ABSTRACT
The fundamental building blocks of financial due diligence are therefore strikingly similar to those in the other due diligence disciplines. In most cases financial due diligence is carried out by firms of accountants. The financial due diligence team will try to speak to the auditors and review the audit files for the last two to three years and, if they are also looking at tax, the tax files for up to the last six years. Financial due diligence involves detailed analysis of a business supported by interviews with the key people in the business. Budgets are an essential planning and control tool in most businesses, so financial due diligence should show how the process works in the target company and, more importantly, how effective it is. Maintainable profit is the underlying profit which the target company is capable of earning. Cash flow is as widely used in valuation as profit.
