A Due Diligence Audit Service involves the assessment of an Entity, in order to determine its financial performance. It helps one to gain a better understanding of the business earning capabilities, the competency of the management, the prospective customers, and suppliers, as well as their financial position.
The demand for Due Diligence Audit Service is ever growing with the economy gaining strength each day. The investors of a company are always keen on ensuring that they do not acquire much risk when they are putting their hard-earned money into new business
Due diligence audit is the equivalent to a detailed investigation of the facts and figures of an entity in which new investment is opted out by the owners. These audits are generally used to ensure that no hidden or contingent liabilities exist in the Company. 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.
The following are the major types of due diligences:
a) Financial due diligence
b) Operational due diligence
c) Commercial due diligence
d) Legal due diligence.
Difference between due diligence and financial audit are:
1) The audits are governed by the accounting standards and auditing standards applicable in each country while the due diligence is based on an agreement with the client.
2) The audit is focused on the analysis of financial statements to form an opinion whether the financial statements present fairly in all material respects the financial position of the entity, meanwhile due diligence focuses on the quality of the earnings and the existence of any hidden liabilities in the Entity.
3) The audit focuses on the preparing the financial statements on a particular period which does not change normally while the due diligence report has no such fixed scheduled format or period.
The investors may also perform business valuation before acquiring the company to ensure that they are getting the right value for the amount paid.
Due Diligence Audit Service in UAE is provided mainly by reputed audit firms in UAE. United Auditing is the audit division of Emirates Chartered Accountants Group also provides these services to the prospective investors.
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