Trading performance, quality of earnings, working capital and net-debt definition. Owns the price.

• II.1

  Obtain audited statutory accounts for the last three financial years.

  Severity A
• II.2

  Obtain management accounts to the most recent month-end (P&L, balance sheet, cash flow).

  Severity A
• II.3

  Tie management accounts back to audited results; explain any variance > 2%.

  Severity A
• II.4

  Obtain trial balance and chart of accounts; map to FDD reporting structure.

  Severity B
• II.5

  Test revenue recognition policy against FRS 102 or IFRS 15 as applicable.[FRC]

  Severity A
• II.6

  Identify and quantify all QoE adjustments (non-recurring, owner remuneration, normalisations).

  Severity A
• II.7

  Build a working-capital normalisation: 12-24 month average, seasonality, day-count.

  Severity A
• II.8

  Define net debt: cash, debt, debt-like items, IFRS 16 lease liabilities, deferred consideration.

  Severity A
• II.9

  Obtain monthly KPI pack (volume, ASP, margin) for the last 24 months.

  Severity B
• II.10

  Test gross-margin walk by product/service line; identify mix-shift effects.

  Severity B
• II.11

  Reconcile bank statements to ledger cash for each period-end.

  Severity B
• II.12

  Obtain debtor and creditor ageing; test for overdue balances and concentration.

  Severity B
• II.13

  Identify any factored or invoice-financed receivables and recourse position.

  Severity B
• II.14

  Confirm bad-debt provisioning policy and movement over the period.

  Severity C
• II.15

  Obtain stock listings; test NRV and slow-moving / obsolete provisioning.

  Severity B
• II.16

  Review capex history and forecast; distinguish maintenance vs growth.

  Severity B
• II.17

  Confirm depreciation policy, useful-economic-life assumptions and asset register integrity.

  Severity C
• II.18

  Obtain board pack and management commentary for the last 12 months.

  Severity C
• II.19

  Obtain forecast model (P&L, balance sheet, cash flow) for the next 24 months.

  Severity B
• II.20

  Sensitivity-test the forecast on revenue, gross margin, capex and working capital.

  Severity B
• II.21

  Identify any post-period-end trading variance vs forecast.

  Severity A
• II.22

  Confirm cut-off testing: revenue, costs and stock at each period-end.

  Severity B
• II.23

  Identify any change in accounting policy, estimate or judgement during the period.

  Severity B
• II.24

  Obtain auditor's management letter and partner-review file for each year.

  Severity B
• II.25

  Confirm any covenant compliance reporting to lenders and headroom on each test date.

  Severity A