Agree the purpose of the review
Financial due diligence is performed for a defined transaction purpose. The investor’s questions, proposed transaction structure and information available determine the scope. It is distinct from a statutory audit and should not be described as a substitute for one.
Before uploading records, agree the periods covered, the questions to be examined, access arrangements and the intended users of the report.
Build a consistent financial record
Organise financial statements, trial balances, management accounts and relevant supporting schedules. Identify the source and date of each file. Reconcile important balances across the records so that reviewers can follow the relationship between the statutory accounts and current management information.
Where a difference remains unresolved, explain it. A clear information-gap schedule is more useful than conflicting files with no description of which version should be used.
Prepare transaction-specific schedules
Depending on the agreed scope, reviewers may need information about revenue, expenses, debt, cash, receivables, inventory, payables and related-party transactions. Contracts, tax records and other documents may help explain the financial effect of an arrangement.
Separate factual records from management explanations and future projections. Estimates should state their assumptions, and unusual items should have a supporting explanation.
Control access and respond consistently
Use agreed secure access arrangements and assign a person to coordinate information requests. Maintain a record of questions, documents supplied and matters that remain open. Avoid circulating confidential records through uncontrolled email chains.
A diligence finding may identify a risk, an information gap or an adjustment relevant to the transaction. It does not automatically establish misconduct, determine a purchase price or assure that every issue has been discovered. The reporting basis and limitations should remain clear.
This note provides general information. A transaction-specific conclusion requires review of the facts, records and applicable requirements.
Related service: Transaction Advisory and Due Diligence