UHY Voscon

Business Overview

• Description of the Target’s business activities including details of geographic presence, profile of directors and organizational structure.
• History and significant events, including when and where the business was established and changes of ownership since inception.
• Summary of key contractual relationships identifying any implications of the proposed transaction (e.g., change of control clauses).
• Comment on related party transactions, providing a summary of the contractual arrangements with each related party.

Quality of Earnings

We shall assess and provide commentary on the following:

• Net interest margin evolution and trends in the average balances and yields/ cost of funds of loans, investments, deposits and other funding; Include other earnings ratios as covered in the table under ratios.
• Trends in fee, commission and other non-interest income;
• Gains and losses from investment securities trading and revaluations and other sales of assets;
• Loan origination and commitment, transaction processing fees;
• Trend in cost profile and contribution of each cost component to the total interest and operating expenses.
• Review and comment on related party transactions and comments on whether the arrangements are at arm’s length
• Target revenue drive
• Prepare an adjusted Operating Profit Before Tax schedule for the review period
• Review and comment all other income

Quality of Net Assets

      Cash and short-term funds

• Ascertain existence and accuracy of cash and short-term funds;
• Review the Bank’s cash certificates at the agreed cut-off period;
• Review the bank reconciliation and bank statements of the balance as at the cut-off period;
• Assess and comment on foreign exchange conversion;

Loan to bank and customers

• Review the files for the top 50% exposures for adequacy of impairment and sector concentration (excluding loans classified as lost)
• Analyse the loan portfolio in terms of concentration risks (loan type, currency, geographic category and industry);
• Analyse and assess loan risk provisions is in line with IFRS and Bank of Ghana prudential guidelines;
• Comment on the level of compliance with the regulatory limits on loan to deposits ratio (LDR) and limit of lending to single and group borrower and related party
• Individual loan file reviews of top 20% loans (excluding loans classified as lost) to
  • Assess completeness of risk classification and provisioning on loan portfolio;
  • Propose reclassifications and additional impairments based on IFRS provisions;
• Analyse NPLs and the change in provisions for loan losses and highlight the key loans driving change in NPLs and how they were resolved;
• Loans and advances by industry, currency, maturity, pricing etc.
• Movement in performing loan portfolio over the historical period;
• High level review of the board minutes over the last eighteen (18) months for potential financial impact on the balance sheet;
• Review and comment on payables and receivables aging analysis;
• Review and comment on the stated capital
• Investment and pledged assets
• Review and comment on the existence and ownership of reported investment securities balance;
• Review investment schedules as at the cut-off date period and comments on the adequacy of the amount reported
• Comment on the maturity profile of investment securities as at the cut-off date
• Assess and comment on the following with a view to understand the investment securities portfolio;
• Ascertain that investments have been properly classified according to IFRS 9 (reporting of financial instruments)
• Assess and comment on the impairment of investment securities (if any) and make appropriate provisions.
• Analyse investment in subsidiaries and associated companies
• Assess and comment on the latest financial statements and performance of all investee companies noting the need to restate value of investment.

Suspense accounts and foreign exchange accounts

• Review and comment on suspense accounts and unclassified balances. Ensure they are reconciled subsequently.
• Review all foreign currency accounts and comment on possible exposures.

Equity and regulatory

• Review and comment on the bank’s capital and capital adequacy ratio (CAR);
• Review of trading positions (FX, Interest rates, Securities, Equity) and capital supporting such position;
• Comment on regulatory limits - Cash reserve, Open position;
• Review of ALCO minutes as part of the review of board minutes;
• Comment on liquidity ratios (cash to deposit, liquid asset to total deposits, etc) ;
• Ascertain the bank’s accurate foreign currency position by reconciliation of the GL balances vs the Nostro accounts vs Currency blotter;

Deposit liabilities (due to banks and customers)

• Review and comment on deposits liability for the top 20 depositors by maturity, type and sector etc.
• Comment on related party deposit (if any) as at the cut-off date.
• Comment on the target’s loan to deposits ratio
• Comment on deposit under lien or pledged under cash collateral as at the cut-off date (if any)
• Review and comment on the target’s deposit products, maturity profile, interest rates, etc.

Borrowings (if any)

• Review and comment on the target’s compliance to the general terms and conditions agreed in the facility contract agreement.
• Review the loan amortization schedule and confirm the completeness of the balance reported as at the cut-off date

Other assets and liabilities

• Comment on fixed assets, including impairment write-downs, and depreciation, capitalised expenditures;
• Assess and comment on tall accounts receivables balances (staff loans & advances, intercompany receivables, accrued interest, sundry receivables and deferred taxation) as the reporting date
• Review and comment on the Bank’s receivables and payables ageing analysis.
• Discuss and comment on potential liabilities that could result from pending litigations or investigations by regulatory or other authorities etc;
• Comment on lease and other material agreements;
• Assess and comment on the list of contingent liabilities including confirmed letters of credit etc. as at the reporting date;

Statement of cash flow

• Review and comment on key line items in sundry account;
• Obtain an understanding of cash being generated every year after all financing and investing expenses have been taken care of
• Review the cash flow statement to gain an understanding of reasons behind the cash flow position.
• Recompute the cash flow and investigate any differences identified.
• Check the quality of cash flow Review and comment on the target’s compliance to the general terms and conditions agreed in the facility contract agreement.
• With the assistance of sensitivity analysis, assess the business potential to meet its debt obligations should there be a dip in the business of a priority client.
• Review and comment on trend in historical cash flow.
• Reconcile net income and cash flow from operation to identify non-cash items and assess management approach to financial reporting.
• Consider and adjust (if appropriate), any P&L adjustments made in Adjusted Earnings if they have an impact on the Adjusted Cash Flow analysis
• Comment on categorization between maintenance / replacement and expansionary capex.
• Comment on the historical trend in capital expenditure.
• Review the drivers of the change in equity and ensure it is in line with industry practice
• Obtain an understanding (nature and intent) of unusual items such as shareholders loans pending conversion to equity or advance capital.
• Investigate any adjustment made to equity and prior year adjustment.

Quality of Financial Information

• Provide commentary on the following:
• How management information is generated and how useful is it in the context of the current and anticipated needs of the business?
• What is the degree of estimation in the monthly numbers?
• What financial systems and controls exist?
• Reconcile the general ledger;
• Review the Central Bank’s evaluation report on the target and comment on the impact of issues identified in exercise (if any)

• The scope of work sets out our understanding of matters to be addressed through our work. Unless our instructions are otherwise amended in writing, the procedures we undertake will be restricted to those set out in the Scope of Work below. If we are unable to perform any of our procedures because, for example, information required is not available to us, we will advise you accordingly.
• The taxes included in our work will be business tax compliant, corporate income tax (CIT), withholding tax (WHT), VAT & National Health Insurance Levy (NHIL), GETFund Levy, employment related taxes, custom duty and transfer pricing.
• Review period –Fiscal years ended 31 December 2018, 31 December 2019, 31 December 2020, 31 December 2021, 31 December 2022 and period ended 30th June 2023.
• Reporting - our report will summarise key findings on an exceptions basis, applying a materiality as agreed on an issue-by-issue basis.
• Assumptions – which if misstated our scope, fees and timing for the tax due diligence will need to be amended accordingly:
• Complete and accurate information will be made available to us on a timely basis in electronic format through an electronic data room.
• We will have unrestricted access to Target Management (persons responsible for and aware of the tax affairs of the project) for the purposes of our interviews.
• Tax affairs are centrally managed by the same person(s).
• Inquire as to tax department reporting and administrative functions and the extent to which project company relies on third-party advisers for tax advice, planning, and preparation.
• Inquire of and discuss with such advisers any known significant exposure items or issues, if applicable. 
• Document and assess the implications of tax examinations, disputes, investigations or litigation for Target (whether current, settled, or pending) during the Review Period, and read the relevant correspondence with respect to such examinations.
• Review other relevant correspondence with the tax authorities to document material risks.
• Review the external auditors report on the tax affairs of the project company for the financial years under review.
• Inquire as to material acquisitions and disposals in the Review Period and how each was treated for tax.
• Document tax exemptions/concessions and any special tax arrangements or agreements the project company may have and their availability post-Transaction.
• Comment on the transfer pricing and thin-capitalisation ( if any) position of project company without conducting a detailed review or benchmarking of the position. Inquire about:
• material transactions with related parties in the project company’s group;
• actions taken by Management to ensure or confirm that the related party transactions are conducted on an arm’s length basis;
• nature and extent of documentary evidence to support the arm’s length nature of related party transactions; and
• comment on potential risks arising from the facts as provided.
• Review the tax returns submitted, corporate income tax and capital allowance computations, and report on:
• material differences identified between the taxable income submitted and taxable income assessed;
• material differences between quarterly tax payments (if any) made and final assessments;
• provisions for uncertain tax position;
• Any expenses that may have been inappropriately treated as tax deductible and
• existing tax loss carry forward balances and foreign tax credit balances (if any) and the likelihood of their availability following the completion of the project.
• Review ruling requests submitted to a Revenue Authority within the Review Period

Understand the tax compliance status on capital gains generated by the project company in respect of material disposals during the Review Period.

Understand the withholding tax compliance profile of the project company via Q&A with Management to document:

• transactions in the Review Period that are (or should be) subject to withholding tax;
• support for positions taken for zero percent/reduced rates of withholding tax; and
• revenue authority tax examinations and findings in relation to withholding taxes in the Review Period.

Understand VAT, NHIL and GET Fund levy compliance of the project company by way of a Q&A with Management to understand and document risks associated with:

• VAT, NHIL and GET Fund levy compliance history;
• VAT, NHIL and GET Fund levy planning implemented; and
• revenue authority tax examinations and findings in relation to VAT, NHIL and GET Fund levy in the Review Period.

Understand compliance with employment-related taxes for the project company by way of a Q&A with Management to understand and document risks associated with:

• payroll compliance history;
• payroll procedures (including in relation to expense and authorisations, business and staff entertaining, travel and subsistence and benefits in kind) including review of remuneration and HR practices;
• foreign nationals;
• payments to contractors;
• remuneration planning implemented; and
• revenue authority tax examinations and findings in relation to payroll taxes in the Review Period.
• Review agreements of the project company to determine the applicability of stamp duty and report on any non-compliance.

Understand the operations of the project company to ascertain whether any goods imported by project company is subject to customs duty and whether the duty has been duly paid.

• Review ruling requests submitted to a Revenue Authority within the Review Period

Understand the tax compliance status on capital gains generated by the project company in respect of material disposals during the Review Period.

Understand the withholding tax compliance profile of the project company via Q&A with Management to document:

• transactions in the Review Period that are (or should be) subject to withholding tax;
• support for positions taken for zero percent/reduced rates of withholding tax; and
• revenue authority tax examinations and findings in relation to withholding taxes in the Review Period.