Asked on 14 November
Our company recently sold portions of a regional business, with the purchase price pegged to a target working capital. We have the ability to audit the actual working capital balance as of the close date and any findings ultimately will be dollar for dollar adjustments to the purchase price.
I am familiar with audit procedures to test liabilities for understatement (search for unrecorded liabilities,etc.); however, does anyone have examples of procedures to test liabilities (current liabilities in my case) for overstatement? The reason being if working capital is understated, the buyer pays less money.
Topic: Audit Methodology, Liabilities for Overstatement
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Nitesh Kumar Research Analyst
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