When selling a small business, how do you "verify sales and expenses"?
A friend of mine was browsing through businesses for sale and a lot of them said "seller to verify sales and expenses upon receipt of a conditional offer."
That got me thinking. Other than financial statements (which can obviously be falsified), how would they verify these things?
I don't assume an external audit would be conducted as that seems crazy expensive for a small business.
- 8 months agoFavourite answer
Unless you're buying a lemonade stand the cost of the business will be substantial enough for anyone with a brain to have a CPA conduct an audit.
If you're in the mindset that a small business should cut corners and blow off due diligence such as audited financial statements you might as well save your money because it's going to go "Poof!" so fast it will make your head spin.
- tek1intLv 48 months ago
It sounds like they would hand over their records to you (whether the books or tax returns) and permit you any discreet auditing of them.
- Elaine MLv 78 months ago
Tax returns are the first thing to ask for. And talking to the businesses' book keeper.
- notLv 78 months ago
As the buyer you would audit the records to come to the conclusion that the financial statements are a trustworty summary.
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- JudyLv 78 months ago
Tax returns would be a start
- RichardLv 58 months ago
Businesses file tax returns and a copy of the tax return would show sales income and expenses which when deducted would indicate the profit on which the business pays its taxes. Ask for a copy of the tax return.
- A HunchLv 78 months ago
taxes can't be falsified.
... well they can be fraudulent