Workflow template for finance and accounting
Quality of earnings adjustment evidence schedule
When management proposes adjustments to a target's EBITDA, the deal team gets one schedule: each adjustment tied to its ledger entries, explanation and documents, with repeats, overlaps and gaps flagged and every gap written as a question. The engagement lead decides what is accepted.
Listed under
Add it to a workflow in the Fully Powered Planner, beside the teams and roles that will run it. Book a fit call
The outcome
Management's list of adjustments arrives with a reported EBITDA, a higher adjusted figure and a folder of support. Before the team can form a view, someone has to tie each line to the ledger and the documents. This workflow template does that tying and lays it out as one schedule.
Each adjustment shows the ledger entries management cites and whether they add up to the amount, management's explanation, and each supporting document matched to its entry. Estimates, such as an owner's salary brought to the cost of a replacement, have their arithmetic recomputed and every figure that is not from the ledger listed with its document, or marked as having none. The facts a reviewer would challenge are flagged: the same supplier paid in the prior year for an item called one-off, one ledger entry claimed by two adjustments, an entry outside EBITDA, an entry dated outside the test period. Each adjustment gets an evidence status (traced, traced with flags, or not traced), and every gap becomes a plain question for management.
The schedule proposes no adjustment of its own, states no adjusted earnings of its own, and gives no valuation and no opinion. The engagement lead decides which adjustments the firm accepts and which questions go to management.
Who starts the work, and when
A member of the deal team, such as the manager or senior on the engagement, starts it when management's proposed adjustments arrive with the ledger detail and supporting documents. It runs again each time management answers questions or sends more documents, and marks each earlier question answered, partly answered or still open. One run covers one target and one test period.
The engagement lead reviews the schedule, decides what the firm accepts, and decides which questions are sent. The target's finance contact answers what only the business can answer.
What they supply
- Engagement settings: the target, the test period, a look-back period (by default the year before), the currency, reported EBITDA, management's adjusted EBITDA, the tie tolerance, and which of management's categories count as one-off and which as estimates.
- Management's adjustment list, with each adjustment's reference, description, category, amount and the ledger entries it cites.
- Ledger detail for the accounts the adjustments cite, covering the test period and the look-back period.
- An account map showing which accounts sit inside EBITDA.
- Management's explanations, one per adjustment.
- The supporting documents, or the data room index that lists them, with each document's counterparty and amount.
- Earlier questions and answers, on a second run.
Files exported from the ledger and the data room are enough. If a column heading does not match, the template stops and asks. It needs no access to the target's systems, and it never asks for a password or a login code.
What comes out
One schedule, in a fixed order: management's bridge from reported to adjusted EBITDA, as management states it; a summary of the adjustments by evidence status, with totals that add back to management's total; one block per adjustment showing ledger, calculation, explanation, documents, prior-year look-back, flags and questions; the questions for management, as a draft for the engagement lead; the decisions that are the engagement lead's; and what was not assessed.
A good schedule lets the engagement lead pick any adjustment and see in one place what supports it, what does not, and what to ask next.
An invented example
Illustrative example with invented data. The businesses, suppliers, customers, people, documents and figures below are all invented. Company K is an invented 70-person maker of shop fittings that is being sold. An invented advisory firm is carrying out financial due diligence for the buyer. Company K's management has proposed six adjustments to its reported EBITDA for the twelve months to 30 September 2026. First come the inputs the deal team supplied, in full, then the schedule the workflow template returned.
The inputs
1. Engagement settings
Target: Company K
Test period: 2025-10-01 to 2026-09-30
Look-back period: 2024-10-01 to 2025-09-30
Currency: dollars (all amounts)
Reported EBITDA for the test period per the financial statements: 842600.00
Management's adjusted EBITDA as stated: 975800.00
Tie tolerance: 0.00
One-off categories: non-recurring
Estimate categories: normalisation; pro forma
Files received on: 2026-11-06
Engagement lead: Engagement lead
Finance contact: Company K finance contact
2. Management's adjustment list
adj_ref,description,mgmt_category,amount,entries_cited
A1,Owner-director salary to the cost of a general manager,normalisation,90000.00,P-01;P-02;P-03;P-04
A2,Adviser fees for the settled dispute with a former distributor,non-recurring,18400.00,G-211;G-219;G-230
A3,Office relocation,non-recurring,12500.00,R-301;R-305
A4,Bad debt on Customer Q after it ceased trading,non-recurring,7300.00,B-410
A5,Sale preparation adviser fees,non-recurring,11000.00,C-501;G-230
A6,Insurance proceeds for storm damage,non-recurring,-6000.00,I-601
3. Ledger detail for the accounts cited
entry_id,date,account_code,account_name,counterparty,description,amount
P-91,2024-12-31,6010,Salaries - directors,Owner-director,Owner-director salary Oct to Dec 2024,57500.00
P-92,2025-03-31,6010,Salaries - directors,Owner-director,Owner-director salary Jan to Mar 2025,57500.00
P-93,2025-06-30,6010,Salaries - directors,Owner-director,Owner-director salary Apr to Jun 2025,57500.00
P-94,2025-09-30,6010,Salaries - directors,Owner-director,Owner-director salary Jul to Sep 2025,57500.00
P-01,2025-12-31,6010,Salaries - directors,Owner-director,Owner-director salary Oct to Dec 2025,60000.00
P-02,2026-03-31,6010,Salaries - directors,Owner-director,Owner-director salary Jan to Mar 2026,60000.00
P-03,2026-06-30,6010,Salaries - directors,Owner-director,Owner-director salary Apr to Jun 2026,60000.00
P-04,2026-09-30,6010,Salaries - directors,Owner-director,Owner-director salary Jul to Sep 2026,60000.00
G-150,2025-03-14,6200,Professional fees,Supplier L,Dispute advice,4200.00
G-160,2025-06-30,6200,Professional fees,Supplier R,Annual accounts,5500.00
G-211,2025-11-20,6200,Professional fees,Supplier L,Distributor dispute,9000.00
G-219,2026-01-22,6200,Professional fees,Supplier L,Distributor dispute,6400.00
G-230,2026-03-05,6200,Professional fees,Supplier L,Settlement and sale review,3000.00
G-240,2026-06-30,6200,Professional fees,Supplier R,Annual accounts,5800.00
C-501,2026-08-08,6200,Professional fees,Supplier S,Sale preparation,8000.00
R-301,2026-04-18,6800,Relocation costs,Supplier M,Office removal,7500.00
R-305,2026-04-30,1610,Leasehold improvements,Supplier N,Fit-out of new office,5000.00
B-310,2025-02-10,6400,Bad debts,Customer W,Write-off Customer W,2100.00
B-410,2026-06-12,6400,Bad debts,Customer Q,Write-off Customer Q,7300.00
I-601,2025-09-28,4900,Other income,Insurer V,Storm damage claim,-6000.00
4. Account map
account_code,account_name,statement_line,in_ebitda
1610,Leasehold improvements,Fixed assets,no
4900,Other income,Other income,yes
6010,Salaries - directors,Staff costs,yes
6200,Professional fees,Overheads,yes
6400,Bad debts,Overheads,yes
6800,Relocation costs,Overheads,yes
7100,Depreciation,Depreciation and amortisation,no
5. Management's explanations (received 2026-11-04)
A1. The owner-director drew 240,000 in salary in the year. After the sale a general manager would run the business. We put the cost of that role at 150,000 a year, so the adjustment is 240,000 less 150,000, which is 90,000.
A2. Supplier L's fees for the dispute with our former distributor, which was settled in March 2026. We do not expect another dispute of this kind.
A3. We moved office in April 2026. These are the removal costs and the fit-out of the new premises. This will not happen again.
A4. Customer Q ceased trading in May 2026 owing 7,300. We have never lost a customer balance of this size before.
A5. Fees for getting the business ready for sale: Supplier S's preparation work and Supplier L's review of the sale documents.
6. Supporting documents index
doc_ref,adj_ref,doc_type,doc_date,counterparty,amount,what_it_shows
D-01,A2,invoice,2025-11-18,Supplier L,9000.00,Fees for the distributor dispute Oct to Nov 2025
D-02,A2,invoice,2026-01-20,Supplier L,6400.00,Fees for the distributor dispute Dec 2025 to Jan 2026
D-03,A3,invoice,2026-04-16,Supplier M,7500.00,Office removal
D-04,A3,invoice,2026-04-29,Supplier N,5000.00,Fit-out of the new office
D-05,A4,write-off memo,2026-06-10,Customer Q,7300.00,Balance written off after the customer ceased trading
D-06,A5,invoice,2026-08-06,Supplier S,8000.00,Sale preparation work
D-07,A6,settlement letter,2025-09-20,Insurer V,6000.00,Storm damage claim settled
7. Earlier questions and answers
None. First run.
The schedule
QUALITY OF EARNINGS ADJUSTMENT EVIDENCE SCHEDULE: Company K, test period 2025-10-01 to 2026-09-30
Draft for: Engagement lead. Files received 2026-11-06. Currency: dollars. Run: first run.
File checks: None.
This schedule traces Company K management's proposed adjustments to the evidence supplied. It proposes no adjustment, states no adjusted earnings of its own, and gives no valuation and no opinion.
1. Management's bridge (management's figures, as supplied)
Reported EBITDA per the financial statements: 842,600.00
A1, Owner-director salary to the cost of a general manager, normalisation: 90,000.00
A2, Adviser fees for the settled dispute with a former distributor, non-recurring: 18,400.00
A3, Office relocation, non-recurring: 12,500.00
A4, Bad debt on Customer Q after it ceased trading, non-recurring: 7,300.00
A5, Sale preparation adviser fees, non-recurring: 11,000.00
A6, Insurance proceeds for storm damage, non-recurring: -6,000.00
Management's adjustments, total: 133,200.00
Reported EBITDA plus management's adjustments: 975,800.00. Management's adjusted EBITDA as stated: 975,800.00. Agrees.
2. Summary by evidence status
Traced: 1, 7,300.00: A4.
Traced with flags: 1, 12,500.00: A3.
Not traced: 4, 113,400.00 net: A1, A2, A5, A6.
Total: 6, 133,200.00. Agrees to management's total, 133,200.00.
Entries cited by more than one adjustment: G-230, 3,000.00, A2 and A5.
3. Adjustments
A1. Owner-director salary to the cost of a general manager. Category: normalisation. Amount: 90,000.00. Evidence status: Not traced.
Ledger: P-01, 2025-12-31, 6010, Owner-director, 60,000.00; P-02, 2026-03-31, 6010, Owner-director, 60,000.00; P-03, 2026-06-30, 6010, Owner-director, 60,000.00; P-04, 2026-09-30, 6010, Owner-director, 60,000.00. Linked entries in the test period: 240,000.00. Estimate: tied in the calculation.
Calculation: 240,000 less 150,000 (management's explanation); recomputed 90,000.00, agrees; ledger figure 240,000.00 ties to P-01 to P-04; assumptions: 150,000.00 yearly cost of a general manager, no document.
Explanation: supplied 2026-11-04: the owner-director's salary is replaced by management's figure for a general manager after the sale.
Documents: P-01: no document; P-02: no document; P-03: no document; P-04: no document. None indexed.
Look-back: not checked; normalisation is not a one-off category.
Flags: None.
Questions: Q1, Q2, Q3.
A2. Adviser fees for the settled dispute with a former distributor. Category: non-recurring. Amount: 18,400.00. Evidence status: Not traced.
Ledger: G-211, 2025-11-20, 6200, Supplier L, 9,000.00; G-219, 2026-01-22, 6200, Supplier L, 6,400.00; G-230, 2026-03-05, 6200, Supplier L, 3,000.00. Linked entries in the test period: 18,400.00. Ties.
Calculation: Not an estimate.
Explanation: supplied 2026-11-04: Supplier L's fees for a dispute with a former distributor, settled in March 2026; management does not expect another of this kind.
Documents: D-01 matches G-211; D-02 matches G-219; G-230: no document.
Look-back 2024-10-01 to 2025-09-30: same accounts 2 entries, 9,700.00; same counterparty G-150, 2025-03-14, Supplier L, "Dispute advice", 4,200.00.
Flags: Recurs: Supplier L was also paid 4,200.00 in the look-back period (G-150). Overlap: G-230, 3,000.00, is also cited by A5.
Questions: Q4, Q5.
A3. Office relocation. Category: non-recurring. Amount: 12,500.00. Evidence status: Traced with flags.
Ledger: R-301, 2026-04-18, 6800, Supplier M, 7,500.00; R-305, 2026-04-30, 1610, Supplier N, 5,000.00. Linked entries in the test period: 12,500.00. Ties.
Calculation: Not an estimate.
Explanation: supplied 2026-11-04: removal costs and the fit-out of new premises for the April 2026 move; management says it will not happen again.
Documents: D-03 matches R-301; D-04 matches R-305.
Look-back 2024-10-01 to 2025-09-30: same accounts 0 entries, 0.00; same counterparty none.
Flags: Outside EBITDA: R-305, 5,000.00, is in 1610 Leasehold improvements, which the account map marks in_ebitda no.
Questions: Q6.
A4. Bad debt on Customer Q after it ceased trading. Category: non-recurring. Amount: 7,300.00. Evidence status: Traced.
Ledger: B-410, 2026-06-12, 6400, Customer Q, 7,300.00. Linked entries in the test period: 7,300.00. Ties.
Calculation: Not an estimate.
Explanation: supplied 2026-11-04: Customer Q ceased trading in May 2026 owing 7,300; management says it has not lost a customer balance of this size before.
Documents: D-05 matches B-410.
Look-back 2024-10-01 to 2025-09-30: same accounts 1 entry, 2,100.00; same counterparty none.
Flags: None.
Questions: None.
A5. Sale preparation adviser fees. Category: non-recurring. Amount: 11,000.00. Evidence status: Not traced.
Ledger: C-501, 2026-08-08, 6200, Supplier S, 8,000.00; G-230, 2026-03-05, 6200, Supplier L, 3,000.00. Linked entries in the test period: 11,000.00. Ties.
Calculation: Not an estimate.
Explanation: supplied 2026-11-04: Supplier S's preparation work and Supplier L's review of the sale documents.
Documents: D-06 matches C-501; G-230: no document.
Look-back 2024-10-01 to 2025-09-30: same accounts 2 entries, 9,700.00; same counterparty G-150, 2025-03-14, Supplier L, "Dispute advice", 4,200.00.
Flags: Recurs: Supplier L was also paid 4,200.00 in the look-back period (G-150). Overlap: G-230, 3,000.00, is also cited by A2.
Questions: Q4, Q5.
A6. Insurance proceeds for storm damage. Category: non-recurring. Amount: -6,000.00. Evidence status: Not traced.
Ledger: I-601, 2025-09-28, 4900, Insurer V, -6,000.00. Linked entries in the test period: 0.00. Does not tie: difference (adjustment minus linked entries in the test period) -6,000.00. Outside the test period: I-601, 2025-09-28, -6,000.00.
Calculation: Not an estimate.
Explanation: Not supplied.
Documents: D-07 matches I-601.
Look-back 2024-10-01 to 2025-09-30: same accounts 0 entries, 0.00; same counterparty none.
Flags: Outside test period: I-601, -6,000.00, is dated 2025-09-28, before the test period starts on 2025-10-01.
Questions: Q7, Q8.
4. Questions for management (draft; the engagement lead decides which are sent)
Q1. (A1) The calculation uses 150,000.00 as the yearly cost of a general manager. What is that figure based on, and which document supports it?
Q2. (A1) Do the 240,000.00 of salary in P-01 to P-04 and the 150,000.00 both include, or both exclude, employer payroll taxes and benefits?
Q3. (A1) Please supply the payroll records for P-01 to P-04, 60,000.00 each, posted to 6010 Salaries - directors.
Q4. (A2, A5) Please supply the invoice behind G-230, Supplier L, 3,000.00, 2026-03-05, and say how it divides between the distributor dispute (A2) and the sale document review (A5). Both adjustments cite the full 3,000.00.
Q5. (A2, A5) Supplier L was also paid 4,200.00 on 2025-03-14 (G-150, "Dispute advice"). Did that payment relate to the same dispute, another dispute or other work?
Q6. (A3) The fit-out, R-305, Supplier N, 5,000.00, is posted to 1610 Leasehold improvements, which the account map places outside EBITDA. Was this cost charged in arriving at the reported EBITDA of 842,600.00, and if not, why is it in the adjustments?
Q7. (A6) The insurance receipt I-601, Insurer V, -6,000.00, is dated 2025-09-28, before the test period starts on 2025-10-01. Is there an entry in the test period for these proceeds, and if not, why is the deduction made from the test period?
Q8. (A6) Please supply management's explanation for A6.
5. Decisions for the engagement lead
1. Which of management's 6 adjustments the firm accepts, in whole or in part. The evidence status above is not that decision.
2. Which of the questions are sent to management, and in what form.
3. A2 and A5, Recurs: Supplier L was paid 4,200.00 for "Dispute advice" in the look-back period (G-150). Does this bear on whether the A2 and A5 costs are one-off?
4. A2 and A5, Overlap: G-230, 3,000.00, is cited in full by both adjustments. How is it treated until management answers Q4?
5. A3, Outside EBITDA: R-305, 5,000.00, sits in an account the account map places outside EBITDA. Does it belong in the bridge?
6. A6, Outside test period: I-601, -6,000.00, is dated before the test period. Does the deduction belong in this test period?
6. Not assessed
Adjustments management did not propose. Entries management did not cite. Whether any document is genuine: documents were compared from the index on counterparty and amount only. Anything outside the look-back period supplied, 2024-10-01 to 2025-09-30. No check was skipped for a missing input.
Prepared from the files received 2026-11-06 for the Engagement lead's review. It changes no records and sends nothing.
Every figure traces to the inputs above. The six adjustments total 90,000.00 + 18,400.00 + 12,500.00 + 7,300.00 + 11,000.00 - 6,000.00 = 133,200.00, and 842,600.00 + 133,200.00 = 975,800.00, the figure management states. A1's ledger figure is 4 × 60,000.00 = 240,000.00, and 240,000.00 - 150,000.00 = 90,000.00. A2's entries add to 9,000.00 + 6,400.00 + 3,000.00 = 18,400.00; A3's to 7,500.00 + 5,000.00 = 12,500.00; A5's to 8,000.00 + 3,000.00 = 11,000.00. The look-back entries in 6200 are G-150 and G-160: 4,200.00 + 5,500.00 = 9,700.00. The Not traced total is 90,000.00 + 18,400.00 + 11,000.00 - 6,000.00 = 113,400.00, and 7,300.00 + 12,500.00 + 113,400.00 = 133,200.00.
Where it fits
- Finance and accounting, filed under mergers and acquisitions, where diligence on earnings is done.
- Professional services, where transaction-advisory and accounting firms test management's adjustments for a buyer, a seller or a lender.
- Finance and investment, where an investment team reviews a target's adjustments before it relies on an adviser's report.
- Acquisitions & integration, when a business is being bought and its earnings are the basis of the price.
- Private equity & portfolios, where a portfolio company's adjusted EBITDA is tested before an add-on purchase or an exit.
It stays apart from client schedule to ledger reconciliation, which agrees a client's schedule to its own books, and from the client document request tracker, which tracks what a client has sent. This one tests management's proposed earnings adjustments against their evidence.
What has to change for your company
- Your exports. The column names your ledger exports and data room index produce. If a heading does not match, the template stops and asks rather than guessing.
- Your categories. Which of management's categories your firm treats as one-off and which as estimates, and the tie tolerance.
- Your look-back. One prior year by default; longer where the files allow.
- Your roles. Who runs it, who the engagement lead is, and who sends questions to the target.
- Your question style, so the list can go into your request tracker once the lead has reviewed it.
- Your platform. It runs in ChatGPT, Claude, Copilot or Gemini, from files you supply. Given the confidentiality of a deal, decide which files the assistant may read and where the signed-off analysis is kept.
What has been checked
Fully Powered AI wrote this workflow template. It was editorially reviewed on 11 November 2026. It was tried on its invented example in Claude on 11 November 2026; the record is published with it. After the run its wording was tightened following review; the example's inputs and figures were not changed. A later review pass made small further edits, including writing every date in the example's schedule in one style; the example was not run again. It has not yet been tested in a client environment. It has not yet been tested as a packaged version in ChatGPT, Claude, Copilot or Gemini.
Testing in your environment means running it on a completed engagement whose adjustments your team has already worked through, plus hard cases written in advance, each with the expected result: an entry cited by two adjustments, a cost paid to the same supplier the year before, an estimate with no document for its assumption, an entry dated before the test period, a file with a heading it does not recognize. The engagement lead compares every tie and flag with the signed-off work before anyone relies on it. Pilot acceptance-test preparation sets those cases up, and what we test before we call an AI workflow ready describes the record we keep.
Who decides
Your people keep
- Which adjustments the firm accepts
- Which questions are sent to management
It does not
- Proposes no adjustment of its own
- States no adjusted earnings of its own
- Gives no valuation and no opinion
- Sends nothing to the target
- Never asks for a password or a login code
Questions people ask
Who is this for?
A member of the deal team, such as the manager or senior on the engagement, starts it when management's proposed adjustments arrive. The engagement lead reviews the schedule.
What do I need to supply?
Engagement settings, management's adjustment list, ledger detail for the accounts cited, an account map, management's explanations and the supporting documents or the data room index that lists them.
Does it say which adjustments are supportable?
No. Each adjustment gets an evidence status: traced, traced with flags, or not traced. Which adjustments the firm accepts is the engagement lead's decision.
Does it send the questions to management?
No. The questions are a draft for the engagement lead, who decides which questions go to management.
What has been checked?
Fully Powered AI wrote and editorially reviewed it. It has not yet been tested in a client environment.
The full workflow template
Everything above is the outline. The complete workflow template is the working version: the roles, the inputs, the procedure, the exceptions and stop conditions, the output format, the reviewer checklist, the acceptance tests, the instructions for an AI assistant and what to customize for your company. It comes with a download and the link to its folder in Fully Powered’s public repository.
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Next step
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