Quick answer: The cost of a Quality of Earnings report depends mainly on four things: how much of the business is in scope, how clean and accessible the financial records are, how complex the business model is, and how fast the work has to be done. Two companies with similar revenue can need very different levels of effort. Ask for a scope-based proposal rather than comparing headline quotes.
This guide explains what drives the work and how buyers, sellers and their advisers can shape the scope sensibly. It does not quote fees: those depend on the provider, the market and the engagement, and any figure without that context would mislead.
Why QoE fees vary so much
A QoE is not a fixed product. It is a set of analyses chosen to answer specific questions about earnings, and the effort behind those analyses changes with the business and the data. A company with monthly closes, reconciled balance sheets and a clean revenue system can often be analysed quickly. A company with year-end-only adjustments, several entities and manual revenue tracking needs far more reconstruction before analysis can even begin.
The main cost drivers
| Driver | Why it adds effort | What reduces it |
|---|---|---|
| Periods in scope | Each additional year or month must be mapped, reconciled and analysed | Agree the periods the decision actually needs, often two to three years plus LTM |
| Entities and locations | Intercompany balances, eliminations and different ledgers | Consolidated, reconciled data and a clear group structure chart |
| Quality of monthly closes | Missing accruals and year-end-only adjustments distort monthly trends | Monthly trial balances that tie to year-end figures |
| Revenue complexity | Contracts, recurring billing, rebates or percentage-of-completion need detailed testing | Customer-level revenue data that reconciles to the ledger |
| Number of adjustments | Each proposed add-back needs evidence and discussion | Management’s adjustment list prepared early, with support |
| Additional workstreams | Working-capital peg, net debt, proof of cash and forecast review each add work | Deciding upfront which ones the transaction requires |
| Timetable | Compressed timelines need more people working in parallel | Starting data collection before exclusivity pressure peaks |
| Management availability | Slow answers extend the engagement | A named finance contact and a shared questions log |
Common scope options
- Sell-side QoE: prepared for the business before a sale, so issues are found and explained before buyers find them.
- Buy-side QoE: commissioned by an acquirer or its lender to test the seller’s earnings claims.
- Focused QoE: earnings adjustments only, sometimes with a summary working-capital view, for smaller transactions or early-stage decisions.
- Full financial due diligence: QoE plus working capital, net debt, cash conversion and, where required, forecast review.
Lenders sometimes ask for a QoE as a condition of acquisition financing. If debt is part of the deal, confirm the lender’s requirements before agreeing the scope, so the work is not repeated.
How to control cost without weakening the work
- Prepare the data before the provider starts. Monthly trial balances, general ledger detail, customer-level revenue and management’s adjustment list are the usual starting point. The financial due diligence checklist includes a data request starter.
- Agree materiality. Decide the threshold below which items will be noted rather than investigated.
- Phase the work. Start with the earnings bridge and the areas most likely to change value, then extend scope if early findings justify it.
- Name one decision-maker on each side for scope changes, so additional work is approved deliberately.
- Keep the questions log moving. Most overruns come from waiting, not analysis.
What the fee should buy
Whatever the price, a QoE should leave you with outputs you can use in negotiation and in the transaction documents:
- A bridge from reported to adjusted EBITDA, with each adjustment explained and evidenced.
- A view on the sustainability of revenue and margins.
- Where in scope, a monthly working-capital analysis and a supportable approach to the net working capital peg.
- Where in scope, a net-debt and debt-like items schedule.
- A databook that traces every exhibit back to source. See what an FDD databook contains.
- A clear list of open questions and judgement areas.
Questions to ask a QoE provider
- Which analyses are included, and which are optional extras?
- Who will do the work, and who reviews it?
- How are scope changes priced and approved?
- What data do you need on day one, and what happens if it arrives late?
- Will we receive the databook, or only the report?
- How do you handle confidential data and access to the data room?
Adding capacity without adding cost to the client
Many accounting firms and advisory boutiques manage QoE workload peaks by adding analytical capacity behind their own team, keeping the client relationship, scope and sign-off in-house. Plus One supports firms in the US, UK, Australia and Europe with outsourced QoE and FDD analysis on that model. For the difference between this work and a statutory audit, read Quality of Earnings vs audit.
Frequently asked questions
How much does a Quality of Earnings report cost?
There is no standard price. The fee depends on the periods and entities in scope, how clean the monthly records are, revenue complexity, the number of adjustments, extra workstreams such as working capital or net debt, and the timetable. Compare proposals on scope, not on the headline number.
Who pays for a Quality of Earnings report?
Whoever commissions it. A seller pays for a sell-side QoE prepared before a sale; a buyer or its lender pays for a buy-side QoE that tests the seller's earnings.
Can a QoE be scoped to keep the cost down?
Yes. A focused QoE can cover earnings adjustments only, and the work can be phased so the areas most likely to change value come first. Agree materiality and the periods the decision really needs before work starts.
Does a lender require a Quality of Earnings report?
Some lenders ask for one as a condition of acquisition financing. If debt is part of the deal, confirm the lender's requirements before agreeing the scope so the work is not repeated.
Finance and advisory team based in Gurugram, India, working since 1992. This guide is general information and does not constitute transaction, accounting, tax or legal advice.