Post-Merger Audit Checklist

Pull the target's trial balance as of the close date and lock the period in their GL (QBO, Xero, Intacct, NetSuite). Any post-close entries from the seller should hit a separate cleanup period — never the locked close-date TB.

Record the PPA workpaper assigning consideration to identifiable assets, intangibles (customer lists, tradename, non-compete, developed tech), and goodwill. Engage a third-party valuation firm if intangibles or contingent consideration are material — auditors will challenge in-house valuations.

If the target reported under tax-basis or cash-basis and the parent reports under US GAAP, conversion entries are needed before consolidation. Document revenue recognition (ASC 606), lease (ASC 842), and inventory method differences.

Common gotcha: target was on cash-basis and never recorded A/R or A/P — these become large opening adjustments.

If there were any pre-close transactions between parent and target (loans, services, IP licensing), tie out both sides and document elimination entries. Mismatches discovered later force restatement of the first combined close.

Run the target's A/R aging at close and tie to GL. Investigate any 90+ day balances — these typically need an allowance for doubtful accounts adjustment. Confirm balances >$25K with top customers via positive confirmation.

Search for unrecorded liabilities: review post-close cash disbursements for invoices dated pre-close that weren't accrued. Common at acquired companies running cash-basis bookkeeping.

Tie the target's fixed-asset register to GL, walk additions/disposals year-to-date, and compute step-up depreciation under ASC 805 fair-value basis. Form 4562 will need updated entries for the short tax year.

Every AJE needs a memo, supporting workpaper reference, and reviewer initials. Plug-to-RE entries without explanation are the #1 audit finding in first-year combined statements.

Triggered when the prior step flags differences. Document root cause for each variance >$10K (or your performance materiality threshold), the proposed correcting entry, and whether the difference is a measurement issue or a control failure that needs remediation.

Walkthroughs for revenue, procure-to-pay, payroll, and financial close. Document the actual process (not the policy) — owner-operator targets often have one person doing AP entry, check signing, and bank rec, which is a segregation-of-duties finding on day one.

Identify gaps where the target has no control covering a key risk the parent's matrix addresses (or vice versa). Tag each gap as remediate-now, remediate-next-quarter, or accept.

SEC issuers get a one-year integration grace period before the acquired entity must be in-scope for ICFR assessment. Confirm with external auditor and document the scoping memo. Coordinate with PCAOB-registered audit team.

Reassign system roles in QBO/NetSuite/Intacct so no one person can initiate, approve, and record a transaction. Implement compensating monthly review controls where headcount won't allow full segregation.

Confirm the target's final pre-close 1120/1120-S/1065, final 941, and short-period state returns are in process. Stock deals require a short tax year ending on close date for S-corps and partnerships; missing this triggers IRS notices.

Combined entity may now exceed economic-nexus thresholds (typically $100K or 200 transactions post-Wayfair) in states where neither party did individually. Pull a 50-state revenue summary and register where required before back-tax penalties accrue.

If the target had NOL carryforwards, the ownership change triggers Section 382 limitation on annual usage. Compute the limit (long-term tax-exempt rate × equity value at change date) and document for tax provision.

Migrate target's sales-tax filings to combined Avalara/TaxJar account. Audit vendor master for 1099-NEC eligibility — every vendor paid >$600 for services who isn't a corporation. Collect missing W-9s before year-end.

Three options: migrate target into parent's GL (NetSuite/Intacct), keep separate and consolidate via Fathom or spreadsheet, or stand up a new platform. Document the decision, cost, and timeline before committing.

Triggered when migration to parent ERP is chosen. Build a COA crosswalk mapping each target account to the parent's account, class, location, or dimension. Avoid creating new GL accounts for what should be class/location splits — bloated COAs are the #1 reason close cycles balloon.

Update the Written Information Security Plan (IRS Pub 4557, FTC Safeguards Rule) to cover acquired employee SSNs, customer PII, and any new state-specific obligations (MA 201 CMR 17, NY SHIELD, CA CCPA). Schedule employee training within 60 days.

Update signers on all target bank accounts, refresh Plaid/direct bank-feed connections, and confirm positive pay is enabled on disbursement accounts. Old signers retaining wire authority is a common control failure post-close.

Review top 25 customer contracts, all leases, key vendor agreements, and debt covenants for change-of-control, assignment, and consent provisions. Flag anything that requires landlord or counterparty consent before integration proceeds.

Refresh secretary-of-state registrations, sales-tax permits, payroll-tax accounts, and industry-specific licenses to reflect new ownership or merged entity. EIN treatment varies by deal structure — confirm with tax counsel.

Walk the audit partner through PPA, opening balance adjustments, control gap remediation status, and PBC list expansion for the combined entity. Earlier the briefing, fewer surprises during fieldwork.

Final review by engagement partner or CFO covering financial reconciliation, controls remediation plan, tax structuring memo, and integration risk register. Lock the workpaper file once signed.