Transaction Services

Transaction service is a type of corporate finance activity.  Transaction service refers to a third party service provided by a professional services firm (e.g. Big 4 etc.) when a business transaction takes place.  An example of a business transaction would be a merger or acquisition of a company.  When working on a merger (the joining of two companies) or an acquisition (one company purchasing another), the transaction services team will perform an investigation into the value and viability of the company in question.  Their services also extend to financial modelling, market research and risk analysis.  A key aspect of transaction services is the offer of financial due diligence service to help clients assess, manage and plan business transactions such as mergers or acquisition.  The financial due diligence process ensures that all information and financial records provided by both sides of the transaction are true and accurate.  This often involves close financial analysis and various audits, the findings of which will be reported back to the client.  The most common task that a transaction service provider will focus on is completing due diligence reports (ensuring the viability and legality of the transaction on behalf of the client).

 

Requirements

  

There are three Corporate Finance related pronouncements issued by the Accounting Professional and Ethical Standards Board (APESB):

  

• APES 345 specifies the mandatory professional and ethical obligations of a member in public practice who undertakes an engagement to prepare a report on or in connection with prospective financial information included in a public document.  It outlines the requirements for members in public practice in respect of documentation, reporting, communication with those charged with governance and professional fees.

• APES 350 sets out mandatory professional requirements and guidance for members in public practice who provide professional services to a client by participating in and/or reporting to a Due Diligence Committee (DDC) as a DDC member, DDC observer or reporting person.

• APES GN 31 provides guidance for members in public practice when performing Low Doc Offering Engagements. The guidance considers the fundamental responsibilities of the members in public practice as well as the roles and responsibilities relating to the Low Doc Offering Engagement. The guidance also considers engagement circumstances that may enable or preclude the issue of a Low Doc Offering Sign-off and reporting and documentation considerations.

Key Areas

 

1. According to Section 5 of APES 345, when providing a reporting service engagement, members in public practice must consider interests or relationships, such as financial interests, close business relationship with the client etc., that may create threats to the fundamental principles of the Code.  

2. Members in public practice shall prepare working papers in accordance with this APES 345 that appropriately document the work performed, including aspects of the engagement that have been provided in writing.  For example, the documentation prepared by the members in public practice shall provide a sufficient and appropriate record of the procedures performed for the reporting service engagement (APES 345.7.1).

3. Members in public practice who become aware of instances of non-compliance or suspected non-compliance with laws and regulations when providing a reporting service engagement shall comply with APES 110 section 260 Responding to Non-Compliance with Laws and Regulations.

4. The scope of the role and responsibilities of a member in public practice as a Due Diligence Committee (DDC) observer should be specified in the Engagement Document.  The role should also be described in the Due Diligence Planning Memorandum and should be consistent with that specified in the Engagement Document.