Due Diligence Audit is an investigation Audit or examination of a business or person before signing a contract, or an act with a certain standard of care. During a Due Diligence Audit, the analysis or review could be carried out for a potential objective for the merger, acquisition, privatization, or similar corporate finance transaction, usually by a buyer.
A reasonable investigation is focusing on future material matters and current practices of process and policies. It can be a legal obligation, but the term due diligence will more commonly apply to voluntary investigations. A typical example of due diligence audit in various industries is how a potential acquirer evaluates a company that he has targeted or its assets for an acquisition. In some circumstances, sellers also opt for due diligence audit.
The businesses involved in acquisition or mergers as buyers or sellers must ensure that all the financial and other information exchanged are verified and accurate. A due diligence process will help the buyers pay more than the actual purchase price or, in the seller’s case, receiving less than a reasonable price.