You may have heard of financial due diligence, but what does it actually mean for you and your organisation? Brown Auditing Services in New South Wales is here to help with the examination of financial records to mitigate risk and keep businesses safe. Learn more about our due diligence process and what to expect from different types of due diligence.

Demystifying Due Diligence

We start our step-by-step guide by exploring due diligence in accounting and the role it plays in evaluating financial risks and making informed decisions. ‘Due diligence’ describes an investigation, review or audit used to confirm facts or details. Finance departments ensure due diligence by examining financial records prior to a transaction or contractual agreement with another party. This is a systematic way to analyse and mitigate risk from a business and/or financial standpoint. To do your due diligence is to conduct your research and review both transaction and business history before moving forward with a new deal.

Due Diligence Accounting & the Audit Connection

Now that we’ve defined due diligence, let’s look at the connection between the due diligence process and audits. Many different types of due diligence require an audit of an organisation’s finances to confirm everything matches up and it’s safe to proceed with the purchase or contract. Audits play an important role in due diligence assessments by scrutinising the financial assumptions of the decision. If, for example, your organisation is looking to acquire another smaller business, a due diligence audit will identify hidden costs and future projections. By collaborating with due diligence experts, and keeping in mind the potential financial and reputational implications of your choice, you are empowered to make the right decision.

Key Aspects of Due Diligence

Due diligence plans and reports should be customised to suit your organisation and your needs. Some reports may be more specific than others, but it’s important to look at the company as a whole, not just the finances. Below are the key elements to look for in due diligence:

  • General records and the business plan to learn the corporate structure, setting the scene for a more in-depth investigation.
  • Organisation and ownership to look at the company structure from a personnel point of view. This is especially important when doing an acquisition or a merger.
  • Administrative information such as business locations and facilities, occupancy rates and workstations.
  • Compliance and regulation, including any antitrust risks or industry concerns.
  • Financial position and historical performance, which can be reviewed through statements, budgets, business plans and forecasts. Tax and legal standing also require review.

The most effective examples of due diligence will look at all these elements to better understand the possible risks and rewards of any major business decision.

Contact Brown Auditing Services About Financial Due Diligence

Do you have questions about the different types of due diligence or how to get started with this process? Brown Auditing Services can provide a comprehensive due diligence report for your business. Contact us today for due diligence services in New South Wales.