due diligence

I suppose that it could be carried out at any time but it is normally associated with a prospective take over.

It’s an expensive exercise so presumably is not undertaken unless there is a good reason

Ok?

Due diligence, as stated above, is more often associated with a takeover (also involved where a private company is going public or is seeking a stock-exchange listing)

It’s frequently a quote from ISAs that the auditor should obtain a thorough understanding of the client’s business. I think due diligence may go a little beyond “obtaining a thorough understanding” but I doubt that you would be penalized for using the expression “due diligence”

If you were to write “the auditor should obtain a thorough understanding (due diligence)” I cannot see a marker saying “No, that’s not right” and failing to give you a score.

So why not use both expressions as above and cover all bases?

You’re welcome

No, I believe that due diligence is not included as a separate topic within the course notes.

Maybe I shall correct that some time in the future

Meanwhile, here’s a definition from wikipedia:

“Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care.

It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition.[1] The theory behind due diligence holds that performing this type of investigation contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate in a reflexive manner on the decision at hand and all its costs, benefits, and risks.[2]”

It goes further into detailed explanation but what I have just posted will start you down the right track

OK?