Methods of Financial Due Diligence

During the investigative process, financial personnel usually will employ the following fundamental methods:

Review – through review of financial statements and other financial materials, identify critical and material financial factors;

Analytical procedures – includes procedures such as performance analysis, trend analysis, structural analysis etc., analysis of materials acquired through all channels then through collating the results of this analysis discovering abnormalities and important issues.

Interviews – sufficient communication with every level of the internal hierarchy, employees of different positions and roles, as well as intermediary institutions.

Internal communication – due to investigative group personnel coming from different backgrounds and specialisations, mutual communication and timely sharing of work results creates an effective method of accomplishing investigative targets.

There are some key differences in the objectives of financial due diligence and financial statement auditing. In addition, the duration of a financial due diligence is comparably short, and therefore in the place of auditing methods such as confirmations, physical inventory observation and the re-calculation of financial figures, methods such as trend analysis, structural analysis and other such analytical tools are more often utilized.