Glossary
7 Questions to Ask a Quality of Earnings Provider
Choosing a Quality of Earnings provider starts with the decision the work needs to support. Before comparing proposals, agree on the earnings questions, intended users, available records and transaction timetable. A report title or page count does not tell you which procedures will actually be performed.
In our transaction advisory work, we review the scope separately from the format used to present it. These questions turn that distinction into a practical comparison you can use with any provider, including Treewalk.
- What experience is relevant to this acquisition?
Ask for examples involving similar records, revenue models or owner involvement. Ask who will perform and review the work, and how questions will be escalated. A redacted sample and public references can make the discussion concrete without disclosing another client’s information.
Engagement volume alone does not establish whether a provider understands the issues in your target business.
- What procedures are included and excluded?
Request a written scope. Which earnings periods, adjustments and balance-sheet questions will be examined? What records are needed? Which questions remain outside the engagement?
A limited set of agreed procedures should be described as such. It should not acquire a broader label just because the results are presented in a spreadsheet. See the Quality of Earnings guide for the purpose of the wider analysis.
- What will we receive, and who needs to use it?
Ask to see the proposed output, whether a data book, written report or combination. Confirm that the intended buyer, lender or investor understands the proposed scope and format before work begins.
Do not assume that an Excel file and a narrative report contain the same procedures, or that either is automatically acceptable to a lender. Ask the intended user directly.
- How will proposed adjustments be supported?
Ask the provider to walk through an adjustment from the seller’s schedule to the underlying records. The explanation should distinguish the claim, supporting evidence, accepted treatment and unresolved questions.
For owner compensation, ask how the analysis distinguishes SDE from earnings after replacement management costs. For a discretionary expense, ask how the provider assesses whether the business still needs it. Our EBITDA normalization guide provides related context.
- What does the timetable depend on?
Ask when the work can start, what constitutes a usable data package, and when preliminary findings can be discussed. Agree on who answers follow-up questions and what happens when records are incomplete.
The provider should explain the dependencies behind the timetable. A fixed promise made before reviewing the available information is not a substitute for a workable plan.
- Who handles matters outside financial diligence?
Separate financial diligence from tax advice, legal work and valuation. Identify the adviser responsible for each and how findings will be shared. A reconciliation between tax filings and financial statements is not the same as a tax diligence engagement.
Treewalk’s financial diligence scope should be confirmed in the engagement terms, with specialist advisers involved where needed.
- How are findings and scope changes handled?
Ask how unsupported adjustments, missing records and new questions will be communicated. Who can authorize additional procedures? What happens if the buyer or lender asks for work beyond the original scope?
The answer should leave a clear record of what was done and what remains unresolved, not simply a revised headline earnings figure.
A scope-to-evidence comparison
| Decision | Ask the provider for | Resolve before proceeding |
|---|---|---|
| Assess relevant experience | Redacted output and permitted references | Who performs and reviews your work? |
| Compare scope | Procedures, periods and exclusions in writing | Which material questions are not covered? |
| Test an earnings adjustment | Proposed amount, records, conclusion and open items | Is the treatment supported or still disputed? |
| Select a deliverable | Sample format and intended-user requirements | Does the user accept the proposed scope and output? |
| Plan the timetable | Data requirements, milestones and response owners | What changes if records arrive late? |
| Coordinate specialists | Responsibility list and escalation route | Who owns tax, legal and valuation questions? |
This qualitative framework is based on anonymized Treewalk scope and earnings discussions. It is not a provider ranking, a finding about issue frequency, or a guarantee that a particular engagement will meet a lender’s requirements.
Where to next
Request a sample QoE deliverable and discuss the records, users and decisions your engagement needs to support.
