and comparison of financial forecasts for their relevance and reliability
- Reviewing the underwriting and financial Analysis
- Reviewing the Property Appraisal, Estoppels, SNDAs and Closing Statements
- Reviewing the Property's Books and Records "Before Sale or investment."
* Financial Due Diligence for Lenders
Reviewing Previous Audits
- Ipsen Management Services starts by reviewing the borrower's previous audits looking for opinions and the number of times an auditing firm has been replaced in the past 5 years. In addition, IMS checks to see if the borrower has followed the recommendations of auditors?
Analysis of Internal Controls and Financial Ratios
-IMS will perform an analysis of internal controls and financial ratios looking for red flags indicating the concealment of liabilities, fraudulent activity, fictitious sales or receivables, embezzlement or a sudden increase in debt to equity.
Examination of Financial Statements
-IMS employing Data Analytics examines Profit & Loss Statements looking for significant changes.
-Further due diligence calls for the examination of other financial and tax transactions that may signal unpaid obligations or pending litigation.
-IMS will review and compare Balance Sheets against mathematical models looking for possible earnings manipulations as well as determining the overall financial health of the borrowing entity.
-IMS examines the borrower’s income projections to determine the feasibility and correctness of the risk associated with the investment.
In addition, IMS asks "Who is the Seller?"
-IMS examines the seller to determine if the "seller" owns the property or has the legal authority to convey the property, etc.
-IMS answers questions as to; who has the authority to bind the seller and is the payoff sufficient to cover all liens?
* Fraud Risk Assessment, Policy Manuals and Internal Controls for your Startup or Nonprofit
Ipsen Management Services Offers Consultation
Let us help you with the creation of financial policies, procedures and internal controls, all of which are tailored to your needs.
Strong fiscal policies and procedures will:
- Protect the assets of the organization;
- Ensure the maintenance of accurate records of the organization’s financial activities;
- Provide a framework for the organization’s financial decision making;
- Establish operating standards and behavioral expectations;
- Serve as a training resource for staff; and
- Ensure compliance with federal, state, and local legal and reporting requirements.
Following an Audit (Corrective Action Plans)
Ipsen Management Services can help with the correction of deficiencies noted in the auditor's report.
Business and Nonprofits both have fiduciary responsibilities and the need for:
- The establishment of internal controls as they relate to accounting and operational needs
- The improvement of internal controls that have since become outdated.
Board members have a fiduciary responsibility towards the organization
and remain accountable for protecting the organization’s financial well being.
With respect to internal controls and financial policies and procedures, Ipsen Management Services can assist the finance committee by taking the lead in:
1.) Creating needed financial policies and procedures,
2.) Ensuring that they are appropriately documented in the policy manual,
3.) Confirming that internal controls are being followed
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