By: Milton Gene Friedman CPA, MS-Taxation, CFE, CFF, CIRA is the President of Friedman Associates
Due Diligence generally consists of representing prospective buyers of privately owned businesses and Professional practices. Clearly, most sellers have every incentive possible to exaggerate the successes of the business that they are trying to sell. Thus, the approach we take is to assume that the books of the business have been “cooked” until such time that we can establish that the information provided is reasonably accurate. We will examine the books, income tax returns, and whatever else we deem appropriate, so we can advise our clients, the buyer, as to what is really happening with the business and what realistic expectation the buyer can have if the buyer does purchase the business. In particular, we prepare a cash flow forecast based upon our expectations as to how our client is going to operate the business, to determine whether or not there is going to be sufficient funds to pay reasonable compensation to our client and to provide a reasonable return on the buyer’s investment. Thus, while not an opinion on the proposed purchase price, if at the stated price and the anticipated expenses, the cash flow is not sufficient; then clearly the contracted price needs to be adjusted, or the buyer’s expectations for the return on his investment must be lowered.
Forensic Accounting: today is found in just about every aspect of life. Most people associate this area of practice with divorce cases. But, in fact, forensic accountants are used in many other types of litigation. In addition to divorce cases, our engagements consist of: Business damage/lost profits litigation; Fraud and theft issues; Loss of an individual’s income due to an accident of one type or another (PI cases); Business insurance claims; and many other similar needs. We have been doing this work for over 40 years. We are totally knowledgeable of the applicable Federal and State Rules of Practice. All the attorneys whom we have been involved with speak highly of our contribution. Our approach is that once again, there is going to be the other side and they are going to have their experts who are promoting their clients’ position. As in our due-diligence examinations, we do not accept any documents or representations as being correct until we can reasonably establish their veracity. In simple English, we assume the other side is lying until we can establish that they aren’t.
Specialized Tax Representation; We represent many domestic and foreign taxpayers, providing tax planning and tax resolution services. Today many of our clients are Non-Resident Aliens who are investing here in the United States. There are many income tax ramifications, so proper tax planning for these people is imperative. Another service we provide is for our clients who have open issues with the IRS. Some owe the IRS and can’t afford to pay. Others have been audited by the IRS and received a very unfair result that now needs to be “cleaned up”. Lastly, we do sophisticated income tax, and Estate & Gift tax planning for both US Citizen and NonResident Aliens. who are investing here in the United States. There are many income tax ramifications, so proper tax planning for these people is imperative. Another service we provide is for our clients who have open issues with the IRS. Some owe the IRS and can’t afford to pay. Others have been audited by the IRS and received a very unfair result that now needs to be “cleaned up”. Lastly, we do sophisticated income tax, and Estate & Gift tax planning for both US Citizen and NonResident Aliens.
Valuation/Appraisal: There are many situations where a determination of value can be necessary. All of the valuation/appraisal engagements that we undertake are performed consistent with the standards of the professional organizations that we belong to or adhere to; the principle one being Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Foundation. In 1989, the U.S. Congress enacted the Institutions Financial Reform, Recovery, and Enforcement Act (FIRREA), which authorized the Foundation as the source of appraisal standards and qualifications.