Difference between Due-Diligence and Audit with its comparison

In this article we will discuss about Difference between Due-Diligence and Audit with its comparison.


Auditing

Auditing is a process in which there is systemic and scientific examination of company accounts by a well qualified person. The word audit derived from Latin word” Au-dire” which means” to hear”. Auditor can examine the books of accounts to ensure that accounts of the company are properly maintained or not. True and fair accounts of the company show their financial position and deducting errors.

Following are the objectives of Auditing.

According to the section 143 of company’s act 2013, the Primary Objective of auditing is to report the owners whether the financial statement provides true and fair view of financial matters of the company.

The Secondary Objective is to Detection and prevention of frauds and detection and prevention of errors.

Due-Diligence

Due-Diligence refers to a process in which all the books are verified before the contract between two parties. In this contract both the parties are agreed after the examination of accounts, facts and it happens before the legal sign by the both parties.

Generally the term Due-Diligence is used in reference to business transactions (mostly mergers and acquisitions, joint venture, project finance, securitization, etc.).

Due diligence is the careful, thorough evaluation of a potential investment, whether on a corporate or individual level.

Due diligence is the process of systematically researching and verifying the accuracy of a statement.

The main aim of due diligence process is to identify business problems and it is mainly beneficial to seller buyer and shareholders.

Difference between Due-Diligence and Audit with its comparison

Basis Due-Diligence Audit

Meaning

Due-Diligence refers to a process in which all the books are verified before the contract between two parties.

Auditing is a process in which there is systemic and scientific examination of company accounts by a well qualified person.

Scope

Less scope then auditing

Wider scope

Purpose

The purpose of due-diligence is to deduction of errors.

The purpose of due-diligence is to examination of company accounts.

Mandatory

It may be or not

It is mandatory

Type

It required for future decision

It is analysis in nature

Representative

It represent occasional  events

It representing recurring  events

Assurance

It provides negative assurance

It provides positive assurance

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