Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › due diligence
- This topic has 7 replies, 4 voices, and was last updated 10 years ago by MikeLittle.
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- October 9, 2014 at 10:55 am #203955
Is due diligence only conducted when a company acquires another company? or it can be conducted in normal circumstances.?
October 9, 2014 at 4:23 pm #203998I 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?
October 14, 2014 at 7:11 am #204382@MikeLitte
Morning
When I have been answering questions regarding planning audit I have used the term due diligence as method of obtaining understanding of client, is this wrong?
October 14, 2014 at 3:39 pm #204420Due 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?
October 17, 2014 at 7:43 pm #204775Thanks Mike 🙂
October 19, 2014 at 11:16 am #204929You’re welcome
October 23, 2014 at 4:07 am #205498i want notes on due diligence but i didnt find the topic in opentuition notes of p7! kindly help
October 23, 2014 at 7:58 am #205521No, 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?
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