Financial Due Diligence is once of the review engagement that normally requested by the potential investors to perform a financial review of the target company.
Financial Due Diligence normally concerns with reviewing and identification of the targeted company’s Financial Position, potential hidden liabilities like continence liabilities which is not stated in Financial Statements and financial records of the company.
In some case, the investors purchasing the shares or the company is not expecting the profit from the current performance, which causes them to but is because of expecting from the future growth of the business.
In this case, they need not only want to know the current position of the company in the market, but they want to see the future of the company by forecasting or projection.
Financial Due Diligence is really important for the investors who want to the acquire the targeted company since it not only help them to understand about the past and current financial situation of the target companies, but the Financial Due Diligence will help them to forecast the future financial position of the company.
Read more about the concept of Due Diligence here.
The Financial Due Diligence will not only uncover the potential financial liabilities, but it will help the investors to gain more understanding about the business of the targeted company which it is very important to help them make the correct decision.
Sometime, you might know that shareholders of the company or corporation are not trusting management or among the shareholders themselves. In such a particular case, shareholder normally needs to hair professional forensic accounting or Financial Due Diligence of the Financial Statements.
Then they will use report result from that services as part of the evidence in solving the argument among the shareholders.
In summary, the purpose of Financial Due Diligence is to help investors understand and assess the financial position, uncover unrecorded liabilities, forecast the future cash flow, and help investors for better decision making.
Hope this article will help you understand more about Financial Due Diligence, and if you have any question, please drop it here.