Understand the transaction question
PwC describes financial due diligence as analysis supporting deal decisions, including earnings and cash-flow considerations. That is a service description, not a promise of the work assigned to every intern. In a specific role, inspect whether the team focuses on transaction services, financial analysis, quality of earnings, working capital or another area.
Audit, diligence and valuation should not be used as interchangeable labels. For preparation, distinguish assessing the information, investigating what it means for a transaction, and estimating a value under assumptions. This guide is an educational introduction and a fictional exercise, not an audit opinion or a valuation of a real company.
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Work a fictional earnings-adjustment schedule
All figures in this exercise are thousands of dollars. Reported EBITDA is 1,000. Proposed adjustments add 150 for litigation expense and 80 for owner compensation above an assumed market level, and subtract 100 for rental income that will not continue. The proposed adjusted figure is 1,130.
| Line | Amount | Evidence question |
|---|---|---|
| Reported EBITDA | 1,000 | Does the starting figure reconcile to the underlying records? |
| Litigation add-back | +150 | Which amount is supported and why is recurrence treated this way? |
| Owner compensation adjustment | +80 | What supports the replacement-cost assumption? |
| Noncontinuing rental income | −100 | Will this income cease under the transaction assumptions? |
| Proposed adjusted EBITDA | 1,130 | Arithmetic result, not approval of the assumptions |
The arithmetic does not approve the adjustments. The litigation expense might recur, the compensation comparison might be weak, or the rental-income assumption might be wrong. Each line needs a supporting explanation and evidence about whether it belongs in the defined earnings measure. Keep management's proposed adjustment separate from an adjustment you have actually supported.
Show the disagreement instead of hiding it
Suppose only 50 of the proposed 150 litigation adjustment is supported. Holding the other assumptions fixed, adjusted EBITDA becomes 1,030. The difference is 100, and the schedule should show it explicitly. Do not present a single precise answer while concealing the assumption that produces the difference.
Use columns for proposed amount, supported amount, unresolved amount and evidence needed. A reader should be able to identify what is known and which questions remain. Do not count the same expense twice under different adjustment labels. Reconcile the schedule back to its starting figure after every change.
Working capital is a separate analysis. An earnings add-back does not automatically change the cash required to operate the business. Keep balances, cash timing and earnings adjustments in separate schedules until you have a reasoned bridge between them.
Make a diligence-style memo with an evidence trail
Build the fictional adjustment schedule and write a one-page memo identifying the two most consequential uncertainties. Explain which document or analysis would resolve each one. Do not invent a data-room document, management response or customer confirmation. You can state what you would request without pretending you received it.
Include a source log, units, period and formula checks. Use a consistent sign convention and make the difference between recurring and nonrecurring an argument supported by facts, not a label applied to make the result look better. A transparent unresolved item demonstrates judgment; it is not a flaw to hide.
Data and worked inputs
Describe your experience accurately
An independent model can show accounting fluency and analytical care, but it is not transaction experience. In your résumé or interview, explain that you built a fictional diligence schedule, reconciled its arithmetic and tested an unsupported adjustment. Do not suggest you advised a buyer or audited a company.
Read the internship's required coursework and software expectations. Ask whether interns work on data preparation, schedule building, research or report support. Pay, travel, hours and offer timing require the exact posting or recruiter confirmation; they cannot be inferred from the term transaction services.
To compare adjacent work, use the treasury-versus-FP&A exercise and the credit comparison. Each asks a different question of financial information, which can help you choose a preparation project and a more focused search.