Accounting and Due Diligence Working Group

Mandate

The Working Group brings a European focus to issues that arise out of the accounting and due diligence aspects of high yield and leveraged credit transactions. Representatives of the audit, banking, and legal professions work collaboratively to integrate disparate business perspectives and regulatory concerns into consistent and efficient market practices. The accounting work focuses on general accounting standards throughout Europe and discrete issues such as disclosure, diligence, arrangement letters for auditor engagement, and comfort on "adjusted" data. Work in the due diligence area examines the roles and responsibilities of an issuer's management and of the various legal, accounting and financial advisors.

Current Initiatives

The Working Group is developing a form of the arrangement letter that is executed by the issuer, the auditors and the financial advisors (underwriters) at the outset of a contemplated capital markets transaction. The arrangement letter is a key transaction document. It sets the expectations of the parties in respect of the international aspects of a transaction by defining the scope and nature of the work that the auditors agree to perform and the comfort letter given. The work governed by the arrangement letter represents a basic component of the due diligence defense that underwriters create during the execution of a capital markets transaction. As a result, the letter is often the subject of protracted and costly negotiation. The completed form letter, which will also be suitable for use in other non-investment grade debt and equity transactions, will aid substantially in reducing the cost and delay inherent in the current market practice of negotiating ad hoc agreements.

Members