Analysis and evaluation of the financial state of the enterprise (Due diligence), Analysis of the effectiveness of management of marine vessels

The main goal of The Due diligence – is the formation of a complete picture of the real financial condition of the company and all the risks that may have a negative impact on it.

Our company is engaged in conducting the Due diligence procedures concerning the analysis and assessment of the financial state of the enterprise.

Necessity for the Due diligence arises in such cases:

• sale of the business;
• purchase of ready business;
• establishing a joint venture or a merger;
• presentation of evidence of solvency  to a foreign partner or investor;
• checks of reliability and solvency of the counterparty;
• checks of the efficiency of the subsidiaries

The task of auditors – is to determine the financial and tax risks, to assess the reliability of financial reporting and the financial state of the enterprise.

Financial Due diligence includes all material aspects of the activity, i.e. the economic and property condition, the situation in the financial sector, the state of cash payments, etc.

At the same time the data structure provided by auditors might look like this:

• Analysis of the structure of revenues and expenses of the Company for the period under review, the analysis of the main indicators of the Company’s activities;
• Assessment of the internal control system in the case of document turnover relating to the Company’s expenses. Selective analysis of the quality and completeness of the documents confirming the Company’s expenses;

• Analysis of the main assets: the overall composition ,accrued depreciation, revaluation results;
• Analysis of financial investments of the Company;
• Analysis of accounts receivable;
• Analysis of the Company’s reserves: composition, value, dynamics, surplus stock;
• Analysis of accounts payable;
• Analysis of loan agreements and liabilities: composition of creditors / lenders and amount of funds raised, the conditions to attract  credits and loans
• Analysis of contingent liabilities (fines, penalties, guarantees issued to secure third-party of debt ; bills, lawsuits brought against the Company; deposits);
• An analysis of the completeness and accuracy of accounting of assets and liabilities reflected in the Company’s balance sheet;

Consideration and comments on the above issues with separation of any potential tax risks and benefits. Identification, summation and if possible, the digital expression of all significant tax risks unaccounted  and (or) potential tax liabilities of the Company.

Thus, only a professional audit firm may conduct financial Due diligence, which in addition to standard procedures, will include:

• independent inventory of key assets;
•  assessment of the quality of receivables and payables by counterparties queries and analysis of transactions with related parties;
• Analysis of potential additional charges of tax liabilities;
• financial assessment of the identified risks.

Practice shows that, without examining all aspects of the financial activities of the enterprise, the technical, market and legal assessment is meaningless, because only on their basis it is impossible to make an intelligent decision.

Analysis of effectiveness of the management of marine vessels, the reasonableness of costs and purchase prices of spare parts, fuel under the management of ships.

Analysis of effectiveness of the management marine vessels includes:

1. Analysis of costs on equipment , spare parts and oils for tankers purchase:

– Determining the advisability of procurement;

– Determining the level of procurement prices, their compliance with market prices;

– Verification of the presence of the documents confirming the purchase by tender;

– Verification of compliance with the budget of expenditures for this purpose;

2. Analysis of the costs for the purchase of fuel required for the operation of oil tankers:

– Check for fuel write-off of expenses within the norms;

– Determining the advisability of procurement;

– Determining the level of procurement prices, their compliance with market prices;

– Verification of the presence of the documents confirming the purchase by tender;

– Verification of compliance with the budget of expenditures for this purpose;

3. Analysis of labor costs of seafarers on tankers:

– Analysis of compliance with ITF requirements regarding minimum wages of seafarers;

– Analysis of the level of wages of seafarers,  proposed at the labor market of seafarers on similar vessels;

– Verification of documents on actual wages of seafarers;

– Verification of compliance with the budget of expenditures for this purpose;