What is the difference between due diligence and a financial audit?

An audit is a detailed review of historical financial data involving substantive and systematic testing to corroborate the figures presented in a set of statutory accounts.

Financial due diligence on the other hand will look more in to the trends of financial data, the breakdown of profit streams and analysis of overheads covering past, future and projected periods.

In addition, the scope of a financial due diligence exercise is more wide reaching than the scope of an audit. The results and conclusions of due diligence are often indemnified by the vendor as opposed to being signed off as ‘giving a true and fair view’ by an auditor.

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