During an acquisition, the buyer must conduct exhaustive due diligence to ensure that they have a complete picture of the company they are seeking to buy. This involves many steps, but perhaps one of the most important is producing a quality of earnings report.
As the name suggests, this report is created to analyze the past earnings of the seller and ensure that they are an accurate predictor of future performance. Typically, the buyer will either produce this report themselves if they have the human capital to do so or outsource the task to an accounting firm.