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

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.
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