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Financial due diligence

We acted for an Australian client that intended to acquire a Hong Kong recruitment agency that was involved in contingent recruitment and retainer-based senior executive search business. In the financial due diligence work we examined the target company’s operations, accounts, audit reports, payments of profits tax, correspondence with the Hong Kong Inland Revenue Department, and work done by and advice from its tax advisor and conducted interviews with its key executives, study of the documents provided, benchmarking in the industry, and checking of primary and secondary data from our own research. We highlighted in our report on the period of financial years covered the issues in the profit and loss accounts, the balance sheets, the extraordinary items, inter-company transactions, points to note for utilization of the tax loss brought down, contingent liabilities, the receivables and payables, and the operation issues as observed.

The buyer had earlier after their initial examination made a preliminary offer on the purchase price. Our findings helped them to understand new issues, reinforce what they had already found or known and pay attention to the areas that would impact the transaction and the terms and conditions they had to put in their offer.

The due diligence went smoothly, after two three rounds of discussion with the buyer, we completed the job.


Opinion on write-off

A Hong Kong main board listed company approached us to conduct a review report (based on agreed-upon procedures) on a project they invested in that had turned sour and had to be written off. We were competing with other companies for the commission and were accepted by the listed company and the audit firm after the selection process. The report was required to support the impairment loss with a 3rd party opinion.


The time allowed for the report was short for the deadline that the client had to meet for publication of its audit report. In fact the write-off was one of the key issues why the auditors were not comfortable with in finalizing it. We were running down the clock, finished our groundwork in 6 days and took another 2 to 3 days to complete the report.

Though the time was short, we laid out our plan well, working closely and tirelessly in the course even on a public holiday. Not much was required to be supplemented or amended after our first draft. 

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