Anonymous
Anonymous asked in Business & FinanceSmall Business · 1 month ago

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.

7 Answers

Relevance
  • 1 month ago
    Favorite 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.

    • Login to reply the answers
  • 1 month 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.

    • Login to reply the answers
  • 1 month ago

    Tax returns are the first thing to ask for. And talking to the businesses' book keeper.

    • Login to reply the answers
  • not
    Lv 7
    1 month ago

    As the buyer you would audit the records to come to the conclusion that the financial statements are a trustworty summary. 

    • Login to reply the answers
  • How do you think about the answers? You can sign in to vote the answer.
  • Judy
    Lv 7
    1 month ago

    Tax returns would be a start

    • Login to reply the answers
  • 1 month 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.

    • Login to reply the answers
  • 1 month ago

    taxes can't be falsified.

    ... well they can be fraudulent

    • Login to reply the answers
Still have questions? Get your answers by asking now.