Our firm was engaged by the plaintiffs in a civil litigation matter. The plaintiffs owned an insurance brokerage, which was later sold to a competitor. The purchase and sale agreement required that the assets and net income of the business reach a certain threshold, at which point the remaining proceeds of the sale would be paid to the plaintiffs. After the closing date of the purchase, the purchasers recorded several journal entries in the accounting records, which reduced the book value of the company’s assets as well as its net income. The plaintiffs alleged that the journal entries were not supported.
Our role was to review the accounting records to determine whether the entries recorded were legitimate and to identify the accounting records that should be provided by the purchasers in order to support the entries made.