Five Ways to Improve Due Diligence
by AccountingWeb on
Due diligence is most commonly performed during the sale of a business. It can, however, be a useful tool for gaining a truer picture of the current state of a company whether it is up for sale or not. Here are 5 hints from TheStreet.com, for making the most of a due diligence audit:
- Double-check everything. This includes financials, the customer database, tax returns and filings, copyright and patent filings, employment contracts, vendor lists, and leases for equipment or property. Also, verify that no legal action or complaints have been filed against the firm in local courts, with the Better Business Bureau or with any professional licensing organization. This stage of a due diligence audit is an excellent time to talk to customers and staff about their feelings, both positive and negative, toward the company.
- Hire an expert. If the due diligence audit is part of the sale of the business, consider bringing in an attorney specializing in mergers and acquisitions, a forensic accountant or both.
- Conduct background checks. If background checks are not part of the hiring process, this is a great time to do them. Also, consider updating the background checks on long-time employees to be sure they have disclosed information relative to their jobs to you.
- Know your limits. Not all due diligence audits must be equally thorough nor must every finding of an audit be acted upon. Determine how much information is needed and the type of information that should be acted on before the audit begins.
- Be prepared to change. The point of a due diligence audit is to uncover flaws in the company. Some may be serious and require immediate action. Other will be minor flaws necessitating no action at all. Be sure to open up all the findings of a due diligence audit for discussion with staff members affected by them.