What is Due Diligence Audit?

Due diligence service is a
fact-finding exercise that verifies the veracity of information presented and
considers the legal ramifications to determine if the buyer will benefit from
this transaction. Due diligence provides information regarding the assets and
liabilities of a business, its profitability, and the associated risks. It
provides a clear comprehension of the company’s financial health and position.
It aids in determining whether the proposed purchase/investment is worthwhile
and whether the buyer should proceed with the purchase at the requested price,
renegotiate the price, or reject the transaction altogether.

In addition to business acquisition,
there are numerous other instances in which due diligence is required. For
example, it is conducted prior to a merger or the signing of an agreement, and
a significant creditor or lender of the business may conduct due diligence
prior to extending credit facilities or loaning money to the business. Experts
are employed to conduct due diligence, which, depending on the nature of the
business or project under consideration, may also entail non-financial areas.
The majority of a due diligence investigation’s focus should be on the target
organization’s liabilities.

Objectives of Due Diligence

Typical
due diligence objectives for the acquisition of a target company could include
the following:

·       
Due diligence
collects information about the target company.

·       
Due diligence
conduct SWOT analysis to reveal the strength and weaknesses of the target company.

·       
It improves
bargaining power or position.

·       
It provides
informed decision to take accurate action.

Areas of Service for Due Diligence

There are a number of possible areas for due diligence, but they can be
categorized primarily as follows:

1.     Operational Due Diligence

Due diligence is performed to ensure that there are no operational
issues when assessing the operational potential of a company. In the case of a
merger between two companies, for instance, operational due diligence may be
required to ensure that there are no obstacles to the merger and that it is
viable.

2.     Audit of Financial Due Diligence

Financial due diligence involves examining the financial statements,
cash flows, books of account, and accounting policies and internal controls of
the target company, among other financial aspects.

3.     Due Diligence Tax

Compliance with tax law is crucial, and the taxation system in the
majority of jurisdictions is extremely complex, which expands the scope and
importance of tax due diligence. This examines compliance with tax laws and
payment of taxes owed.

4.     Information System Due Diligence

Today, information technology systems play a crucial role in businesses.
In some instances, proposed mergers were rejected because the IT systems of the
two companies were incompatible. 
Information technology Due diligence determines whether or not the IT
systems used by the target company or companies are suitable/compatible and
whether or not the information generated by the IT systems is accurate and reliable.

5.     Legal Due Diligence

This form of due diligence examines the extent to which target companies
comply with applicable laws and regulations. 
All essential legal aspects are addressed.

6.     Environmental Due Diligence

In certain industries, it would be essential to evaluate the
environmental aspects of the target corporation.

7.     Human Resources Due Diligence

This aspect of due diligence entails gathering information on a wide
variety of areas pertaining to the Human Resources of the target, such as the number
of employees, human resource policies and procedures, salary structure,
employment contract terms and conditions, and retirement benefits.

Due Diligence Services in the UAE

As professional consultants, the ElucidationAcc conducts due diligence
by applying international standards, industry benchmarks, and financial
information from the entity under consideration’s past. We assist our clients
in conducting due diligence to ensure that the contracts they are entering into
are not onerous and that their interests will be adequately protected by ElucidationAcc
professionals. Our professionals have performed due diligence in a variety of
industries and are endowed with the necessary knowledge and professional
experience to conduct the exercise. We guarantee our clients timely delivery
and quality in everything we do, regardless of the industry’s difficulties and
constraints.