"As we know,
there are known knowns. These are the things we know we know. We also know
there are known unknowns. That is to say, We know
there are some things we do not know. But there are also unknown unknowns, the
ones we don't know we don't know."
D Rumsfeld, Department
of Defense Briefing, 12th February, 2002
"True genius
resides in the capacity for evaluation of uncertain, hazardous, and conflicting
information." Winston S Churchill
I have managed the year end
process and the relationship with auditors in almost all of the roles that I
have undertaken. The circumstances where I have undertaken this role have been:
The first of these requires
excellent knowledge of the financial reporting framework of the business concerned:
UK GAAP, US GAAP, the Local Authority Accounting Regulations (2003) and the
related SORP, the SORP for charities and housing associations and central
government's Financial Reporting Manual (FReM). My success in handling these
different frameworks without prior knowledge or experience of them clearly
demonstrates my flexibility in handling these situations. The case of the
Olympic Delivery Authority was an interesting case in that not only was it the
first time that I had prepared statutory accounts using the FReM, but it was
the first time that statutory accounts were prepared for this particular body.
This meant that all of the accounting policies and disclosures had to be
devised and agreed at the outset, against a background of different, very powerful,
government stakeholders. Another complication with this body was that the
management accounts were prepared on a different basis to the statutory
accounts.
The key skill that I
demonstrate with the other 3 points is the relationship between financial
performance and business strategy. And not only being able to demonstrate that
link, but being able to communicate it to an important audience, whether that
be Interconnect's working capital providers or future owners, Ultralife's
merchant banks that underwrote its public offering, SMF Displays' retail bank
or indeed the auditors appointed for the purpose in each of those case studies.
Finally, please note that
this is a financial due diligence. In my paper acquisition
of SME's, I've mentioned other due diligence processes that take place for
this specific purpose that is in addition to the financial due diligence. There
are overlaps between these due diligence processes, where there is a standalone
financial due diligence as is discussed here. For example auditors are
interested in the likelihood of technological obsolesence of products and in
commercial contracts with customers (particularly the auditors of US-quoted
software companies).