this is your starting point.
by ed mendlowitz
202 questions and answers: managing an accounting practice
question: what do you ask for when considering a merger?
more: i’m just starting out; why join an association? | don’t blame the client for your location | who to hire when it’s time to grow | the top tip for reviewing tax returns | you can’t win with lowballing | yes, you have to share work papers | should you merge? here’s how to chart your path | hold staff accountable if you want them to listen to you | higher fees to start: ten ways to make your tax season better
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response: this is a “you show me yours and i’ll show you mine.” you should have this information fairly well organized.
also, look at it critically and try to imagine what a prospective partner would say, and how you would react if this were someone else’s information that were being presented to you.
here’s a 23-item list:
1. current partnership agreement
2. copies of cpa licenses of partners
3. a sample gaap financial statement
4. a sample ocboa financial statement
5. copy of peer review report, any letter of comments and response
6. copy of malpractice insurance policy
7. details of any lawsuits during the last five years – either as a plaintiff or defendant
8. list of 10 largest clients for each of the last two years and the fees billed and collected from them; it is not necessary to show client names
9. percent of practice relating to specific industries if more than 25 percent of practice is from a single industry
10. if time records are maintained, number of chargeable hours last year for each partner
11. if time records are not maintained, explain why, and tell how time of partners and staff is controlled
12. who signs the financial statements
13. who signs the tax returns
14. the percentage of corporate extensions filed to total corporate returns prepared
15. ditto for individual returns.
16. an inventory listing of special or extra work that hasn’t been started yet, or isn’t at least 25 percent complete
17. dates the five largest financial statements were delivered to clients with fiscal year end of client
18. turnaround time of financial statements from the review department
19. ditto for tax returns from tax department reviewers
20. whether any appreciable number (more than 10%) of the tax returns and financial statements bypass the review department
21. a copy of your staff handbook, or policies regarding overtime and sick pay, and the 401(k) plan
22. a copy or summary of medical insurance plan and what it costs the firm
23. request to look at a representative sample of work papers used for financial statements they reported on
the above is a listing of things to see. this doesn’t replace negotiations, visiting the office, “kicking the tires,” getting a feel for the prospective partners and sound judgment.