DUE DILIGENCE
AUDIT
Due diligence audit refers to investigating an organization or a business before signing a contract or a commitment. There is usually an objective for conducting a due diligence audit which a buyer usually conducts.
The main focus of investigation in a due diligence audit is on future and current practices of a company’s policies. In some cases, due diligence audit can be a legal obligation, while in most cases, due diligence audit is voluntary.
A common example of a due diligence audit is buyers’ evaluation of a company’s financial position and where they will invest their assets. Due diligence audit is not only limited to the buyers; in some cases, sellers will also need a due diligence audit.
The businesses being investigated in due diligence audits should ensure that all the financial information exchanged is accurate and verified. There are many types of due diligence, as follows:
Operational Due Diligence
As the name suggests, operational due diligence deals with the operational matters of an organization, such as the review of systems and processes, insurance and risk assessment, HR activities, and assessment of the management team.
Financial Due Diligence
Financial due diligence refers to the validation of a company’s financial statements. The main objective of financial due diligence is to ensure that all a company’s stakeholders have access to the proper information to assess the financial risk appropriately. In other words, financial due diligence allows the buyers to accurately evaluate their financial position to determine the benefits, risks, liabilities, and opportunities associated with a potential opportunity. Usually, the following analyses are involved in the financial diligence:
Legal Due Diligence
Legal, due diligence looks into the legal risks associated with a target company. The issues or risks can range from intellectual property and employment disputes to property rights matters.
Macro-Environment Due Diligence
It deals with the major environmental factors that are uncontrollable and may influence a company’s decision-making actions.
Marketing Due Diligence
Marketing due diligence is a compulsory and basic part of a marketing plan. Marketing due diligence is conducted at different stages of the marketing plan.
Production Due Diligence
It investigates and verifies the production records, such as slips and memos, to ensure that particular standards are maintained. It also involves the verification of logbooks of machinery involved in the production.
Management Due Diligence
It involves tracking managerial actions and measuring performance based on those actions. In a managerial audit, objectives, policies, structure, control, system, etc., are investigated to measure performance.
Information Systems Due Diligence
It considers the investigation of managerial control within an information systems infrastructure. The evaluation results indicate if an organization’s information systems are efficient enough to protect its assets, maintain data integrity, and operate accurately to meet its objectives.
Benefits of Due Diligence Audit for Buyers
Following are the ways due diligence audit benefits the buyers:
Benefits of Due Diligence Audits for Sellers
Following are the ways due diligence audit helps the sellers:
How Can Synergy Help?
Synergy Auditing provides exceptional auditing services and has a team of expert due diligence auditors to help buyers understand the whole process. When it comes to the due diligence audit procedure, Our professionals will assist buyers as an expert during the negotiation process, renewing their sale and purchase documents such as representations, warranties, and indemnities, and through each step of the due diligence process. Furthermore, we will also provide a due diligence audit report to our clients. Our accounting and audit services professionals have years of experience in assisting the seller during the due diligence process and assessing the company before taking the company to the market.
The businesses being investigated in due diligence audits should ensure that all the financial information exchanged is accurate and verified. There are many types of due diligence, as follows:
Operational Due Diligence
As the name suggests, operational due diligence deals with the operational matters of an organization, such as the review of systems and processes, insurance and risk assessment, HR activities, and assessment of the management team.
Financial Due Diligence
Financial due diligence refers to the validation of a company’s financial statements. The main objective of financial due diligence is to ensure that all a company’s stakeholders have access to the proper information to assess the financial risk appropriately. In other words, financial due diligence allows the buyers to accurately evaluate their financial position to determine the benefits, risks, liabilities, and opportunities associated with a potential opportunity. Usually, the following analyses are involved in the financial diligence:
- A Company’s history and background
- Earning and operation effectiveness of a company
- Strengths and weaknesses of employees and their goals
- The financial position of a company
- Assessment of cash flow in a company
Legal Due Diligence
Legal, due diligence looks into the legal risks associated with a target company. The issues or risks can range from intellectual property and employment disputes to property rights matters.
Macro-Environment Due Diligence
It deals with the major environmental factors that are uncontrollable and may influence a company’s decision-making actions.
Marketing Due Diligence
Marketing due diligence is a compulsory and basic part of a marketing plan. Marketing due diligence is conducted at different stages of the marketing plan.
Production Due Diligence
It investigates and verifies the production records, such as slips and memos, to ensure that particular standards are maintained. It also involves the verification of logbooks of machinery involved in the production.
Management Due Diligence
It involves tracking managerial actions and measuring performance based on those actions. In a managerial audit, objectives, policies, structure, control, system, etc., are investigated to measure performance.
Information Systems Due Diligence
It considers the investigation of managerial control within an information systems infrastructure. The evaluation results indicate if an organization’s information systems are efficient enough to protect its assets, maintain data integrity, and operate accurately to meet its objectives.
Benefits of Due Diligence Audit for Buyers
Following are the ways due diligence audit benefits the buyers:
- Enhances the understanding of a target business, in general,
- Provides buyers with an analysis of success factors
- Provides an opportunity to look into the track records of the target business
- Generates the cash flow and sustainable profit
- Provides the assessment of normalized profit
- Provides an insight into the target company’s current and future financial position
- Investigates the quality of the management system
Benefits of Due Diligence Audits for Sellers
Following are the ways due diligence audit helps the sellers:
- Helps to collect necessary information regarding the finance
- Informs about the issues that a buyer can raise
How Can Synergy Help?
Synergy Auditing provides exceptional auditing services and has a team of expert due diligence auditors to help buyers understand the whole process. When it comes to the due diligence audit procedure, Our professionals will assist buyers as an expert during the negotiation process, renewing their sale and purchase documents such as representations, warranties, and indemnities, and through each step of the due diligence process. Furthermore, we will also provide a due diligence audit report to our clients. Our accounting and audit services professionals have years of experience in assisting the seller during the due diligence process and assessing the company before taking the company to the market.