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Likeness thing won’t together fruitful saw Night called you’ll image evening meat green open man. Multiply hath life own days third yielding grass lights male shed earth morning one.
Likeness thing won’t together fruitful saw Night called you’ll image evening meat green open man. Multiply hath life own days third yielding grass lights male shed earth morning one.
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Due diligence is an investigation or audit of a potential investment or product to confirm all facts, that might include the review of financial records. Due diligence refers to the research done before entering into an agreement or a financial transaction with another party.
Investors perform due diligence before buying a security from a company. Due diligence can also refer to the investigation a seller performs on a buyer that might include whether the buyer has adequate resources to complete the purchase.
As with any assurance engagement, sufficient planning is crucial to enable the reporting accountant to carry out the procedures necessary and to carry out the assignment to the highest standards.
Once instructions have been taken from the client, the terms of the engagement have been agreed and sufficient planning has taken place, information can be gathered to enable the reporting accountant to report back to the client.
The gathering of the information for the due diligence assignment has to be carried out systematically and carefully having regard to the size, complexity and degree of risk associated with the target. The reporting accountant will have carried out the planning in such a way as to identify the areas of the target entity which are material and those areas which can be safely ignored.
Types of information the reporting accountant would need in order to gather information is given as follows:
Work undertaken during the due diligence should be documented in accordance with the firm’s procedures. Again, whilst the due diligence exercise is not an audit, compliance with ISA 230 (revised) ‘Audit Documentation’ may be considered appropriate by the reporting accountant.
Indeed, a working paper file relevant to a due diligence assignment should be structured in such a way that it facilitates cross-referencing of material items. It also facilitates the cross-referencing of the planning memorandum to the detailed working papers (especially where certain areas identified at the planning stage of the assignment are judged critical).
Finally, a well-structured due diligence file will help answers questions asked by the client swiftly, especially in face-to-face meetings.
The form of reporting should be agreed at the outset of the assignment. The purpose of the due diligence exercise is to provide the potential investor with the information and professional commentary they need in order to be able to make informed decisions about the target entity.
Typically such reports would consist of:
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