The presentation on “Financial Due Diligence” provides an overview of:
Financial Due Diligence is the art and science of comprehensive evaluation of the financial health and hygiene of an organization and it is normally performed when a buyer wants to acquire an organization. It includes a complete investigation of the following related to the target entity:
- financial management system including the process of maintaining accounting records, compilation and reporting of financial numbers related to the capital structure, investments, assets and liabilities, revenue, and expense reporting of the organization,
- the pillars of the control environment and internal control process on which the edifice of financial management system rests,
- Risk management arising out of the business drivers which drive the historic and projected order book, sales revenue, cost structure, profitability, and projected cash flow analysis.
The fundamental principles of Financial Due Diligence are:
- Independence
- Prudence
- Completeness
- Materiality
- Substance over legal form.