The Auditor's Role in Mergers and Acquisitions

The high rate of mergers and acquisitions (M&A) failures indicates that often organizations underestimate the importance of risk management in M&A decision-making. The internal audit function can improve the quality of risk management throughout the M&A process by conducting due diligence and providing expertise in business process integration. Internal audit departments usually have little or no involvement in M&A strategy development. However, once an acquisition strategy has been determined, an audit review can add great value if its findings are geared toward preparing the company for diversification. At the post-acquisition stage the main objective is for the two organizations to integrate smoothly into one firm, accomplishing the planned level of synergy. The final stage of an M&A project is the post-acquisition audit. Internal auditing can make a significant contribution to the development of more effective post-acquisition risk management by promoting effective control techniques combined with measures that ensure people are highly motivated to contribute to the M&A process.