The due diligence process from the underwriter's - Fried Frank

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verification notes. The proper balance should be discussed early in a transaction and will depend on the circumstances. i. Corporate Governance/Sarbanes-Oxley Due Diligence • In light of the passage of the Sarbanes-Oxley Act and the SEC rules promulgated thereunder, underwriters may also consider engaging in a due diligence review of the corporate governance policies of the company. • Underwriters could focus on, among other things, the following topics in discussions with the company: • filing of CEO/CFO certifications under Section 302 and Section 906 of the Sarbanes-Oxley Act, • the company’s disclosure controls and procedures and internal controls, • the company’s code of ethics and any exemptions to the code, • the company’s whistleblowing procedures, • any loans from the company to management, • the composition of the audit committee and whether there is a “financial expert” on the audit committee, • the composition of a nominating committee, if applicable, • the company’s internal audit function, • the company’s document retention policy, • any non-audit services provided by the company’s independent auditors, • any restatements of the company’s financial statements, • any unresolved comments from the SEC in connection with any filing, • any off-balance sheet transactions, and • any non-GAAP financial information in its 1934 Act reports or press releases. 18 106
j. Audit Committee Due Diligence • Underwriters may also consider having a discussion with the chairman or a member of the audit committee. This is not currently a standard practice in the due diligence process, but on occasion could be helpful as part of an overall diligence review. Any such discussion could include the following topics: • the structure of the audit committee, • the audit committee’s meeting process, review of financial data and line of communication with the company, • any significant issues encountered by the audit committee, • the audit committee’s review process for periodic reports and monthly statements, • the audit committee’s review of internal controls, • the audit committee’s review of any off-balance sheet liabilities and contingencies, • the mechanism used by the audit committee to select the auditors, • any process for meeting with auditors without management, • the company’s critical accounting policies; • any related party transactions, • the impact of any new accounting or SEC pronouncements on the company’s financials, • any goodwill amortization, • the level of communication between management and the audit team, • any significant accounting issues that have arisen in connection with the most recent periodic reports, • any material issues discussed at the most recent meetings, • the audit committee’s review of taxes and tax reserves and • any significant disagreements between the audit committee and the auditors or between the audit committee and management. 19 107
Page 1: 3 THE DUE DILIGENCE PROCESS FROM TH
Page 5 and 6: 1. WHY DO UNDERWRITERS CONDUCT DUE
Page 7 and 8: or other written or oral statement
Page 9 and 10: numbers which become available for
Page 11 and 12: • interviews with senior manageme
Page 13 and 14: • revenue recognition • goodwil
Page 15 and 16: • Correspondence with the SEC or
Page 17: • In U.K. public equity offerings
Page 21 and 22: • During the due diligence proces
Page 23 and 24: • Even though the financial state
Page 25 and 26: • “It argues in particular with

The due diligence process from the underwriter's - Fried Frank

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