Financial Audit vs Financial Due Diligence


Abstract:

In the following text, I will try to define and contrast financial audit and financial due diligence amongst their use in a merger and acquisition (M&A) process. Whether it is horizontal or conglomerate, main evaluation of an M&A performance will be financial at the end. This can be listed as profit, or revenue, or share prices of the company for following years. Hence it is important for an M&A to financially make sense. To understand if it financially makes sense, a crude analysis of historic revenue or profit figures may seem enough to make the decision. But in order to achieve the value sought from M&A thorough analysis is needed. That is the point where audit and due diligence breaks apart.