Audit & Assurance
Quality of Earnings & Due Diligence
Buy-side and sell-side quality of earnings and financial due diligence for deal decisions.
In a transaction, the reported numbers are only the starting point. Buyers and sellers need to understand what earnings actually look like once one-time items, adjustments, and timing are stripped out. Modus is an AI-native firm that helps you with quality of earnings and financial due diligence on both sides of a deal, so decisions rest on a clear, tested view of the business.
What is a quality of earnings analysis?
A quality of earnings analysis examines whether reported earnings are sustainable and how they were derived. It normalizes EBITDA for one-time and non-recurring items, tests the quality of revenue, and analyzes net working capital and cash. This is a transaction advisory engagement, not an audit, and it does not produce an audit opinion. It produces a diligence report that informs price, terms, and risk.
Who needs quality of earnings and due diligence?
- Buyers evaluating an acquisition target.
- Sellers preparing to go to market and pre-empt buyer questions.
- Private equity firms diligencing platform and add-on deals.
- Lenders and investors assessing the reliability of earnings.
What quality of earnings covers
- Normalized and adjusted EBITDA analysis.
- Net working capital analysis and a proposed peg.
- Revenue quality and customer concentration review.
- Identification of one-time and non-recurring items.
- Proof of cash to tie earnings to cash flows.
- Source-linked support for each adjustment.
How Modus helps with your quality of earnings and due diligence
Modus works from the target’s financials and underlying data. Our AI-native tooling ingests the numbers, builds the trend analysis, and drafts the adjustments, while our team applies deal judgment to what is truly recurring. We analyze revenue, working capital, and cash, and we document each adjustment with a link to its source. The result is a diligence report that a buyer, seller, or lender can rely on, delivered on a timeline that keeps a deal moving. This is transaction advisory, not an audit opinion.
Why choose Modus
- Buy-side and sell-side experience across deal types.
- Tooling that automates the heavy financial analysis.
- Source-linked support behind every adjustment.
- Top-firm rigor at a middle-market price.
- A turnaround that fits deal timelines.
Frequently asked questions
Is a quality of earnings the same as an audit?
No. A quality of earnings is a transaction advisory engagement. It does not provide an audit opinion. It gives buyers and sellers a tested view of earnings, working capital, and cash to support deal decisions.
What is the difference between buy-side and sell-side QoE?
Buy-side QoE supports an acquirer’s diligence and negotiation. Sell-side QoE prepares a business for market and anticipates buyer questions before they arise. Both rest on the same rigorous analysis.
How does net working capital analysis affect a deal?
Net working capital analysis establishes a normalized level, or peg, used to set the working capital target at close. It helps avoid disputes and post-close adjustments by grounding the target in historical trends.
Why Modus
Audits at the speed of business
Modus helps you get a faster, higher-quality Quality of Earnings & Due Diligence — top-firm rigor, source-linked workpapers, and far fewer questions for your team.
Ready to talk about your Quality of Earnings & Due Diligence?
Get a fast, fixed-scope proposal from a Modus audit team.