Auditing

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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